The Risk of Global Collapse

US Fed not expanding asset base; dollar overvalued

Asserting that the central banks in Europe and Japan will keep feeding excess liquidity to the world, Marc Faber believes that the US Fed is not expanding its asset base. While European Central Bank and Bank of Japan are doing so, flows out of Europe and Japan will lead to weakening of the euro and yen and strengthen the dollar, he said. 

The editor of Gloom Bloom & Doom Report told CNBC-TV18 that contrary to popular opinion that emerging markets have performed poorly in 2016, any market outside the US looks very attractive now especially in terms of valuations. 

Investors are too bullish about the US, negative about emerging markets, and are neglecting Japan and Europe, he said. India is much better placed and has greater potential to grow than Western economies, Faber said. Corporate profits have still room to expand, he added. Fundamentally, the dollar is overvalued and valuations in US markets are at historical highs, he said. Any further strengthening of the US dollar will curb the US Federal Reserve’s capability to raise interest rates, Faber said. 

The Fed on Thursday raised rates by 25 basis points and in the past indicated the possibility of three interest rate hikes in 2017. Oil and mining companies, financials and tech figure among his favourite sectors for 2017, he said, adding that he sees a lot of upside potential in agricultural commodities.

- Source

Marc Faber's Contrarian Trump Strategy: Buy Gold, Emerging Markets

Marc Faber, the editor and publisher of “The Gloom, Boom & Doom Report,” says the savvy investors will know the right moves to make amid the current rally as the stock market continues to bask in Donald Trump’s election victory.

Faber suggested many investments that appear contrarian, including gold and emerging markets. He sees opportunity in some other beaten-down assets, such as the euro and bonds.

However, he warned investors to stay away from assets that have rallied, like the U.S. dollar.

Shrewd investors should seek stocks that are "oversold, and avoid the sectors that are overbought," he told CNBC.

- Source

Marc Faber: A Trump Victory is Much Better for U.S. Assets

Gloom, Boom and Doom Report Editor Marc Faber and WL Ross & Co. Founder Wilbur Ross discuss the election's impact on the markets and economy.

- Source

I don't think big corruption comes from bank notes

Anuj: I remember when I can to Chiang Mai to interview you, you said you would vote for anyone but Hillary Clinton. You would be a happy man today. 

A: Yes, and I still would do the same. 

Latha: But what do you do as a stock picker? This evening would you be looking at buying any of the emerging markets, developed markets? What are you doing with your money today? 

A: I am not interested in today. When I invest money, I am interested in the next 5-10 years and I told you always over the last two years, I would rather invest in India than in the United States, which is an over-valued, over-promoted market. I would also rather invest in other emerging economies and in Europe than in the US. 

Sonia: So, since you mentioned that you would invest in India rather than other economies, I wanted to ask you if you have been following the latest news flow that we have about the clamp down on black money that we had overnight. How much of a positive do you think it could mean in the longer run for India? 

A: It is negative in the longer run. I do not believe the big corruption comes from bank notes. The big corruption is like Hillary Clinton, she carries around suitcases. 

Latha: But do you expect there is going to be any protracted downturn since the markets were not prepared for a Trump victory. Are we going to see protracted, in terms of time period as well, losses in equity markets?

 A: My view is that regardless who would have won, the stock markets would have gone down. But, the market made a high a year ago at 2,134 on May 25, and then we went down and in January of this year, we dropped to 1,810 and then we recovered and made a new high at 2,193 on the Standard and Poor (S&P). If the market drops towards the low of this year, which is 1,810, the Fed will launch quantitative easing (QE)-IV. The Fed will support the stock market. The moment it drops 10-20 percent, they will support the stock market.

- Source, Money Control

Commodity prices will strengthen

Demand for infrastructure in emerging Asia and fiscal spending in the West will push commodity prices higher, says The Gloom, Boom & Doom Report's Marc Faber.

- Source

Obvious Trump trade is to own Russian and...

Marc Faber, The Gloom, Boom & Doom Report Editor & Publisher, weighs in on the market reaction to Donald Trump's presidential victory and what he sees as opportunities in his...

- Source, CNBC

Marc Faber on why commodity prices will rise, oil to hit $70 soon

Long-depressed commodity prices are set to finally head higher for two key reasons, Marc Faber, the publisher of the Gloom, Boom & Doom report, told CNBC.

It all boiled down to the need for infrastructure, said Faber, who is also known as Dr. Doom for his usually pessimistic views.

"The need for infrastructure in Asia is huge. They have to build roads. You go to Jakarta, Manila, the infrastructure is a catastrophe," he told CNBC's "Street Signs," adding that to accommodate tourists, Asian countries needed to build airports and railways. "You cannot ship that many people by airplanes. There's no space."

The second reason commodity prices were set to rise was because developed markets were also set to boost their spending, he said.

"In the western world, they believe — I'm not saying it's the right belief — but the belief among economists and the neo-Keynesian and the interventionists is that monetary policy alone cannot lift the global economy out of its slow growth mode," he said. "So they have to go and build infrastructure and boost governments' fiscal deficits."

That was also set to send commodity prices higher, he said.

"This combination of infrastructure in emerging economies and infrastructure spending in the developed economies of the U.S. and Europe, in my opinion, will mean that inflation will actually surprise on the upside," he said.

When it comes to one particular commodity – crude oil - Faber also pointed to economic growth in emerging Asia as boosting prices, adding that oil could easily test $70 a barrel in the not too distant future.

U.S. oil futures were down 0.55 percent at $50.57 a barrel, while Brent futures were off 0.41 percent at $51.58 at 11:42 a.m. HK/SIN.

- Source, CNBC

Dr Doom Marc Faber sees Trump win as boom for commodities and Russian assets

He said that there is another notable trade investors should be eyeing in connection with the Trump win.

"The obvious trade with a Trump victory is to own Russian and Kazakhstan assets — bonds and equities," Faber said. "That is the obvious trade for the simple reason that Mr. Trump has a more benign view of the world and respects the perspective of foreign leaders."

As for the Trans-Pacific Partnership, which Trump has notoriously opposed over the course of the presidential race, Faber believes it is off the table.

"But," he noted, "many Asian countries were not all that much in favor of TPP to start with ... so I don't think that it's a negative."

Faber said nowadays, Asia is "China-centric" — in other words, more dependent on the Chinese economy than that of the United States.

Trump's stance on China has been largely negative over the course of his campaign. His seven-point trade plan promises to bring trade cases against the Asian nation and accuses it of currency manipulation, among other claims.

The Republican won the office of president Wednesday morning after a highly contested and polarizing race against his Democratic opponent, Hillary Clinton.

- Source, CNBC

This is Going to End Badly, Buy Gold Now

Most assets by traditional valuations are overpriced. Now are they overpriced compared to zero interest rates or negative interest rates? If you take the 10-year German bonds or the 10-year Swiss bonds or the 10-year Japanese bonds, you have no or negative yield. But you can buy equities that give you a dividend yield of 2 percent or more. Then you say stocks compared to negative interest rates are a bargain.

But they are not cheap by traditional valuation methods.

However, I think it’s dangerous for someone to say: “We all agree that it will end badly, so we keep 100 percent of our money in cash.” First, you have to decide which cash.

Number two, we don’t know what the time frame until it ends badly is. And in an extreme money-printing environment, the Dow Jones Industrial Average can go to 100,000.

It may likely not go up against precious metals, but it can go up in nominal terms endlessly. It’s not going to help the typical household. I have seen many hyperinflating economies, and in each case, the standard of living of average people declined.

That will be the case. If I were interventionist—which I’m not, and I do not support the interventionist—if I were a central banker and I said to myself the right policy now is to increase the negativity of interest rates, we go from 0.5 percent negative to 5 percent negative.

In this particular instance, the people and companies take the money out of the financial system and store it in cash in a vault.

- Source, Epoch Times

Central Banksters Created Our Problems, Not the Rich

It’s nonsense to claim that inflation is only going up 1 percent per year in the United States. The cost of living of a typical family is going up much more than that—insurance, transportation, schooling are all going up.

For example, health care premiums for insurance policies [are rising], so the typical household is being squeezed. The central banks don’t care about that; they don’t look at it.

I suppose the system will collapse before we become like Venezuela. In the West, if they start to print money, the end game will be brief. Within five years, I expect the system to implode.

You better ask the bureaucrats what their plans are. They had zero rates since December 2008; soon eight years [passed], and that hasn’t boosted economic activity for the average household, not in Japan nor the United States nor the EU. Now they talk about fiscal spending.

We already have large deficits but no deficit is large enough for the interventionist, so they will boost fiscal spending. They will finance deficits by issuing government debt, which the central banks will monetize. The Treasury will issue debt, and then the Fed will buy all these debts. Of course, that will not end well, but it will postpone the problem for a while.

Then they will find some academics who will blame wealth inequality on the evil capitalists who made so much money out of asset bubbles.

They will blame the economic woes on these people. To some extent this is true. But the rich people did not create the inflated asset values; it was the central banks, by slashing interest rates to zero and negative interest rates in many countries.

First, you create mispricings through artificially low rates and negative interest rates and you boost the income and wealth of the super-rich. It’s at best the 0.1 percent that really benefit from asset inflation, at the cost of all the people that have no assets and so you have this rising wealth inequality. So we have to tax the rich people and tax them more.

Taking money from the rich is appealing if you go to voters, and you say to them, “Look, the reason the economy is doing so badly, it’s because of the rich people, the billionaires. We have to take 20 percent away from them and give it to you.” You can be sure that everybody will vote for that because the wealthy are a minority. This is what happens after monetary policies completely fail.

Some well-connected people will hide their wealth but a lot of people won’t. Even if they take 50 percent from the richest, it’s not going to help. The next step will be to take money from less wealthy people; the interventionists will go all the way.

- Source, The Epoch Times

Marc Faber: Dow Could Reach 100,000

They could essentially monetize everything, and then you have state ownership. And through the central banking system, you introduce socialism and communism, which is state ownership of production and consumption. You would have that, yes, that they can do.

The BoJ owns more than 50 percent of Japanese ETFs (exchange traded funds), which own large parts of the underlying companies. So indirectly they may own 20 percent of the Japanese companies, and they can go up to a higher level.

I don’t think the central bankers are intelligent and smart enough to understand the consequences of their monetary policies at present. They focus on inflation but in my view they shouldn’t do anything. They don’t focus enough on what it does to the average standard of living of the people, to the average household income.

The developed market central banks can go on for quite some time.If Zimbabwe prints money, the pain is more obvious right away because if you are Zimbabwe, and you print money and the others don’t, and the currency collapses, and you feel the pain much sooner.

If the major central banks, the Fed, the European Central Bank (ECB), the BoJ, the Bank of England, and the Chinese monetize and print money in concert and agreement with each other, they all talk to each other; then the currencies don’t collapse against each other. There may be fluctuations, but we don’t have a general collapse of a currency.

Paper money, in general, can then collapse, and it has to a large extent against asset prices like real estate around the world over the last 30 years, against equity prices, against bond prices—which have been rallying since 1981—and against precious metals since 1999.

Asset price inflation is less obvious to the average person in the street. The average American has no money, so he doesn’t care if prices for paintings and real estate go up—until it touches him.

- Source, The Epoch Times