Madness of central banks can go on for a long time: Faber

The world's central banks, which have maintained an unprecedented ultra-loose monetary policy stance, are likely to up the ante even further, according to noted analyst Marc Faber.In an interview with CNBC-TV18, Faber, who has been critical of central bank policies, said he expects them to continue to print money in an attempt to give growth a leg-up."Central banks are now talking about helicopter money. The Federal Reserve will also introduce QE 4 (another round of quantitative easing)," he said.In such an environment, Faber said he generally agreed with Bond King Jeff Gundlach's recent 'sell everything' call but said investors could seek exposure to precious metals, precious metal mining shares and some real estate. Even US treasures, he said, were reasonably attractive, relatively speaking, in comparison to the USD 11 trillion residing in negative-yield German, Japanese and Swiss bonds.Faber also talked about the GST passage in India, saying that while the tax in general was good, it should not result in rates going up. He added that it would burnish PM Modi's reformist credentials.Below is the transcript of Marc Faber's interview to CNBC-TV18's Sonia Shenoy and Anuj Singhal.Sonia: I wanted your thoughts on the Indian market because today we are rejoicing the passage of the good and services tax (GST) bill. As a foreign investor how would you look at India now?A: First of all, I would like to point out that I know quite a little bit about taxation because I studied under professor who had been the brain behind the introduction of the value added tax (VAT) in Germany under the then minister of finance. I also wrote thesis about the financial reform of Robert Peel who in 1842 introduced an income tax as a permanent measure which was at that time just 7 percent and only levied on income that was very high for that time. So, I have studied taxation and the introduction of the GST in general is positive but I also have to say personally I am against any tax increase. So, if the GST is a tax increase because some states will still impose sales taxes then it is a step backward instead of a step forward.So, there are many details that still need to be known before we can say blanket that its positive or it is negative. What is positive is that at least somebody managed to push through a reform that essentially boost its prestige and its pro reform agenda but the details are not yet known.Anuj: The other big issue for the market has been the global liquidity. At what point do you see this money printing stopping the market from rising almost on a week on week basis? Do you think we have seen start of that with the bit of correction that we have seen in global markets or do you see more bubble like formation in global equities?A: I think money printing in the one or the other form will continue. Now increasingly central banks and fund managers and treasury departments are talking about helicopter money. Helicopter money you don't just buy securities that are traded in the public market like treasuries or sovereign bonds and equities, but you essentially distribute money to each individual. Distributing money is like a tax cut but whereas the tax cut only flows to people that actually pay tax, pay federal tax in the US and roughly half of Americans do not pay Federal tax. So, that tax cut is not taxing everybody but if I send a cheque to every man, woman and child for USD 10000 then he gets that money and he can then go and spend that money, for a month or two that obviously boosts economic activity unquestionably but then comes the question, who finances this? So, what can happen in this helicopter money is that the treasury issues bonds that investors would buy or the treasury just gets the money from the Federal Reserve, so that is another form of money printing.Sonia: What kind of asset allocation would you advice for the investors who are watching you right now because I know that you have been a big bull in gold and gold has been one of the hottest investments or hottest asset classes these days. Between gold, equities, bonds where there is lot of money being made these days as well, what would your preferred asset be for the rest of the year?A: [DoubleLine's] Jeff Gundlach in the US expressed the view that you should sell everything including your children because there is nothing to buy. Philosophically, I agree with his view except the following, let us say you have USD 10 million and you sell everything, your shares, your property, your bonds, your gold and commodities, what will you do with the money? You can put it in a bank but what if that bank goes bankrupt? Because if you are really bearish about equities and bonds then the chances that there will be a financial crisis is high. Say if you have your money with Credit Suisse or Deutsche Bank or any European bank for that matter, there is a risk, including all the US banks. So, I say to myself the madness of central banks can go on for long time. The US treasury and Federal Reserve have stopped with their quantitative easing (QE) for now. However it has been replaced by the ECB and the Bank of Japan, they essentially bought assets worth USD 180 billion every month and I am quite sure that QE4 in the US will follow some time when the economy weakens in the one or the form because the treasury departments of countries and the central banks they of course work together. So, in this environment I still want to own some precious metals. This year silver has outperformed gold and in the last couple of weeks platinum has outperformed gold and of course the best performing shares were gold and silver shares this year. No group comes even close to it.I would hold some precious metals, I would hold some real estate. I think there are some problems associated with real estate like real estate taxes and so on but in India there is still plenty of opportunities in real estate especially in terms of families owning second home in resort areas. Then I would own some equities.When it comes to bonds and cash I agree with people who say US treasuries are unattractive, yes that is correct but what would you rather own? A 10- year Japanese government bonds at negative interest rate or a 30 year Swiss franc bond at negative interest rate or a 10 year treasury at the yield of over 1.55 percent? Treasury is not attractive but relative to other sovereign bonds and USD 12 trillion worth of bonds trading at a negative yield, relative to these bonds I would say treasuries are reasonably attractive.Anuj: For Indian stock market, do you think investors will still get positive returns and will still get returns in double digits over the next 2-3 years? Is the market still attractive?A: Previously, I had expressed a view that in the next 5-10 years the Indian market would outperform the Standard and Poor (S&P) 500. I still maintain that. We do not know exactly how far the market will move. The Indian market is also dependent on the exchange rate. If the rupee weakens significantly, then the Indian market adjusts upwards. If the Indian rupee would strengthen against the dollar, then the market is less attractive in rupee terms. So, these are all factors, but in general, the Indian economy [will outperform] -- and we can debate, will really grow at 6 percent per annum for the next five years or only at 4 percent, it does not really matter. Compared to the US, that has 1 percent growth, at probably best, maybe even less. And to Europe that has no growth, the Indian economy is performing reasonably well and that equities are reasonably attractive.