Marc Faber takes on Yellen with recession call, likes Treasuries

[SINGAPORE] Marc Faber recommends Treasuries and says the US is at the start of an economic recession, clashing with Federal Reserve chair Janet Yellen's view that things are improving.

"Ten-year US Treasuries are quite attractive because of my outlook for a weakening economy," Mr Faber, the publisher of the Gloom, Boom & Doom Report, said in an interview with Bloomberg on Monday. "I believe that we're already entering a recession in the United States" and US stocks will fall in 2016, he said.

Ms Yellen raised interest rates this month for the first time in almost a decade and said Americans should take the decision as a sign of confidence in the US economy. Analysts differ over whether the Fed's decision to increase its benchmark came at the right time because the inflation rate is stuck near zero even as gross domestic product expands.

The benchmark US 10-year note yield was little changed at 2.22 per cent as of 6:40 am in London, according to Bloomberg Bond Trader prices. The price of the 2.25 per cent security due in November 2025 was 100 1/4. Treasuries have returned 1.1 per cent in 2015, down from 6.2 per cent last year, based on Bloomberg World Bond Indexes.

US economic growth slowed to an annualized 2 per cent rate last quarter from 3.9 per cent in the previous three months, the Commerce Department said Dec 22. The last time the economy was in a recession was December 2007 until June 2009, according to the National Bureau of Economic Research.

"While things may be uneven across regions of the country and different industrial sectors, we see an economy that is on a path of sustainable improvement," Ms Yellen said Dec 16 after the Fed increased its benchmark rate by a quarter percentage point.

Former US Treasury Secretary Lawrence Summers and economist Nouriel Roubini had both warned the Fed should be cautious because inflation has yet to pick up as the economy expands.

Mr Faber is also at odds with the consensus view on Treasuries. US 10-year yields will climb to 2.80 per cent by the end of 2016, based on Bloomberg surveys of economists with the most recent forecasts given the heaviest weightings.

BLOOMBERG