Marc Faber: Unload bonds while you still can

Global markets are heading for an “important turning point” with interest rates beginning to rise within about three months and the U.S. dollar gaining strength, according to investor Marc Faber.

Investors should buy stocks and sell cash and bonds because governments are continuing to print too much money and may create a new “credit bubble,” Mr. Faber, publisher of the Gloom, Boom & Doom Report, told reporters during a forum in Seoul, South Korea, last week.

“Instead of interest rates’ going down, they could start to go up. Instead of the dollar being weak, it could strengthen,” Mr. Faber said.

“I’m ultrabearish on everything, but I believe you’ll be better off owning shares than government bonds,” he said.

The U.S. Dollar Index slid 8.5% last quarter, the most since June 2002, and dropped 1.3% this month after Federal Reserve Chairman Ben S. Bernanke signaled that he may add money to the economy. That new supply is reflected in exchange rates, based on how the currency reacted to the last round of so-called quantitative easing, according to HSBC Holdings PLC, BNP Paribas SA and Nordea Bank AB.

Mr. Faber’s recommendation on stocks is shared by Warren E. Buffett, the billionaire chairman of Berkshire Hathaway Inc. Investors buying bonds now “are making a mistake,” Mr. Buffett said recently.

U.S. stock dividends are paying more than government bonds. Ten-year Treasuries yield 5.2 percentage points less than equities of companies in the S&P 500 when adjusted for annual inflation, which is near the March 2009 high.

Mr. Faber told investors to abandon U.S. stocks a week before 1987’s so-called Black Monday crash, and said in August 2007 that U.S. shares were entering a bear market. The S&P 500 peaked two months later before retreating as much as 57%.