Dr. Marc Faber Comments On US Bailout

Posted on Bloomberg News.

• Marc Faber Says U.S. Rescue Plan Won't Stop Recession
  
  By Ian C. Sayson
  
  Sept. 30 (Bloomberg) -- Investor Marc Faber said any proposal to rescue the U.S. financial system will fail to avert a recession in the world's largest economy.
  
  A stock rally in the event that a package is approved will be temporary and should be used as ``an opportunity'' to sell, said Faber, who predicted the so-called Black Monday crash in 1987. U.S. lawmakers voted yesterday to reject a $700 billion plan worked out by congressional leaders and the administration of President George W. Bush.
  
  ``The rejection of the package is good because it shows that some people in the U.S. are still sane,'' Faber said in a phone interview. ``A bailout will not buy the U.S. a way out. The government is less powerful than markets in fixing this mess.''
  
  Investors should hold 20 percent of their funds in stocks, 10 percent in gold and the balance in U.S. treasury bills, said Faber, who manages more than $300 million.
  
  The rescue plan's rejection sparked a sell-off in stocks that dragged the MSCI World Index down by 8 percent in the past two days on concern the credit crisis will deepen. The turmoil caused more than $590 billion in losses and writedowns and the collapse of Bear Stearns Cos. and Lehman Brothers Holdings Inc.
  
  The U.S. economy grew 2.8 percent in the second quarter, slower than the 3.3 percent preliminary estimate of the Commerce Department, as consumer spending and corporate investments weakened ahead of the worsening credit crisis.
  
  `Very Uncertain Times'
  
  The economy probably shrank in the third quarter, economists including Deutsche Bank AG's Joseph Lavorgna and Morgan Stanley's David Greenlaw said. A further contraction is likely in the next two quarters, some economists predicted, making the recession the longest since 1981-82.
  
  Faber, publisher of the Gloom, Boom & Doom report, told investors to sell U.S. stocks a week before 1987's so-called Black Monday crash, according to his Web site, and recommended buying gold at the start of its six-year rally.
  
  Any rebound in equities triggered by an eventual rescue package for the U.S. financial system will not lead to ``new highs'' for stock markets.
  
  ``We live in very uncertain times and nobody knows the extent of the damage from the slowdown of credit growth,'' he said. ``It will be good to diversify.''

Source: http://www.bloomberg.com/apps/news?pid=20601080&sid=alvjAlfEBU1s&refer=asia