With Asian demand set to surge in the years ahead, lucrative global investment opportunities lie in commodities and Asian stocks, while prospects for U.S. bonds and equities are dim, well-respected investment guru Marc Faber said on Thursday.

Speaking to a Toronto audience, the Hong Kong-based author and investment commentator said that while commodities will continue to be volatile going forward, they will move in an upward trend. He pointed to levels of oil consumption in many Asian countries, which remain far lower than American consumption levels. Faber expects that over the next 10 to 20 years, this consumption level could double, fueling growth in crude prices.

“There will be price pressure on the upside,” he said.

Gold and silver will also perform well going forward, Faber added. While he is cautious on the performance of gold in the near term — particularly if equities recover — he expects the precious metal to be a safe investment in the long run. Hard assets such as precious metals, Faber said, will ultimately outperform equities and other securities since the commodities are of limited supply.

“The supply of precious metals — gold, silver, platinum — and other commodities cannot be increased at the same rate,” he said. “I think we will have an outperformance of very hard assets.”

Faber encourages all investors to hold some portion of gold in their portfolio.

As a result of the expected strength in commodities, Faber is bullish on resource-related currencies around the world, including the Canadian dollar.

Meanwhile, Faber is very pessimistic on the U.S. dollar and the state of the U.S. economy. He said moves by the U.S. government in recent years to ease monetary policy and set “artificially low” interest rates have been harmful to the economy, resulting in easy money and high debt levels.

In recent years, Faber noted, the U.S. dollar has performed well when the prices of other assets — including equities, bonds, real estate, and others — have been low, and vice versa.

“There’s nothing good about the U.S. dollar,” he said. “It will end up worthless.”

Correspondingly, Faber is very bearish on U.S. government bonds, with the country’s fiscal deficit set to rise substantially this year, which will drive up the government’s hefty debt load.

Faber also expects the performance of U.S. equities to be weaker than those in Asia.

“Asian stocks, I think, are reasonably attractive,” he said. “In general, investing in Asia will be more rewarding over time than in the United States.”

Furthermore, the crisis hampering the U.S. financial sector could continue for quite some time, Faber warned. He does not expect financial sector earnings to return to their peaks of recent years.

“I believe the financial sector will actually shrink for many years,” he said.

He added that Asian economies are much better prepared to deal with the current economic downturn than the U.S. thanks to higher savings rates and less reliance on debt.

In general, other key investment areas where Faber sees strong potential include pharmaceutical and health care companies and local Asian brands. He also expects corporate bonds to be more attractive than equities going forward.

IE