Marc Faber warned last week that central-bank-funded deficits were creating bigger and bigger governments which implicitly reduce the dynamism of the economy and slow growth. Today, it was billionaire venture capitalist Peter Thiel's turn to make the anchors on business media squirm a little in his unleashed truthiness. Having predicted the current surge in volatility just weeks ago (due to the end of QE), Thiel believes "the thing that is most distorted is the bond market and fixed income, and perhaps less on the equity side," but, he warned, "we certainly are back on a government bubble of massive size," and as Faber notes, that means slower growth as Thiel notes, with regard Tech investing "investors always overrate growth."
While The IMF recognizes the gaping chasm between collapsing global growth expectations and market exuberance, they remain confident that US growth will save the world. This, Marc Faber explains to a wise Bloomberg TV panel, is why stocks around the world (and now in the US) are starting to weaken, "the recognition that global growth is not accelerating," as the narrative would like us all to believe, "but is slowing." Central Bank money-printing has enabled deficit-heavy fiscal policy and, Faber simplifies, "the larger the government, the less growth there will be from a less dynamic economy." Policy-makers have only one tool - money-printing, and QE99 is coming.
Veteran investor Marc Faber, author of The Gloom, Boom and Doom Report, reiterated the need for gold in a diversified portfolio when interviewed on CNBC. "Now, I want to be diversified, I want to own some gold, I want to own some shares, I own the most in Asia, and some in Europe because I think in Europe there’s still better value than in the US, and I own some bonds and cash and real estate."
If the market signs are blurry, your best option is to look at what the top investors are doing.
"We find ourselves with the same anti-free market interventionist types who set up the Federal Reserve, the US Treasury and the US government running foreign policy in America and then go and intervene in the affairs of Libya, Syria, Egypt, Iraq or Afghanistan. And as can be expected, they mess up just about everything. I think the whole region will blow up and financial markets are not paying sufficient attention to this."
This weekend’s “Things To Ponder” is comprised of a variety of readings that cover a fairly broad spectrum from educational to informative and even a little bit sarcastic.
With credit markets beginning to creak, market internals flailing, and numerous sectors and individual stocks in a state of correction or bear market, it appears Marc Faber's calls for a big correction in stocks is more right than wrong but the algo-driven exuberance in indices maintains the illusion a little longer (even as the number of leading stocks drops). However, with redemptions increasing in credit, and costs of funding rising, perhaps Faber's insights in the following interview with a radiant Trish Regan are about to be realized. "By printing money, [The Fed] has delayed the cleaning process," as mal-invested capital (and self-referential buybacks) have sustained (and even encouraged) the worst quality companies. As corporate defaults pick up (and The Fed's free money dries up), perhaps that cleaning process will be allowed into the free-market producing "the big sell-off" Faber sees in the Fall.
Nouriel Roubini, Kyle Bass, Hugo Salinas Price, Charles Nenner, James Dines, Jim Rogers, David Stockman, Marc Faber, Jim Rickards, Paul Craig Roberts, Martin Armstrong, Larry Edelson, Gerald Celente and Others Warn of Wider War
Having provided his clarifying perspective on why the markets are extremely fragile and due for a 20-30% correction, Marc Faber was assaulted by CNBC's Scott Wapner reading off a litany of recent calls that have not worked out as planned. His response was notable: "I started to work in 1970, and over that career, somehow, somewhere, I must have made some right calls; otherwise I wouldn't be in business." What CNBC then edited out of the transcript was Faber pointing out his 22% annualized return in his publicly-viewable funds since then and asking - sounding somewhat frustrated at the anchor's mockery (and background snickers) - "I wonder what the CNBC portfolio would look like since 1999?" The response: silence.
Is there any doubt that we are living in a bubble economy? At this moment in the United States we are simultaneously experiencing a stock market bubble, a government debt bubble, a corporate bond bubble, a bubble in San Francisco real estate, a farmland bubble, a derivatives bubble and a student loan debt bubble. And of course similar things could be said about most of the rest of the planet as well. And when these current financial bubbles in America burst, the pain is going to be absolutely enormous.
"There is a colossal bubble in all asset prices and eventually it will burst," is the subtle recurring message from The Gloom, Boom, & Doom Report's Marc Faber, warnings that "maybe has begun to burst already." While Faber admits he has called for such a correction previously, he notes that the difference now is that "valuations are so much higher; and contrary to what the mainstream economists believe, I don't believe the global economy is strengthening; in fact I believe it is weakening." Furthermore, while "you never know what will trigger for a bull market or bear market is until after the fact," Faber offers 3 factors (aside from the Fed) that could trigger a 30% crash or more... beginning with "a) In The White House we have a very poor President - which will lead to political issues domestically in the US," which are not priced in.
Under the influence of the neo-Keynesian interventionists and the professors at the Fed, the public has been brainwashed into believing that governments can revive economic growth. However, as Hayek notes, “the more the state ‘plans’ the more difficult planning becomes for the individual." As the Rahn Curve states, the larger the government becomes beyond a certain point (about 20% of GDP) the slower economic growth will be. Always remember, Faber warns, echoing Barry Goldwater, “The government that is big enough to give you all you want is big enough to take it all away."
While Marc Faber has said "I will never sell my gold," he also noted "I like the idea of Bitcoin," and the battle between the 'alternative currencies' continues. The following infographic provides a succinct illustration of the similarities and differences between gold and bitcoin.
For over 5 years we have been explaining the hole that the fed has been digging (most ironically here). This morning's op-ed by Warsh and Druckenmiller highlights many of the problems but we leave it to Marc Faber to succinctly sum up the dilemma that the Fed faces (and by dilemma we mean, the plan) - "The more they print, the more inequality there is, the weaker the economy will become." Simply put, "it's a catastrophe," Faber told CNBC, "what the Fed has done is to lift asset prices, and the cost of living. In the meantime, the cost of living increases are higher than the wage increases. The typical American household income is going down in real terms." Recovery?