Marc Faber's Predictions for 2014

Since 2010, we had a massive outperformance of the US vis-a-vis emerging economies. The US cyclically adjusted earnings P/E ratios are relatively high, which would indicate low returns for the next 7 to 10 years. In other words, in the opinion of Jeremy Grantham returns of less than 2% are negative in real terms for each of the next 7 years.

Conversely, in emerging economies we had bear markets. In some markets, adjusted for the depreciation for currencies like the Brazilian real, the Indian rupee, and so forth, we had declines of 30% to 50% from the highs. So the question for the investor is, ‘Do I buy the US that is still currently momentum driven but it won’t be driven forever, or do I gradually move into emerging economies?’

I think it’s too early to move into emerging economies, and I think it’s too late to buy US stocks. They (US stocks) may go up another 10%, maybe even 20%, but the risks have increased significantly and I don’t think equity investors in the US, aside from a short-term trading opportunity, will reap very high returns in the future.

Now, compared to equities in emerging economies and equities in the US, what is really incredibly depressed are mining companies. My preference has always been to own physical gold, but I have to say that at this level the mining companies are relatively good values.

- Marc Faber via a recent King World News interview:

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/12/9_Marc_Faber_Exclusive_-_His_Stunning_2014_Predictions.html

I'm Not Optimistic About Any Asset Class

"I’m not optimistic about any asset class, whether it’s art, collectibles, bonds, equities, or commodities, but relatively speaking, probably commodity related stocks are very cheap. And don’t forget in 1999 to March 2000 there were a handful of technology stocks that went ballistic, and these so-called ‘old economy’ stocks were all sleeping. And when the Nasdaq collapsed, the ‘old economy’ stocks came back (into vogue).

So my sense is that as a contrarian and also given the extremely negative sentiment about gold, silver, platinum, and palladium, going into 2014 I think that the mining sector looks reasonably attractive."

- Source, Marc Faber via a recent King World News interview:

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/12/9_Marc_Faber_Exclusive_-_His_Stunning_2014_Predictions.html

We Are in a Gigantic Speculative Bubble

"Now can the market go up another 20 percent before it tumbles?" Faber said on"Squawk Box". "Yeah, it can go up even more, if you print money."

Marc Faber is Sounding Like a Reluctant Bull

Amid all the steady-as-she-goes predictions for the S&P 500 SPX -0.01% Marc Faber is predicting U.S. markets could rise another 20% from here.

But unless you have the temerity to get in then get out quick, it’s already too late to profit.

“They may go up another 10%, maybe even 20%, but the risks have increased significantly and I don’t think equity investors in the U.S., aside from a short-term trading opportunity, will reap very high returns in the future,” said Marc Faber, outlining his expectations for 2014 in an interview with King World News on Monday.

Since 2010, said Faber, U.S. markets have massively outperformed compared to emerging economies.

- Source, Market Watch:

http://blogs.marketwatch.com/thetell/2013/12/10/marc-faber-is-sounding-like-a-reluctant-bull/

The Ego of Mr. Bernanke has been Badly Inflated

Not a Good Time to Buy Stocks

(Please Click the Image to Watch the Video)

Boom Gloom & Doom Report Editor Marc Faber on the mounting risks of a market bubble.

- Source, Fox Business:

http://video.foxbusiness.com/v/2886517394001/marc-faber-not-a-good-time-to-buy-stocks/

Why hasn't the GOLD PRICE Held Up?

There is Value in Precious Metals Mining Companies

Faber said that the nomination of Janet Yellen to head the Federal Reserve could lead to an even bigger bubble.

"With all this collection of dovish professors at the Fed, that actually the asset-purchased programs could be increased—not tapered, increased," he said. "There's no great value in equities with very few exceptions, but it can become even more overvalued."

The Nasdaq was overvalued in the summer of 1999 but continued climbing until March 2000, Faber noted.

"The fact that the market goes up doesn't necessarily make it good value," he said.

Faber said that he saw value in mining companies, particularly precious metals.

- Marc Faber via a recent CNBC interview:

http://www.cnbc.com/id/101212211

A Colossal Bubble in the High End Sector

Known as a market bear, Faber also said bubbles are forming in some areas.

"I see a bubble in everything that relates to the financial sector," he said. "We have a bubble in bonds. We have a bubble in low-quality bonds. We have a bubble in equities. If you look at the financial sector as a percentage of the global economy, it's very large. We have a huge debt bubble, and it's only getting bigger. It's not getting any smaller.

"Everything that is in the financial sector is the bubble, and it's been pumped up by central banks."

Faber also called "a colossal bubble" in the high-end sector, adding, "Think diamonds and the prestige art and luxury."

While the luxury sector has been strong, costs have also been going up and competition has increased, Faber said. "The outlook is relatively favorable, but tastes may change."

- Marc Faber via a recent CNBC interview:

http://www.cnbc.com/id/101212211

Superbear Marc Faber Sees Opportunities

 

"At the present time, I think that Europe has had a very good move from the lows. It outperformed the U.S., and I would be a little bit careful to buy stocks indiscriminately at the present time because everything has moved up significantly. There's a lot of bullish sentiment"

- Source, CNBC:

http://www.cnbc.com/id/101212211

Financial Crisis Don't Happen Accidentally, They Are Inevitable

Authored by Marc Faber, originally posted at The Daily Reckoning blog,

As a distant but interested observer of history and investment markets I am fascinated how major events that arose from longer-term trends are often explained by short-term causes. The First World War is explained as a consequence of the assassination of Archduke Franz Ferdinand, heir to the Austrian-Hungarian throne; the Depression in the 1930s as a result of the tight monetary policies of the Fed; the Second World War as having been caused by Hitler; and the Vietnam War as a result of the communist threat.

Similarly, the disinflation that followed after 1980 is attributed to Paul Volcker’s tight monetary policies. The 1987 stock market crash is blamed on portfolio insurance. And the Asian Crisis and the stock market crash of 1997 are attributed to foreigners attacking the Thai Baht (Thailand’s currency). A closer analysis of all these events, however, shows that their causes were far more complex and that there was always some “inevitability” at play.

Take the 1987 stock market crash. By the summer of 1987, the stock market had become extremely overbought and a correction was due regardless of how bright the future looked. Between the August 1987 high and the October 1987 low, the Dow Jones declined by 41%. As we all know, the Dow rose for another 20 years, to reach a high of 14,198 in October of 2007.

These swings remind us that we can have huge corrections within longer term trends. The Asian Crisis of 1997-98 is also interesting because it occurred long after Asian macroeconomic fundamentals had begun to deteriorate. Not surprisingly, the eternally optimistic Asian analysts, fund managers , and strategists remained positive about the Asian markets right up until disaster struck in 1997.

But even to the most casual observer it should have been obvious that something wasn’t quite right. The Nikkei Index and the Taiwan stock market had peaked out in 1990 and thereafter trended down or sidewards, while most other stock markets in Asia topped out in 1994. In fact, the Thailand SET Index was already down by 60% from its 1994 high when the Asian financial crisis sent the Thai Baht tumbling by 50% within a few months. That waked the perpetually over-confident bullish analyst and media crowd from their slumber of complacency.

I agree with the late Charles Kindleberger, who commented that “financial crises are associated with the peaks of business cycles”, and that financial crisis “is the culmination of a period of expansion and leads to downturn”. However, I also side with J.R. Hicks, who maintained that “really catastrophic depression” is likely to occur “when there is profound monetary instability — when the rot in the monetary system goes very deep”.

Simply put, a financial crisis doesn’t happen accidentally, but follows after a prolonged period of excesses (expansionary monetary policies and/or fiscal policies leading to excessive credit growth and excessive speculation). The problem lies in timing the onset of the crisis. Usually, as was the case in Asia in the 1990s, macroeconomic conditions deteriorate long before the onset of the crisis. However, expansionary monetary policies and excessive debt growth can extend the life of the business expansion for a very long time.

In the case of Asia, macroeconomic conditions began to deteriorate in 1988 when Asian countries’ trade and current account surpluses turned down. They then went negative in 1990. The economic expansion, however, continued — financed largely by excessive foreign borrowings. As a result, by the late 1990s, dead ahead of the 1997-98 crisis, the Asian bears were being totally discredited by the bullish crowd and their views were largely ignored.

While Asians were not quite so gullible as to believe that “the overall level of debt makes no difference … one person’s liability is another person’s asset” (as Paul Krugman has said), they advanced numerous other arguments in favour of Asia’s continuous economic expansion and to explain why Asia would never experience the kind of “tequila crisis” Mexico had encountered at the end of 1994, when the Mexican Peso collapsed by more than 50% within a few months.

In 1994, the Fed increased the Fed Fund Rate from 3% to nearly 6%. This led to a rout in the bond market. Ten-Year Treasury Note yields rose from less than 5.5% at the end of 1993 to over 8% in November 1994. In turn, the emerging market bond and stock markets collapsed. In 1994, it became obvious that the emerging economies were cooling down and that the world was headed towards a major economic slowdown, or even a recession.

But when President Clinton decided to bail out Mexico, over Congress’s opposition but with the support of Republican leaders Newt Gingrich and Bob Dole, and tapped an obscure Treasury fund to lend Mexico more than$20 billion, the markets stabilized. Loans made by the US Treasury, the International Monetary Fund and the Bank for International Settlements totalled almost $50 billion.

However, the bailout attracted criticism. Former co-chairman of Goldman Sachs, US Treasury Secretary Robert Rubin used funds to bail out Mexican bonds of which Goldman Sachs was an underwriter and in which it owned positions valued at about $5 billion.

At this point I am not interested in discussing the merits or failures of the Mexican bailout of 1994. (Regular readers will know my critical stance on any form of bailout.) However, the consequences of the bailout were that bonds and equities soared. In particular, after 1994, emerging market bonds and loans performed superbly — that is, until the Asian Crisis in 1997. Clearly, the cost to the global economy was in the form of moral hazard because investors were emboldened by the bailout and piled into emerging market credits of even lower quality.

Above, I mentioned that, by 1994, it had become obvious that the emerging economies were cooling down and that the world was headed towards a meaningful economic slowdown or even a recession. But the bailout of Mexico prolonged the economic expansion in emerging economies by making available foreign capital with which to finance their trade and current account deficits. At the same time, it led to a far more serious crisis in Asia in 1997 and in Russia and the U.S. (LTCM) in 1998.

So, the lesson I learned from the Asian Crisis was that it was devastating because, given the natural business cycle, Asia should already have turned down in 1994. But because of the bailout of Mexico, Asia’s expansion was prolonged through the availability of foreign credits.

This debt financing in foreign currencies created a colossal mismatch of assets and liabilities. Assets that served as collateral for loans were in local currencies, whereas liabilities were denominated in foreign currencies. This mismatch exacerbated the Asian Crisis when the currencies began to weaken, because it induced local businesses to convert local currencies into dollars as fast as they could for the purpose of hedging their foreign exchange risks.

In turn, the weakening of the Asian currencies reduced the value of the collateral, because local assets fall in value not only in local currency terms but even more so in US dollar terms. This led locals and foreigners to liquidate their foreign loans, bonds and local equities. So, whereas the Indonesian stock market declined by “only” 65% between its 1997 high and 1998 low, it fell by 92% in US dollar terms because of the collapse of their currency, the Rupiah.

As an aside, the US enjoys a huge advantage by having the ability to borrow in US dollars against US dollar assets, which doesn’t lead to a mismatch of assets and liabilities. So, maybe Krugman’s economic painkillers, which provided only temporary relief of the symptoms of economic illness, worked for a while in the case of Mexico, but they created a huge problem for Asia in 1997.

Similarly, the housing bubble that Krugman advocated in 2001 relieved temporarily some of the symptoms of the economic malaise but then led to the vicious 2008 crisis. Therefore, it would appear that, more often than not, bailouts create larger problems down the road, and that the authorities should use them only very rarely and with great caution.

We Are In A Gigantic Speculative Bubble

"We have to be careful of these kind of exponentially rising markets," chides Marc Faber, adding that he "sees no value in stocks." Fearful of shorting, however, because "the bubble in all asset prices" can keep going due to the printing of money by world central banks, Faber explains to a blind Steve Liesman the difference between over-valuation and bubbles (as we noted here), warning that "future return expectations from stocks are now very low."

- Source, CNBC and Zero Hedge:

http://www.zerohedge.com/news/2013-11-29/marc-faber-we-are-gigantic-speculative-bubble

http://www.cnbc.com

Real US Economy Trampled

Authored by Marc Faber, originally posted at The Daily Reckoning,

I would like readers to consider carefully the fundamental difference between a “real economy” and a “financial economy.” In a real economy, the debt and equity markets as a percentage of GDP are small and are principally designed to channel savings into investments.

In a financial economy or “monetary-driven economy,” the capital market is far larger than GDP and channels savings not only into investments, but also continuously into colossal speculative bubbles. This isn’t to say that bubbles don’t occur in the real economy, but they are infrequent and are usually small compared with the size of the economy. So when these bubbles burst, they tend to inflict only limited damage on the economy.

In a financial economy, however, investment manias and stock market bubbles are so large that when they burst, considerable economic damage follows. I should like to stress that every investment bubble brings with it some major economic benefits, because a bubble leads either to a quantum jump in the rate of progress or to rising production capacities, which, once the bubble bursts, drive down prices and allow more consumers to benefit from the increased supplies.

In the 19th century, for example, the canal and railroad booms led to far lower transportation costs, from which the economy greatly benefited. The 1920s’ and 1990s’ innovation-driven booms led to significant capacity expansions and productivity improvements, which in the latter boom drove down the prices of new products such as PCs, cellular phones, servers and so on, and made them affordable to millions of additional consumers.

The energy boom of the late 1970s led to the application of new oil extracting and drilling technologies and to more efficient methods of energy usage, as well as to energy conservation, which, after 1980, drove down the price of oil in real terms to around the level of the early 1970s. Even the silly real estate bubbles we experienced in Asia in the 1990s had their benefits. Huge overbuilding led to a collapse in real estate prices, which, after 1998, led to very affordable residential and commercial property prices.

So my view is that capital spending booms, which inevitably lead to minor or major investment manias, are a necessary and integral part of the capitalistic system. They drive progress and development, lower production costs and increase productivity, even if there is inevitably some pain in the bust that follows every boom.

The point is, however, that in the real economy (a small capital market), bubbles tend to be contained by the availability of savings and credit, whereas in the financial economy (a disproportionately large capital market compared with the economy), the unlimited availability of credit leads to speculative bubbles, which get totally out of hand.

In other words, whereas every bubble will create some “white elephant” investments (investments that don’t make any economic sense under any circumstances), in financial economies’ bubbles, the quantity and aggregate size of “white elephant” investments is of such a colossal magnitude that the economic benefits that arise from every investment boom, which I alluded to above, can be more than offset by the money and wealth destruction that arises during the bust. This is so because in a financial economy, far too much speculative and leveraged capital becomes immobilized in totally unproductive “white elephant” investments.

In this respect, I should like to point out that as late as the early 1980s, the U.S. resembled far more a “real economy” than at present, which I would definitely characterize as a “financial economy.” In 1981, stock market capitalization as a percentage of GDP was less than 40% and total credit market debt as a percentage of GDP was 130%. By contrast, at present, the stock market capitalization and total credit market debt have risen to more than 100% and 300% of GDP, respectively.

As I explained above, the rate of inflation accelerated in the 1970s, partly because of easy monetary policies, which led to negative real interest rates; partly because of genuine shortages in a number of commodity markets; and partly because OPEC successfully managed to squeeze up oil prices. But by the late 1970s, the rise in commodity prices led to additional supplies, and several commodities began to decline in price even before Paul Volcker tightened monetary conditions. Similarly, soaring energy prices in the late 1970s led to an investment boom in the oil- and gas-producing industry, which increased oil production, while at the same time the world learned how to use energy more efficiently. As a result, oil shortages gave way to an oil glut, which sent oil prices tumbling after 1985.

At the same time, the U.S. consumption boom that had been engineered by Ronald Reagan in the early 1980s (driven by exploding budget deficits) began to attract a growing volume of cheap Asian imports, first from Japan, Taiwan and South Korea and then, in the late 1980s, also from China.

I would therefore argue that even if Paul Volcker hadn’t pursued an active monetary policy that was designed to curb inflation by pushing up interest rates dramatically in 1980/81, the rate of inflation around the world would have slowed down very considerably in the course of the 1980s, as commodity markets became glutted and highly competitive imports from Asia and Mexico began to put pressure on consumer product prices in the U.S. So with or without Paul Volcker’s tight monetary policies, disinflation in the 1980s would have followed the highly inflationary 1970s.

In fact, one could argue that without any tight monetary policies (just keeping money supply growth at a steady rate) in the early 1980s, disinflation would have been even more pronounced. Why? The energy investment boom and conservation efforts would probably have lasted somewhat longer and may have led to even more overcapacities and to further reduction in demand. This eventually would have driven energy prices even lower. I may also remind our readers that the Kondratieff long price wave, which had turned up in the 1940s, was due to turn down sometime in the late 1970s.

It is certainly not my intention here to criticize Paul Volcker or to question his achievements at the Fed, since I think that, in addition to being a man of impeccable personal and intellectual integrity (a rare commodity at today’s Fed), he was the best and most courageous Fed chairman ever.

However, the fact remains that the investment community to this day perceives Volcker’s tight monetary policies at the time as having been responsible for choking off inflation in 1981, when, in fact, the rate of inflation would have declined anyway in the 1980s for the reasons I just outlined. In other words, after the 1980 monetary experiment, many people, and especially Mr. Greenspan, began to believe that an active monetary policy could steer economic activity on a noninflationary steady growth course and eliminate inflationary pressures through tight monetary policies and through cyclical and structural economic downturns through easing moves!

This belief in the omnipotence of central banks was further enhanced by the easing moves in 1990/91, which were implemented to save the banking system and the savings & loan associations; by similar policy moves in 1994 in order to bail out Mexico and in 1998 to avoid more severe repercussions from the LTCM crisis; by an easing move in 1999, ahead of Y2K, which proved to be totally unnecessary but which led to another 30% rise in the Nasdaq, to its March 2000 peak; and by the most recent aggressive lowering of interest rates, which fueled the housing boom.

Now I would like readers to consider, for a minute, what actually caused the 1990 S&L mess, the 1994 tequila crisis, the Asian crisis, the LTCM problems in 1998 and the current economic stagnation. In each of these cases, the problems arose from loose monetary policies and excessive use of credit. In other words, the economy — the patient — gets sick because the virus —the downward adjustments that are necessary in the free market — develops an immunity to the medicine, which then prompts the good doctor, who read somewhere in The Wall Street Journal that easy monetary policies and budget deficits stimulate economic activity, to increase the dosage of medication.

The even larger and more potent doses of medicine relieve the temporary symptoms of the patient’s illness, but not its fundamental causes, which, in time, inevitably lead to a relapse and a new crisis, which grows in severity since the causes of the sickness were neither identified nor treated.

So it would seem to me that Karl Marx might prove to have been right in his contention that crises become more and more destructive as the capitalistic system matures (and as the “financial economy” referred to earlier grows like a cancer) and that the ultimate breakdown will occur in a final crisis that will be so disastrous as to set fire to the framework of our capitalistic society.

Not so, Bernanke and co. argue, since central banks can print an unlimited amount of money and take extraordinary measures, which, by intervening directly in the markets, support asset prices such as bonds, equities and homes, and therefore avoid economic downturns, especially deflationary ones. There is some truth in this. If a central bank prints a sufficient quantity of money and is prepared to extend an unlimited amount of credit, then deflation in the domestic price level can easily be avoided, but at a considerable cost.

It is clear that such policies do lead to depreciation of the currency, either against currencies of other countries that resist following the same policies of massive monetization and state bailouts (policies which are based on, for me at least, incomprehensible sophism among the economic academia) or against gold, commodities and hard assets in general. The rise in domestic prices then leads at some point to a “scarcity of the circulating medium,” which necessitates the creation of even more credit and paper money.

- Source, Marc Faber via the Daily Reckoning:

http://dailyreckoning.com/real-us-economy-trampled-by-white-elephants/

Gold and Gold Miners

Gold peaked at $1,921 an ounce in September 2011. Since then, it has been in a correction mode. Sentiment is bearish, but some countries are accumulating gold, notably China, which will buy an estimated 2,600 tons this year, exceeding annual production. Prices probably are bottoming.

Gold-mining shares aren't expensive either, although many exploration companies won't make it. If you buy the miners, look for companies that have raised capital already or have sufficient reserves. They are best-positioned to survive the next few years if there is no upturn in the gold price.

- Source, Zero Hedge:

http://www.zerohedge.com/news/2013-10-27/mark-faber-fears-stocks-could-be-dead-money-while-gold-has-bottomed

Stocks Could Be Dead Money For A While

"Since September 2011's $1921 peak, gold has been in correction mode," Mark Faber tells Barrons in this brief clip, but the overhwleminly bearish sentiment combined with the major accumulation (most notably by China) means "gold prices have probably bottomed," and some gold mining stocks are well positioned. While Faber has recently expressed concern at the potential for a major correction in stocks, he notes that there are pockets of value worth investigating including European Telcos and Indo-China travel-related stocks. However, the Gloom, Boom & Doom report writer warns that "stocks could be dead money for a while."

- Source, Zero Hedge:

http://www.zerohedge.com/news/2013-10-27/mark-faber-fears-stocks-could-be-dead-money-while-gold-has-bottomed

The Price of Gold is Bottoming

The Gloom, Boom & Doom writer says the price of gold is bottoming. Plus: How to profit from a new breed of Chinese tourist.

- Source, Barron's:

http://online.barrons.com/home-page

Marc Faber - US FED is Counter Productive

- Paul Ebeling via Live Trading News:

“The question is not tapering. The question is at what point will they increase the asset purchases to say $150-B, $200-B, or $1-T a month,” Mr. Faber said Monday in a TV interview.

The Fed is now buying $85-B of Treasury and mortgage bonds a month in what is known as quantitative easing is now dubbed (QE-Infinity).

When the Fed started buying long-term bonds, in what was called QE-1, it said the program would last 6 months. But it started another round of assets purchases, and then another, without setting a firm ending dated. That is why the latest reiteration of the program is called QE Infinity.

“Look, every government program that is introduced under urgency and as a temporary measure is always permanent,” Mr. Faber explained. “The Fed has boxed itself into a position where there is no exit strategy.”

The continuing QE is counterproductive, he noted, stating benefits flow only to a limited number of people.

And, although inflation continues to remain subdued, Mr. Faber sees “a colossal asset bubble” as well as a debt bubble.

“The quantitative easing is wind at the back of the economy,” he said. “But when they unwind quantitative easing, which they will ultimately have to do, it will be a head wind in the face of the economy. And then it will not be so much fun.”

Few believe the Fed will increase QE or make it permanent, more experts are predicting the central bank will maintain its current level of bond purchases into next year because of growth disruptions caused by the government shutdown.

A survey of 40 economists indicated the Fed will decide to reduce its purchases to $70-B a month in March 2014, to $25-B by July and end the purchases in October 2014.

The shutdown cut economic growth by 0.3 percentage points in Q-4, the economists said. It also suspended data collection the Fed uses to set policies.

It is going to be harder to signals from the data, Fed’s policies are tied to the data, they waiting for more confirmation the economy is moving in the direction of the Fed’s outlook, and they do not have data or the data is inconclusive, then the Fed will not feel confident enough in the outlook to make a clear determination to pare or not pare. This is a continuing story, stay tuned…

- Source, Live Trading News:

http://www.livetradingnews.com/marc-faber-us-fed-counter-productive-15011.htm#.UmwV8PmshcY

Deflationary Collapse is Coming

"One day this asset inflation will lead to a deflationary collapse one way or the other. We don't know yet what will cause it."

- Marc Faber via a recent CNBC appearance.

The World is in Gigantic Asset Bubble

Marc Faber, The Gloom, Boom & Doom Report, shares his views on how inflation has impacted global wealth.

- Source, Yahoo Finance:

http://finance.yahoo.com/video/world-gigantic-asset-bubble-faber-115400228.html

Wealthy At Big Risk

Faber suggested that, as the main beneficiaries of Fed policy, the rich would also be the hardest hit when the policy changes.

"If you think that high end will never lose anything …" he said. "This is all the result of quantitative easing. The Fed wanted to get the stock markets going. That's what QE-1, 2, and 3 are all about. Move people out the risk curve, and so far it's worked."

- Source, The Fiscal Times:

http://www.thefiscaltimes.com/Articles/2013/10/22/Wealthy-Big-Risk-If-Fed-Tapers-Marc-Faber

FED Policy Has Made the Wealthy Wealthier

"We are in a gigantic asset bubble around the world with prices of real estate having risen a lot," he said. "The high end is at record highs. In the Hamptons, in Mayfair, London, Hong Kong, Singapore, and we have a high inflation overseas, so I think that one day this asset inflation will lead to deflationary collapse one way or the other."

Faber echoes a growing number of financiers—from billionaire hedge fund manager Stanley Druckenmiller to Omega Advisors' Leon Cooperman—who argue that the Fed policy has made the wealthy wealthier, primarily through rising asset prices. Rising stock markets have fueled a record number of millionaires in the U.S., with 1.7 million new millionaires added in the past 12 months, according to Credit Suisse.

- Source, The Fiscal Times:

http://www.thefiscaltimes.com/Articles/2013/10/22/Wealthy-Big-Risk-If-Fed-Tapers-Marc-Faber

The World Will Face Massive Wealth Destruction

Faber has been predicting so-called "QE infinity" because "every government program that is introduced under urgency and as a temporary measure is always permanent." He also said, "The Fed has boxed itself into a position where there is no exit strategy."

The continuation of Fed bond-buying has helped support stocks, and the Dow Jones Industrial Average and S&P 500 Index are coming off two straight weeks of gains, highlighted by record highs for the S&P.

The world is in 'gigantic asset bubble': Faber
Marc Faber, The Gloom, Boom & Doom Report, shares his views on how inflation has impacted global wealth.While there may be little inflation in the U.S., Faber said there's been incredible asset inflation. "We are the bubble. We have a colossal asset bubble in the world [and] a leverage or a debt bubble."

Back in April 2012, Faber said the world will face "massive wealth destruction" in which "well to-do people will lose up to 50 percent of their total wealth."

- Source, CNBC:

http://www.cnbc.com/id/101127962

Quantitative Easing is Permanent

Marc Faber, The Gloom, Boom & Doom Report, explains why the thinks the Fed's quantitative easing program is permanent and is likely to increase.

- Source, CNBC:

www.cnbc.com

Central Bank Will Increase QE

Marc Faber, publisher of The Gloom, Boom & Doom Report, told CNBC on Monday that investors are asking the wrong question about when the Federal Reserve will taper its massive bond-buying program. They should be asking when the central bank will be increasing it, he argued.

"The question is not tapering. The question is at what point will they increase the asset purchases to say $150 [billion] , $200 [billion], a trillion dollars a month," Faber said in a "Squawk Box" interview.

- Source, CNBC:

http://www.cnbc.com/id/101127962

Janet Yellen to Run the Federal Reserve

Marc Faber discusses Janet Yellen running the Federal Reserve. According to Marc Faber, "The FED has boxed itself into a corner".

- Source, Bloomberg:

http://www.bloomberg.com/

Hold Physical Gold

I don’t know what the end game will be, and whether we’ll still be alive or whether we’ll be in wars or in revolutions as the worst. That’s why I want to hold some physical gold. There’s no point to hold physical gold somewhere in the sky. I would hold some physical gold in my proximity. In other words, I own some in Thailand and some in Hong Kong. I still have too much in Europe, but over time, I will move it to Asia.

- Source, Sprott Money Ask the Expert:

http://www.sprottmoney.com/

Government is Wasting Money, No Safe Haven Left

Swiss investor Marc Faber, publisher of the Gloom Boom & Doom Report, speaks to Bloomberg's Tom Keene and Sara Eisen about where to invest amid market uncertainty.

- Source, Bloomberg:

http://www.bloomberg.com/video/faber-there-s-no-safe-haven-left-yXPB~TC6TZ6JF9Okv8UCcQ.html

Chinese Growth May Slow to 4%

Marc Faber, Editor of the Gloom, Boom and Doom report explains why Chinese growth could slow down to a maximum of 4 percent. He also thinks gold, silver and Japanese equities are inexpensive.

- Marc Faber via CNBC:

http://video.cnbc.com

Where Gold is Heading

"When I look at the market action today, I would like to see the next few days, because it may be a one-day event. The markets are overbought. The Feds have already lost control of the bond market. The question is when will it lose control of the stock market. So, I'm a little bit apprehensive. I would like to wait a few days to see how the markets react after the initial reaction."

- Marc Faber via Bloomberg News

This WILL End Badly

I'm not thinking. I'm convinced. It will end very badly. It doesn't mean it has to be tomorrow, you understand. I'm a car mechanic and I tell you, “Look, your car has several problems.” In a week’s time, you’re telling me, “Look, I've been driving and it still works perfectly fine.” The car may still work for another year, or two years, or three years, and one day, you have a crash. And then, you will think back, “Maybe back then I should have repaired my car.”

- Source, Marc Faber via Sprott Money:

http://www.sprottmoney.com/

China is Encouraging Gold Ownership

I wouldn't say that I would trust them much more. I don’t trust any government, period. But if there are significant problems, I think they would come from over-indexness. In other words, the debts are too burdensome for the system, and then it leads to all kinds of symptoms.

In other words, if you can’t pay your debts, you may print money, or you default, or you increase taxation, or you take things away from the well-to-do people, the evil people that make so much money. Well, the Federal Reserve enables them to make so much money. That is a key difference. They didn't abuse the system; they just took advantage of a situation of money printing so their wealth increased more than the wealth of the middle class and the lower classes.

In the Western world, they’ll go after these well-to-do people and people that own gold. In Asia, I'm not so sure this will happen because Asia is increasingly coming under the umbrella, our own umbrella of China. The Chinese government has actually encouraged people to accumulate gold, and themselves, they are accumulating gold.

- Source, Marc Faber via Sprott Money:

http://www.sprottmoney.com/

The State is Getting More Bloated

Q: The turnaround in interest rates in the United States has failed, the Fed continues to print money. Is that good for stocks?

A: The Fed operates in 20 years a policy of monetary expansion.After the collapse of LTCM in 1997, after the collapse of the Nasdaq and after the real estate crisis, interest rates were kept artificially low - at virtually zero percent today. In March 2009 the U.S. stock index S & P 500 reached its nadir with 670 points. Now we are at 1700 points - a tripling! The artificially low interest rates and bond purchases have reduced the prices of stocks and real estate driven up. But the economic effect was relatively small.Milton Friedman wrote in "Capitalism and Freedom": The problem with government programs, they can always be started due to an emergency, but not abolished, when the emergency is over.Thus, the state is getting more bloated. For the Fed, it is becoming increasingly difficult to end their policy. And if they still do it one day, what will happen to the stock market?

Q: Which markets are still interesting because for stock investments?

A: If you press me 100 million euro in the hand and say that you have to invest in stocks, then I would probably select emerging markets, which has dropped so dramatically lately. Malaysia, Thailand, Hong Kong, Singapore - there are plenty of stocks that have a dividend yield of five percent. That's not huge, but still signaled that the cash flow of the company is okay. The Vietnamese market is interesting. Japan was not thrilled me, but the Nikkei could run better than other markets.

Q: Sounds underwhelming.

A: We are in a sideways market. This was back in the seventies when I started my career like that. Nevertheless, there are of course opportunities. Some industries developed tremendously in this sideways market. Did you have gold or energy stocks, you were rich.

- Marc Faber via Business Week:

http://www.wiwo.de/finanzen/geldanlage/marc-faber-physisches-gold-als-versicherung-gegen-unfug/8884908.html

Gold Bullion as Insurance Against Mischief

Business Week: Mr. Faber, you have to buy gold?

Faber: Yes. Owning physical gold is for me personally an insurance against mischief, driving the governments. In the worst-case scenario ...

With state bankruptcies ... or hyperinflation ...

Governments ... will not say: Oh, we have made a mistake. You will not find culprit.

And that will be the wealthy?

I do not think that the individuals' assets remain untouched.

Gold as an insurance against crises, this is the one. What if I want to speculate?

As an investor, you can make more money with gold mining stocks. Were virtually destroyed the last price drop and are now favourable to have.

- Source, Marc Faber via Business Week:

http://www.wiwo.de/finanzen/geldanlage/marc-faber-physisches-gold-als-versicherung-gegen-unfug/8884908.html

Business Talk with Marc Faber

Marc Faber Full Interview - Business Talk Interview Thai TV - September 20, 2013.

- Souce, Marc Faber via Thai TV

The Endgame Is A Total Collapse - But From A Higher Diving Board

With rumors this evening of the White House calling around for support for Yellen, Marc Faber's comments today during a Bloomberg TV interview are even more prescient. Fearing that Janet Yellen "would make Bernanke look like a hawk," Faber explains that he is not entirely surprised by today's no-taper news since he believes we are now in QE-unlimited and the people at the Fed "never worked a single-day in the business of ordinary people," adding that "they don't understand that if you print money, it benefits basically a handful of people." Following today's action, Faber is waiting to seeing if there is any follow-through but notes that "Feds have already lost control of the bond market. The question is when will it lose control of the stock market." The Fed, he warns, has boxed themselves in and "the endgame is a total collapse, but from a higher diving board."

- As seen on Zero Hedge:

http://www.zerohedge.com/news/2013-09-18/marc-faber-warns-endgame-total-collapse-higher-diving-board-now

Marc Faber on Janet Yellen

"She will make Mr. Bernanke look like a hawk. She, in 2010, said if could vote for negative interest rates, in other words, you would have a deposit with the bank of $100,000 at the beginning of the year and at the end, you would only get $95,000 back, that she would be voting for that. And that basically her view will be to keep interest rates in real terms, in other words, inflation-adjusted. And don't believe a minute the inflation figures published by the bureau of labor statistics. You live in New York. You should know very well how much costs of living are increasing every day. Now, the consequences of these monetary policies and artificially low interest rates is of course that the government becomes bigger and bigger and you have less and less freedom and you have people like Mr. De Blasio, who comes in and says let's tax people who have high incomes more. And, of course, immediately, because in a democracy, there are more poor people than rich people, they all applaud and vote for him. That is the consequence."

- Source, Marc Faber via a recent Bloomberg Interview

Stocks Aren't Bargains Anymore

Emerging Asia's shares may have plunged recently, but with the bull market getting long in the tooth, it's not the time to buy, said Marc Faber, the publisher of the Gloom, Boom & Doom report.

"I don't think there's a lot of money to be made in equities for the next 12 to 24 months," Faber, also known as Dr. Doom, told CNBC.

"We are in a bull market that is more than four years old," with the rally beginning in March 2009, he noted. "Four years into the economic expansion, I don't think that stocks are the greatest bargain anymore."

- Source, CNBC:

http://www.cnbc.com/id/101017828

How to Protect Yourself in a Collapse

A deflationary bust, whenever it may happen, it may only happen in 10 years, but it would seem to me that this will be the eventual outcome. It could also happen tomorrow or in 10 years. It is the opposite of an increase in asset prices from inflation. If you look at how asset prices have increased since 1980, it has been highly irregular. Stocks rose strongly until 1987, then they had a setback. After ’87 some markets made new highs but others didn’t. Then you have some regions like Latin America doing particularly well between 1988 and 1994. Growth shifts around and asset prices rise, but with different intensity. We had a collapse in the NASDAQ, but other stocks continued to go up until 2007, whereas the NASDAQ was still 50% below its high and is still today even 40% below its high in 2000. So I think in a collapse what happens is that, over time, everything goes down but some things go down more than others. Traditionally I would say the best thing in a collapse is to hold cash. But then the question arises about what kind of cash you should hold and in what form. Because if you have bank deposits, and I think what happened in Cyprus is a blueprint, maybe you have bank deposits and maybe not all of it will be paid to you. In some sovereign countries, maybe it will be paid to you and in others not, depending on the quality of the banking system. But in general if there was a collapse, then I think all banks would suffer. Then I would imagine that cash would not be the safest investment. And then the currency choice is also important. Would you put all of your money into US dollars? Yeah maybe the US dollar will be strong for another 3 months, maybe another 3 years, but maybe eventually it will be a very weak currency as I expect. Then maybe you turn around and say, “Well, weak, but weak against what?” Maybe not against the others because all of the others also print money. The dollar, paper money, may be weak because they all print and purchasing power will all go down in concert. So maybe gold is part of the solution, and maybe you would need to own some real estate and then you have to think “OK, real estate, but where?” If you lived in Germany in 1900, and we are now 2013, if you had all of your money in cash, you lost your money 3 times: in World War I, then hyperinflation, then in World War II, so cash was not a desirable alternative nor government bonds which were also lost 3 times. If you owned shares in the leading German companies, most of them are still in business, they may not have been the best investments, but you still have these shares so you preserved your wealth. If you had real estate, then the question arises, if your grand-parents had the bad luck to own the real estate in East Germany, you lost it all after World War II, but if you have the fortune to have it in West Germany, then you are ok. So to people who say that real estate is safe, yes, to some extent, but you also need to diversify, it is like a stock portfolio. You should not necessarily put all of your money in one stock, but you should have a diversified portfolio because companies also die and go out of business eventually. When I started to work in 1970, 2 of the most respected companies to buy and put in a drawer and never look at again were Polaroid and Kodak and both are out of business. So there is the question of obsolescence and the same happens to real estate; for political reasons you may lose it.

So I would say we do not know how the world will look in 5 or 10 years, nobody has a clue. There are some people that will say that it will look this way or that way. I am very skeptical of any forecasts, especially long term forecasts. There are some trends that we can see about how society has changed in the last 30 years. I moved to Asia 40 years ago and I can see that Asia has developed a lot and grown a lot and we can see this. But I do not know if in 5 years or 10 years if Asia will continue to develop at the pace it developed in the last 40 years. I can see very clearly that until now, the middle class and the poor people admired the successful rich people. Now, partly under Western influence, there are some misgivings about the distribution of income and wealth. We see this very pronounced in Hong Kong and Singapore where there are a few families that own a great deal of the properties that are incredibly rich and the people pay very high rents and their real incomes, in other words incomes adjusted for inflation, have been going down. So these people ask themselves these questions and then go and demonstrate. So we have some social problems in Asia. Of course, as I have mentioned, we have some geopolitical problems in the world, obviously in the Middle East. We have this rise of the Chinese geopolitical influence in the world and the old masters, the US and Europe, they see their influence waning and they do not like it. So also there, tensions will arise.

- Source, The Prospect Group:

http://www.theprospectgroup.com

Let's Take the Gold Away

I wonder what will happen one day. Let’s take the worst-case scenario. We have either a social unrest, a revolution, or war. Governments decide, “Oh, the price of gold is going up substantially, let’s take it away from people.” In other words, you expropriate it. I think it will, at that stage, not matter very much where you hold your gold, except it may matter where you hold your gold in terms of sovereign state. My sense is that the Asian countries are less likely to take the gold away than Western countries.

- Source, Sprott Money Ask the Expert:

http://www.sprottmoney.com/

A Correction is Coming Soon

Find out why Marc Faber thinks the S&P is about to correct, with CNBC's Jackie DeAngelis and the Futures Now Traders.

- Source, CNBC:

http://video.cnbc.com

India Faces Sovereign Rating Downgrade Threat

Marc Faber, editor and publisher of 'The Gloom, Boom and Doom' report, says he fears that India faces a real threat of a sovereign downgrade given the worsening macro environment accentuated by a weakening rupee. He, however, says the current situation should not be equated to the 1997-98 Asian financial crisis.

- Source, NDTV Profit:

http://profit.ndtv.com/videos/news/video-india-faces-sovereign-rating-downgrade-threat-marc-faber-288337

A Completely Planned Economy

Swiss investor and economic guru,Marc Faber, joins Rick from Hong Kong to discuss the "race to the bottom" that is the universal money printing by the world's central banks and why he ultimately foresees the U.S. transitioning into a completely planned economy.

- Source, Tru News

Marc Faber on the FED Not Tapering

"My view was that they would taper by about $10 billion to $15 billion, but I'm not surprised that they don't do it for the simple reason that I think we are in QE unlimited.The people at the Fed are professors, academics. They never worked a single life in the business of ordinary people. And they don't understand that if you print money, it benefits basically a handful of people maybe--not even 5% of the population, 3% of the population. And when you look today at the market action, ok, stocks are up 1%. Silver is up more than 6%, gold up more than 4%, copper 2.9%, crude oil 2.68%, and so forth. Crude oil, gasoline are things people need, ordinary people buy everyday. Thank you very much, the Fed boosts these items that people need to go to their work, to heat their homes, and so forth and at the same time, asset prices go up, but the majority of people do not own stocks. Only 11% of Americans own directly shares."

- Source, Marc Faber via Bloomberg News

Higher Education is Almost Always Useless

If you look to hire anybody today you will find thousands of people with MBAs and they all want to work for you. The question is, how much can they produce for you. I do not know the answer. If on the other hand, I look for a reliable electrician, carpenter, or plumber, it is very difficult to find. So I think that the generation that grew up say during the depression and in the 1950s, when a worker in America had a very high social standing and could travel to Europe, and with the prevailing exchange rate spend a lot of money in Europe. The view then became, whether it came from the government, the media, or from the workers themselves, was that a workman’s job is a lower class job. We want our children to be academics. A lot of people are not suited to be academics or they do not know how to apply the knowledge they acquired in universities, if anything is acquired, and that is a very big question. So you now have an army of people that came out of universities, and I tell you, a lot of these people I would not dream of hiring. They are completely useless. I am not saying that everybody is useless, some have a very good education and a very good personality. But the ones that I would hire I would hire them with or without a university degree. I would look at them and say, “Can they do something? Are they effective? Can they accomplish something or not?” I would not even ask them if they have a university degree, I am not interested in that.

In general, if you want to be a medical doctor, I can understand that you need to go to medical school. If you want to be an engineer or an architect, I can understand you need to go to a technical college. If you want to be a teacher, then maybe it is useful to know something and go to a university. But for most people, I do not think that education is that important. It is probably important in that, at least when I studied, you were given a job to do or a paper to do, maybe on a subject that you had no idea about. Then you had to go and study and learn about this subject. Through this you may learn how to learn and how to talk about things about which you have no clue, which is very important in business.

- Source, The Prospect Group:

http://www.theprospectgroup.com

Manipulation in the System

I'm aware of some people, including Eric Sprott, that believe that there is manipulation in the system. Where I tend to agree with him is that maybe central banks don’t have all the gold they claim they have, because something must be funny. The Germans have asked for the gold to be returned to Germany. Why would it take eight years to do that? There’s no reason. You can do it in three months.

As I said, I don’t know, but one of the reasons I would be inclined to believe in some manipulation would be, let’s say you’re a central bank, like the Fed. You don’t have the gold that you declared and you know that you have to buy it back at some point. Then, you may wish to manipulate the price down until you can cover your short position in gold at a reasonable cost. There will still be losses, but you can cover them at a reasonable cost. That is really the only reason I could see why a central bank would want to depress the price of gold.

- Source, Sprott Money Ask the Expert:

http://www.sprottmoney.com/

Don't Believe in Government

Worldwide, you shouldn't believe governments, period. I think you should believe market action. When markets go up, they give you a message, and when the markets go down, they give you a message. The only problem nowadays is that the messages from markets have been distorted by very significant government intervention into the free market, so you can’t rely on the information provided by the market participants any longer.

- Source, Sprott Money Ask the Expert:

http://www.sprottmoney.com/

Higher Education and Protecting Yourself in the Coming Economic Collapse

Marc Faber is an economic authority on global macroeconomics, capital markets, and investment and the Editor & Publisher of "The Gloom Boom & Doom Report". He spoke with The Prospect Group about university style formal education, the coming economic collapse, and the options people to preserve their wealth.

- Source, The Prospect Group:

http://www.theprospectgroup.com

We Have a Huge Imbalance in the World

I think that’s an issue. I am not convinced that someone in the US really sits and thinks, “What if we lose reserve currency status?” Clearly the US has a huge advantage in the sense that they can print money. Let’s say they go to war in Afghanistan, they actually do not pay for it, they just print the money. They go to war in Iraq, for now, they do not pay for it. The government prints money, creates large deficits, and the Fed buys this. It will have unintended consequences in the future, but for now it is OK. Other countries cannot do that. If you are a member of the EU, let’s say you are Greece or Spain, you cannot do that. If you wanted to do that you would have to leave the EU. In emerging economies if you print money, then the currency collapses and then you have import inflation. So the US has an advantage from the US dollar being a reserve currency. My view is that the dollar will stay as the reserve currency for a while, but I mentioned that in my view that eventually the financial system will collapse and we will move towards a new kind of arrangement with, most likely, the backing of some precious metals for currencies or with automatic stabilizers so that you have countries that are forced to essentially have a contraction if they have trade deficits and an expansion if they have trade surpluses to balance the trade surpluses and deficits. Today we have a huge imbalance in the world with the US having huge deficits externally and the rest of the world with surpluses.

- Source, The Prospect Group:

http://www.theprospectgroup.com

The FED Knows Nothing Else but to Print

I don’t pay much attention to what the Fed publishes. When you read their statements, they are completely confused and very vague. In other words, all is data-driven. If the stock market dropped ten, 20 percent, for sure there would be more QE programs.

On the other hand, if the economy is very strong, they may taper off somewhat. You get the picture. The worse the situation is in the US, whether regarding asset markets or the economy, the more QE there will be. The Fed doesn't know anything else.

- Source, Sprott Money Ask the Expert:

http://www.sprottmoney.com/news/ask-the-expert-marc-faber-july-2013

The FED is Completely Clueless

I think that the Fed is completely clueless. It is composed by a group of academics. Most of them, or I would say 95 percent, have never worked in a regular job in their lives. They all went to universities and then they went to the Fed or other financial institutions. They have no clue what makes an economy move.

Having printed this much money, and we are essentially in QE4 and QE unlimited, the results have been very dismal. I think the Fed is scratching their head at the present time and can’t believe that when their objective was actually to lower interest rates from July 25 of last year, the ten year Treasury note yield has gone up from roughly 1.4% to, a few days ago, 2.7%. We have an almost doubling of the interest rate because of their QE programs. I think that really makes them scratch their heads and wonder, “What did we do wrong? What do we need to do? Do we taper, or do we have to increase asset purchases?”

- Source, Sprott Money Ask the Expert:

http://www.sprottmoney.com/news/ask-the-expert-marc-faber-july-2013

The FED Will Print More Money

I don’t think they will end QE. I rather think they will have to increase it because as you print money or as you purchase assets, from a central banking point of view, it loses its impact over time. In order to keep the impact going, you have to essentially increase it. I believe that the Doveish members of the Fed will print more money. Especially after the resignation of Mr. Bernanke early next year, when he will be replaced, there will be even more Doveish members.

- Source, Sprott Money:

http://www.sprottmoney.com/news/ask-the-expert-marc-faber-july-2013

1987 Style Crash is Coming

"In 1987, we had a very powerful rally, but also earnings were no longer rising substantially, and the market became very overbought," Faber said on Thursday's "Futures Now." "The final rally into Aug. 25 occurred with a diminishing number of stocks hitting 52-week highs. In other words, the new-high list was contracting, and we have several breaks in different stocks."

The Stark Contrasts Of Mongolia's Economic Boom

Mongolia is in the middle of an economic boom. In the last ten years the GDP has more than doubled, and Marc Faber has said it could be the "Saudi Arabia of Asia" due to its tremendous mineral resources.

But all this growth hasn't come without problems, namely the "resource curse" where economies become unstable because of over reliance on one sector. Political problems are emerging, and neighbouring China's thirst for gold is leading to so-called "ninja miners" who work, dangerously and illegally, under the cover of darkness...

- Source, The Business Insider, read the full article here:

http://www.businessinsider.com/the-stark-contrasts-of-mongolias-economic-boom-2013-8

Has The FED Been Effective?

It is interesting that the money that has been printed essentially has not flown into the pockets of the workers or the middle class. We have precise statistics about who benefited from the money printing. Asset inflation has benefited a maximum of 3% or 4% of the population. It has benefited less than 1% meaningfully because if you look at real estate prices last year in the Hamptons, they were up 35% to record highs. Sandy Weill bought a condo in New York in 2007 for $43m at the peak and he sold it for $88m last August. Steve Cohen, a hedge fund manager, bought a condo for $24m on the East side and he is now putting it on the market for $115m. That price has gone up, the Mayfair economy or the luxury economy has gone up. But if you look at Las Vegas, or anywhere in the US that is not high end, it has recovered somewhat, but it is still way below the peak. But we also see this say in Asia. Recently I was in Bangkok and I have never seen such a big Ducati agent in the world. A Ducati is an expensive toy by Thai income standards. Driving around Thailand, you see a large number of Bentleys and Maseratis and Ferraris and BMWs and the works. These are expensive cars in this country because there is a 100% import duty on these cars. Whereby I think a lot of well to do people did not pay the import duty.

- Source, The Prospect Group:

http://www.theprospectgroup.com/executivefocus/profile/marc-faber-on-shadow-banking-market-psychology-the-global-impact-of-american-monetary-policy/81781/

China vs The United States

This is quickly becoming the favourite geopolitical parlour game. The Prospect Group put the question to Marc Faber and he was more than happy to oblige them with his thoughts on the subject.

Faber’s take on the two is the gap is narrowing but the US still remains the military superpower in the world. It is just quickly losing its perch as the number one market in the world. Which is to be expected according to Faber. China’s population warrants such a perch.

It would be odd for them not to be the leader in the mobile phone market of the refrigerator market if the country was fast growing.

What will cause the most tensions is the pivot towards Asia by the United States. With China flexing its military muscle, the US has been more willing to push out with its fleet and that has caused tensions to flare. Already, territorial disputes have erupted between Japan and China over an island chain.

Faber’s thought is that the US should let the countries resolve it on their own, but seeing as the US has strict alliances with countries such as Japan, that is unlikely. Plus, it is in the US national security interest to keep sea lanes open and controlled essentially by the US Navy.

Overall, the interview is an interesting listen and runs a pretty good clip. Clocks in at around 9 minutes so you’re not subjected to a lot of fluff. Plus this is Marc Faber. You know you’re going to get a steady diet of how he sees the world unfolding.

- Source, Trade the News, read the full interview here:

http://www.tradethenewsroom.com/marc-faber-on-the-growing-china-us-tensions-2603

The Issue of Abenomics

One of the main questions from the prospect group was in regards to Asian Central Banks incurring large losses due to local currency appreciation against foreign currency reserves. Faber pushes back on the question, saying that any losses incurred are small in comparison to those gained. Plus the protectionism being employed will quickly reverse the trend anyways.

He takes China as a prime example. Obviously they are the elephant in the room when it comes to global economies with massive foreign currency reserves. Over the past 12 years, they have build up over three trillion in mostly dollars and other currencies while their local currency did appreciate in value. So, they do have a loss.

Faber flips the argument here and says that loss may in fact be China’s gain. They enjoyed a massive trade surplus with the United States and the rest of the world. And with it came a huge transfer of technology to China as the country became the main producer.

So the small loss China incurred on the foreign exchange market netted it a huge transfer of wealth when it came to real wages, jobs and growth. Marc Faber sees it as a net positive when it comes down to brass tacks of either or.

Then there is the issue of Abenomics. Asian Central Banks are taking the Federal Reserve Experiment and going wild with it. In Japan, the BOJ is rapidly devaluing the yen to try and break the cycle of deflate. Its neighbour to the west Korea is already thinking of following suit. Faber wonders how long China will be able to hold off?

- Source, Trade the News Room:

http://www.tradethenewsroom.com/marc-faber-on-the-growing-china-us-tensions-2603

No Rush To Buy Emerging Market Stocks

Investment Guru Marc Faber says that one should be selling emerging markets when the foreigners are heavy buyers and vice versa. "So investment banks turning negative on India is indeed a positive for country," he says, adding that US may outperform emerging markets.

- Source, Bloomberg tv:

http://www.bloomberg.com/tv/

The Shadow Banking System

I have argued for many years that because of easy monetary policies, we had rapid credit growth in the Western world and also in other countries, whereby, after the Asian crisis, there was some de-leveraging in Asia. But in general, if you look at the world, say compared to the 1950s, 1960s, and even the 1970s, it is very clear that financial markets, official and less official, have grown disproportionately to the real economy. In other words, you have say, a global GDP of $60tr or whatever it is and you have financial markets that turn $60tr around in a week or less. I believe that one day this financial bubble will have to adjust on the downside. Either it will adjust on the downside because we have an inflationary burst or because we have a collapse of the system. We do not know exactly how the end game will be played. But in general, I cannot see how the derivatives market will continue to exist for the next 5,000 years. It has got to end one day and when it ends one day, either through war or through a financial collapse, it will be very painful.

- Source, The Prospect Group:

http://www.theprospectgroup.com/executivefocus/profile/marc-faber-on-shadow-banking-market-psychology-the-global-impact-of-american-monetary-policy/81781/

Through War or Financial Collapse This Will End One Day

"Marc Faber is an economic authority on global macroeconomics, capital markets, and investment and the Editor & Publisher of "The Gloom Boom & Doom Report". He spoke with The Prospect Group about easy monetary policy and credit growth, asset price volatility, and the Fed."

- Source, The Prospect Group:

http://www.theprospectgroup.com/

Sovereign Defaults Are Coming

"If you look back at 2007, before the crisis occurred, and today, the level of credit in the world has increased. The imbalances have also increased.

And the sovereign credit of countries has essentially diminished in quality. Now we have a huge bond market rally because of artificially low interest rates, but I think the next stage in the rolling crisis that we will have will be sovereign defaults."

- Marc Faber via King World News:

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/7/6_Faber_-_Brace_For_Financial_Destruction_%26_Sovereign_Defaults.html

We Have Wage Deflation

"Well, I think investors have a misconception about what inflation is because it is essentially an increase in the quantity of money and credit. We have wage deflation in the world in real terms, for sure. In other words, real wages are going down and the cost of living everywhere are going up. That is why you have social unrest in North Africa, in the Middle East, in Turkey, in Brazil, and it will spread because the average person on the street hasn't participated in the huge asset inflation that has been going on in high-end properties, Mayfair properties, Fifth Avenue, Madison Avenue, the Hamptons and in equities and until recently in bonds and commodities."

- Source, Business Insider:

http://www.businessinsider.com/marc-faber-father-christmas-bernanke-qe99-2013-6

Central Bankers Are a Despicable Class of People

At least if a hedge fund loses money, he stands up and says, ‘Yes, I f*cked up, or I messed up. I lost money.’ But the central bankers will always, always find an excuse that they are not guilty of any mistakes in their policies. It’s a very vicious and despicable class of people (central bankers).

- Marc Faber via a King World News Interview:

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/7/5_Marc_Faber_-_This_Will_End_In_Disaster.html

The FED is Completely Clueless!

Last week I had the honour of interviewing the great Marc Faber. Marc Faber is best known for his monthly investment newsletter, “The Gloom, Boom and Doom Report”. He is regularly seen on major financial news channels such as Fox, Bloomberg, CNBC, and many more. I was able to ask Marc a number of questions that weight heavily on the minds of our viewers. These topics range from the manipulative acts of the Federal Reserve, to the possibility of an outright gold confiscation. I was also able to ask Marc how he sees this insane experiment with fiat money ending. Below are a few of the questions you will hear throughout this interview:

• Do you believe that the Federal Reserve will end QE in the future? If so what would happen to our financial system? 

• Do you believe that the United States is still the world’s dominate financial power or do believe that China is now running the show? 

• Do you think physical gold and silver are protected from confiscation if they are held outside the banking system and stored at a respected facility like Brink’s? 

• If fiat money printers such as the United States and Japan print unlimited amounts, what will prevent them from printing many more billions and simply buy gold bullion as their final desperate act? 

• How do see this all ending Marc? 

In the end it became shockingly clear that Marc believes central banks around the world will continue printing money until the system comes crashing down. They know nothing else. Not surprisingly, Dr. Faber has little faith in the ability of central bankers. Plain and simple, he sees them as being completely incompetent. As always the controversial Marc Faber raises some intriguing points that make you stop and think. Regardless of whether you agree with his analysis or not, he makes for an interesting interview. I hope you enjoy. Thanks.

- Source, Sprott Money Blog:

http://sprottmoneyblog.com/

This Will End in Disaster

It’s going to end in disaster. But it’s not going to end at the hand of central bankers because I know very well how they think....

They are not going to tighten monetary policies any time soon. They are in the driver’s seat in the sense that they will always find an excuse to print more.

They will say, ’OK we have to increase the purchases of assets because now the yield on Treasury bonds has gone up substantially, from less than 1.5% on the 10-Year note a year ago, to 2.68% as of today.’ So they will say, ‘That may damage the economy, so we have to buy more assets.’

And if they do that then the inflation rate may pick-up, and real wages may decline even more. Then they will say, ‘Well, we didn’t do enough because the population isn’t doing well.’ They will always find an excuse to print more. And as you said, it will end in disaster. There is no doubt about that.

- Marc Faber via a recent King World News interview, read the full interview here:

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/7/5_Marc_Faber_-_This_Will_End_In_Disaster.html

Money Printing Only Postpones the Problem

The Federal Reserve and other central banks around the world, they think they can essentially steer economic activity by printing money. This money printing has a number of unintended consequences that will eventually be very costly.

It’s not the first time the Fed has intervened. They intervened after the S&L crisis, after the Tequila crisis, after LTCM in 1998, and then after (the year) 2000 when the Nasdaq collapsed. They kept interest rates artificially low which led to a credit bubble, the housing boom and subsequent collapse.

You can postpone the problems by printing money, but then the problem comes back to an even larger extent.

- Marc Faber via a recent King World News interview:

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/7/6_Faber_-_Brace_For_Financial_Destruction_%26_Sovereign_Defaults.html