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?
Currently there is a great debate within the financial media on the who’s right – who’s wrong, as both sides stare at a financial market that seems to go ever higher with every morning bell. In actuality, it’s both, and neither. Currently the macro economy is being expressed via circumstances resulting from a myopic view of participation. i.e., The financial markets. All of those fundamental based principles have been annexed to what one solitary person will do – then say. That person was Ben Bernanke. Now it’s been codified via the markets recent reactions to Janet Yellen. All of those fundamental based principles have been annexed to what one solitary person will do – then say. That person was Ben Bernanke. Now it’s been codified via the markets recent reactions to Janet Yellen.
Gold has surged over $41 and silver over 70 cents to over $1,314 and $20.46 per ounce or 3% and 4.2% respectively as oil ticks higher on the tinder box that is Iraq ... Faber recently said how he will “never sell his gold”, he buys “more every month” and believes storing gold in Singapore is "safest”.
As he said all along "investors should have some exposure to gold" and Marc Faber has been adding recently as gold (and gold stocks) are so much cheaper than over-inflated stocks. Faber holds around 25% of his assets in gold becaquse he believes eventually the monetary policies of central banks will lead to a further loss of purchasing power in the value of paper money. The CNBC anchor is perturbed as the market is selling gold and buying stocks; to which Faber rebuffs; investors are shunning gold "because the media doesn't like gold, nobody at CNBC owns gold. Nobody at Bloomberg owns gold. Gold is being constantly talked down by the media, and Fed officials, and economists, who also don't own any gold. They're all stocked up in equities." "When people talk about people who are optimistic about gold, they call them 'gold bugs.' A bug is an insect. I don't call equity bulls 'cockroaches.' Do you understand? There is already a negative connotation with the expression of 'gold bug.'"
"In retrospect, the spark might seem as ominous as a financial crash, as ordinary as a national election, or as trivial as a Tea Party. The catalyst will unfold according to a basic Crisis dynamic that underlies all of these scenarios: An initial spark will trigger a chain reaction of unyielding responses and further emergencies. The core elements of these scenarios (debt, civic decay, global disorder) will matter more than the details, which the catalyst will juxtapose and connect in some unknowable way. At home and abroad, these events will reflect the tearing of the civic fabric at points of extreme vulnerability – problem areas where America will have neglected, denied, or delayed needed action.” - The Fourth Turning - Strauss & Howe – 1997
"I am not God, I am not here to judge who is right and who is wrong, but if you look at geopolitics in Asia from a Chinese perspective, its completely unacceptable in the long run to have American military presence in Asia," blasts Marc Faber.
"As a large power like France and Britain and America, you might be able to push around small countries, but you can't push around a country that has twice the population of Europe and the United States, and has become a relatively modern state with military that is very powerful."
Gold surged 1.6% in euros to €928/oz after the historic ECB announcement to adopt negative interest rates. Cheap money, financial repression and currency debasement are classic recipes for short term financial and economic gains. Throughout history, they have been the easy options for emperors, kings, queens and governments. They are the easy option for the ECB and central banks today.
Marc Faber explains To Bloomberg TV in this brief clip just what he would do it put in charge... and nails it..."...if I were a Central Bank, I would be the greatest hawk in the world. I would squeeze the system like a lemon and bring inflation down to deflation, because deflation has some advantage for the majority of people, for the majority of people."
"I Will Never Sell My Gold," Marc Faber Warns, China's "Gigantic Credit Bubble" Unwind Is Just BeginningSubmitted by Tyler Durden on 05/24/2014 20:47 -0400
While the S&P 500 closed at record highs (and VIX near record lows), Marc Faber says the "momentum sell-off has caused serious internal damage to the market," with many of the most-loved and most-levered stocks down 30-50%. Interestingly Faber warns that if bond bears are correct and rates rise to 4% then stock prices "will really tumble." But it is China that worries him the most. Faber warns that Chinese growth figures are a fallacy and that "if one analyzes the data carefully" it is clear that "China is growing at most 4%" and given the "gigantic credit bubble" the outlook is not hopeful as the sharp deceleration in growth is likely to continue. Faber also has strong words for Western nations treatment of the rest of the world and "the US will have to back off.. because China is so important."