Dr. Marc Faber, the Thailand-based editor and publisher of The Gloom Boom & Doom Report, favors stocks only as the least of all evils.

Q: How high can the market go before, if I read your work correctly, America falls apart and takes everything down with it?

A: I'm not sure that the risk/reward now is particularly favorable. The inflationary school of thought says the Federal Reserve has no other option but to print money, and that will lift asset prices. The Standard & Poor’s 500 could get to 1,000 or 1,100 or depending on how much money they print, possibly even higher than that.

Between March and today, the S&P is up 40%, and in an environment of zero interest rates, that's a huge gain. Many of the resource stocks we were recommending in November and December have tripled. So, maybe we have for two or three months now a reversal in expectations, where people suddenly realize that maybe the economy doesn't recover a lot and that deflationary pressures are still there. But if the S&P was to come down to 800 or 750, the Fed would probably increase its money printing activity. So, I kind of doubt that we'll see new lows.

Q. You've warned that US risks Zimbabwe-style hyperinflation and then more recently said US inflation could reach 10% to 20% in five to ten years. Isn't there a big gap between those outcomes?

A. We have the worst recession since the Second World War and actually the prices of necessities are still rising, including food and energy. So, one day within the next ten years, when the economy slowly recovers and when further dollar weakness occurs, inflationary pressures will increase. And once you have inflation increasing, it's not easy to stop it unless you implement tight monetary conditions, which would imply very high real interest rates. And I don't think that Mr. Bernanke or the US government have any intention whatsoever of having positive real interest rates. Combine easy monetary policies with large fiscal deficits, and the likelihood of much higher inflation is there. Once we go to 10% inflation, 20% becomes quite likely and once we go to 20%, we can easily go into hyperinflation.

Q. If the largest economy in the world is at risk of hyperinflation, shouldn't people be selling everything and hoarding gold and silver?

A. For sure, gold is better than cash. But the devious thing about inflation, if we define it as money and credit growth, is that it touches different asset prices at different times with different intensity. And so, you can have for one year a huge increase in the price of gold and then the next year you could have a huge increase in the price of real estate and the next you could have an increase in silver or agricultural commodities, and the next year in wages or stock prices. You just don't know exactly which one will do the best. It's a very tricky environment, and it favors large speculators and the people who are close to the government. It shifts wealth from the middle class and workers to rich people, as has happened over the last 25 years.

Q. You've been bullish on Asia and in particular on Asian banks and Asian real estate, and yet the attitude of Asian central bankers doesn't seem to be materially different from that of the Fed. How does it feel to be invested in assets that are appreciating based on the same Keynesian policies?

A. I don't like Fed policy and I don't like the policy of the Bank of Thailand. But I have to live with it. I'm an investor, and so rather than holding cash in a Thai bank at zero interest rates, I'm investing in equities. But it is not because I have great conviction that anything is healthy. I'm investing in equities because I think that the whole world is basically [in trouble.] The worse the conditions will be, the more they will print money. I can buy in Thailand a basket of equities that will give me a dividend yield, after tax, of 5% to 6%. So at least I'm paid to wait. I would buy Asia on a correction.

Q. Why is Europe so out of favor with international investors?

A. In 2008, the most cyclical economies got hit the hardest. And so, because of the cyclicality, Europe and Japan fell out of favor. Whoever bets on the economic recovery should bet on the most cyclical industries and the most cyclical countries. That would be Japan, southeast Asia, resource producers, and obviously Europe, because they have a high dependence on exports, particularly Germany.

Q. But you don't sound terribly committed to that proposition in the short run.

A. When the market [perceives] that we've fixed the bottom in economic activity and it's growing again, then they can push up stock prices as they have done after March. But it doesn't mean that the global economy will revisit the peak of prosperity we had in 2006-07. That may be a long way away. But you can have a big bounce within the context of a bear market. So, I think that the markets still have a chance to go up, especially given the money-printing attitude not only of the Fed but of all central banks.

Q. You've lampooned President Obama as "the Great Obutu" and called him a commissar, and you've been critical of the Fed's leadership as well. Would it be fair to say you're contemptuous of American policies and American leadership at the moment?

A. I think that's a fair comment. I'm disgusted by the kind of crony capitalism that has emerged in the United States where the doors of the Federal Reserve, of the US Treasury, of the Wall Street establishment are all open to each other. The economic policy of the US since 1982 has been to stimulate consumption. But you can't create prosperity from consumption—you need savings and capital spending.

Q. Thank you.

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