Marc Faber

"The whole world is mad" - so says Marc Faber when beginning his latest observations of the markets in the attached Bloomberg TV interview. "Stocks will be dropping 30%, then rallying 20%, and dropping another 30% -  that's going to be the pattern. And whoever can't live with that shouldn't be buying equities at all." And while the publisher of the Gloom, Boom & Doom report, said "there is a case to be ultrabearish about everything, and markets are going to go lower" he notes that markets are "extremely oversold" and he expects a "snap-back" rally in the U.S. Standard & Poor's 500 Index of about 40-50 points. That said, Faber sees no new highs in 2011. He concludes that he can already smell QE3, and that the next week will be important to see if Bernanke is a true money printer or an amateur, and if he is a true money printer he will start printing soon." Couldn't have said it better ourselves.

The European Central Bank President, Jean-Claude Trichet, was not as optimistic as he usually is, when he raised the alarm level on the debt crisis to “red” late yesterday. After the meeting of the European Systemic Risk Board in Frankfurt, Trichet who chairs the ESRB, said that risk signals for financial stability in the euro area are rising and flashing “red”. He said “on a personal basis I would say yes, it is red”. Trichet warned market participants that the crisis is nowhere close to be resolved. Trichet warned of “potential contagion effects across the union and beyond.” Overnight Marc Faber, publisher of the Gloom, Boom & Doom report, told Bloomberg this morning (see interview below) that he still favours gold and silver. He said there could be short term weakness but that he will keep accumulating gold. Faber warned against shorting the precious metals as they are likely to keep going up. He also warned regarding recent incidents of fraud and corruption by newly listed Chinese companies and said this was indicative a bubble. In his usual contrarian and witty manner, he said that “not to own any gold is to trust central bankers and that you do not want to do in your life.”

Yesterday Marc Faber first made a guest appearance at the Ira Sohn conference, warning his audience to prepare for war, then promptly shifted to Bloomberg's offices where he discussed his outlook primarily on China, but also on the US, with Carol Massar, once again warning about war. As usual, he did not mince his words, warning of a "recession", and predicting that China is simply not growing fast enough in real terms. Nothing new. He did however branch out into the topic of class divergence in both emerging and developed economies: "in front of far too many luxury hotels there are far too many Ferraris, Maseratis, Bentleys... I see a boom everywhere, except for the working class, except for the lower, middle class. But among the well to do people the wealth that is floating around and the prices you pay for high end properties is incredible, and I think that will come to an end, and a lot of people will lose a lot of money... I was in La Jolla, Laguna Beach, Newport Beach, I was in front of a restaurant smoking and I've never seen so many Ferraris, Maseratis, Bentleys and fancy cars anywhere in the world, and this is in America. I am not saying this is wrong, but there is an opulence among a small group of people that is huge when there are lots of people that are struggling. This gives me a bad feeling because I've seen so many emerging economies when they were booming, that was the time to get out." As for the US economy, Faber agrees that the only thing that can help is a massive crisis (or "conflagration" as David Stockman calls it) that jars America out of its hypnotic state. And, sure enough, it will come.

Marc Faber was on CNBC earlier, once again discussing things so patently obvious only the Fed can not grasp them. Namely that as long as cheap money floods the system hard assets will continue rising in value, and gold will continue surging. Which is merely part of the bigger picture: nominal prices continue rising as real prices, denominated in paper and linen, continue to decline. But have no fear: Bernanke can fix everything in 15 minutes. Only that's total BS: "One day they will increase it by a quarter percent. But what does it mean when commodity prices are going through the roof, energy prices are going up, health care costs are going up, insurance premiums are going up?" Somehow, Bernanke believes, a hike will immediately undo months and years of downstream costs progressing through the system. And surely subprime is contained... As for the proverbial gold bubble: "If it were a bubble a lot of people would have gold. The whole world would be trading gold 24 hours a day. But I don't think it's really a bubble. I think gold is maybe cheaper today than it was in 1999, when it was $252." Oddly enough nobody mentions that gold is the only market that is now not part of the Fed's central planning "wealth effect" mandate (and the price suppression mandate is failing by the day): surging gold prices are an indication of one thing only: the market's desire to impose its own gold standard at a mark to market price equivalent for dollar destruction. It is this aspect of the metal: to correlate with Fed stupidity, that makes it such an attractive investment. And since Fed stupidity is endless, does it mean gold's fair value is infinite?

Marc Faber appeared earlier on CNBC in response to a plunging market, and gave his latest updated outlook on QE3... and 4, 5, 6, 7 and 8 (not to mention 18). "We may drop 10 to 15 percent. Then QE 2 will come, (then) QE 4, QE 5,
QE 6, QE 7—whatever you want. The money printer will continue to print,
that I'm sure. Actually I made a mistake. I meant to
say QE 18." Faber was modestly constructive on the Japanese selloff, which at one point hit 18% down in overnight futures trading: "This huge selloff is an investment opportunity in Japanese equities, but if a meltdown occurs then all bets are off." As usual, there is no love loss between Faber and the Chairsatan (recall that today's Empire Manufacturing survey confirmed margins continue to be crushed due to surging input costs): "I think Mr. Bernanke doesn't know much about the global economy but he probably watches the S&P every day." And on Fed criticism: ""Until very recently the Feds have had very few critiques, very few
people criticized the Fed's policies under Mr. Greenspan and Mr.
Bernanke. Over the last few months, a lot of critical
comments have come up about the Fed and its money-printing habit. The
S&P drops 20 percent (and) all the critics will be silent and they
will all applaud new money-printing." No fear of that here: Zero Hedge has been rather vocal in our opinion of the world's most destructive central planning buro from day one. We will continue being so, regardless how low the S&P plummets... Perhaps even to its fair value south of 500.

Hmmm...

All who enjoy hearing a meaty Marc Faber fire and brimstone sermon, that cuts through the bullshit, will be happy to know that the Gloom, Boom and Doom author conducted a 40 minute interview with the McAlvany Financial Group, which covers all the usual suspects: gold, silver, precious and industrial metals, the "crack up boom", the future of the Ponzi and capital markets in general and much more. Of course, it wouldn't be a Faber interview without the requisite soundbite: "I think we are all doomed. I think what will happen is that we are in the midst of a kind of a
crack-up boom that is not sustainable, that eventually the economy will
deteriorate, that there will be more money-printing, and then you have
inflation, and a poor economy, an extreme form of stagflation, and,
eventually, in that situation, countries go to war, and, as a whole,
derivatives, the market, and everything will collapse, and like a
computer when it crashes, you will have to reboot it." Of course, on a long enough timeline...

Last year's Russia Forum was one of the must see events of the year, pitting such high powered independent thinkers as Marc Faber, Hugh Hendry, Nassim Taleb in a free for all. While the cliffhanger back then was the suggestion by Hendry that he had recreated the Paulson ABX trade with "1.5% downside and 75% upside" (which has since not been fully revealed aside from some occasional snippets in the periodic letters that it is a synthetic China short trade), the true brilliance was in the debate between the Treasury skeptics and the fan (Hendry). That said, with the entire curve surging wider, we hope Hendry took profits on his short as we are now virtually exactly where we were a year ago. This year's forum was just as entertaining, and while it didn't have quite a distinguished audience, it did feature Marc Faber and Nassim Taleb in a discussion of whether Russia is the best or worst BRIC. That said, trust both Faber and Taleb not to stick to the script and go off on wild tangents. Sure enough, the line of the night as usual belonged to Faber: "We have a big debate in the world whether we will have a deflationary collapse or an inflationary boom...usually after a period of very heavy money printing war follows." That is the philosophical gist of it. As for Faber's recommendation, it is precisely the asset which has become a short-seller's nightmare in the current geopolitically fragile environment: oil. "Whether you are very bullish or very bearish you should invest in oil."

Marc Faber is on a roll these days. The Gloom, Doom and Boom report author, who recently made headlines after calling Obama a whore minutes ahead of the president's SOTU address, proceeds to go on a truthiness rampage, and with his now traditional grin, proceeds to call Satan Bernanke a "liar" to the entire CNBC Europe audience. In addition to making his thoughts clear on the topic of inflation (5-8%), he also observes where the Egyptian riots will strike next: "You may not have a problem in Saudi Arabia and in the Emirates, in Kuwait and Qatar, because there the governments can heavily subsidize food if they want to. But I am worried that what has happened in Egypt will happen in Pakistan... I think Egypt is a reminder to people that politics, and social events, and geopolitics have a meaningful effect on asset markets. The developed markets have way outperformed, and now I think that it may be a wake up call that the US outperforms emerging economies for a while." As for inflation "The annual cost of living increases are more than 5% today and the BLS is continuously lying about the inflation rate, including Mr Bernanke, he's a liar. Inflation is much higher than what they publish. I think that inflation is between 5% and 8% per annum in the US, and in Western Europe, a little bit lower, also 4-5% per annum." Oh yeah, Pakistan has nukes.

Earlier, Marc Faber appeared on Bloomberg TV, in what may go down in history as his most scandalous interview ever. When asked, in advance of the SOTU address, what he thinks of the president, Faber, who appears to have had enough with all the bullshit, propaganda, and lies, replies: "I think he's done a horrible job and I think that will continue, I think he is a dishonest person, and nothing has changed... Some politicians are more honest than others. I don't think that I have a very high regard for politicians, I have a high regard for businessmen and for people who work, and not for people who abuse the system continuously. And in comparison to other politicians, I think he came in on a platform as a president that would want to change the government in Washington, and actually he's made it worse... We foreigners, we just laugh at someone like Mr. Obama. I was very critical of Mr. Bush, but at least he had one line and he stuck to that line, and at least he set out to do a thing and he was relatively straight on the thing that he did. He may have been wrong, but at least he didn't change his mind continuously, and didn't prostitute himself." If nothing else, how many other people do you know who will compare, in front of a live Bloomberg audience, the president of the formerly greatest country in the world to a whore?

Marc Faber appeared yesterday on CNBC and explained why he is the latest adherent of the "reverse decoupling" theory, whereby the emerging markets are to underperform the developed countries. Of course, anyone who has seen the action in the Shanghai Composite in the past 3 months does not need to be convinced of this. Faber, then proceeds to share some perspectives on Chinese geopolitical ambitions in light of the Hu visit (thank you $19 billion China-US Boeing arrangement which has already cost 1,000 US jobs), and evaluates the impact of rampant money printing on the cost of living in developing countries. To the latter recent riots, and occasional revolutions, across Africa and the Middle East probably frame the issue best. Here is Faber's take: "My concern is this - we have money printing around he world, and in particular in the US, and that has led to very high inflation around the world, and in very low income countries, energy and food account for a much larger portion of disposable income than in the United States. So these countries are suffering from high inflation and that reduces the purchasing power of people, so I think that monetary authorities in emerging economies will have to tighten, or they will have to let inflation to accelerate, both of which are not particularly good for equities." Well, yes, but who cares: after all it is only a matter of time before someone on CNBC pitches the tremendous stock market return in such stunning examples of monetary prudence as Zimbabwe and Weimar Germany.

"If there's one institution in the US that consistently and repeatedly messes up everything, the Federal Reserve is that institution." So says famed investor Marc Faber in an interview he gave to ChrisMartenson.com this week. In it, Chris and he dive deep into the Fed activity (encouraged by Washington and Wall Street) responsible for the current severe health of our economic system. Both feel that once you understand the nature of the critical role the Fed now plays, you have much better clarity into what the most probable outcomes for our economy and financial markets will be.

Marc Faber, who just like Nassim Taleb has never hidden his disdain for investments in US-backed paper, is back to bashing Treasurys, although with logic diametrically opposite to that espoused by those such as Morgan Stanley who see rising rates as a sign of economic growth. "This is a suicidal investment,” Faber told Bloomberg in a telephone interview from St. Moritz, Switzerland. “Over time, interest rates on U.S. Treasuries will go up. Investors will gradually understand that the Federal Reserve wants to have negative real interest rates. The worst investment is in U.S. long-term bonds.” As for equities, Faber increasingly sees a Zimbabwe outcome: “If you print money, the currency goes down and the S&P 500 goes up. By the end of 2011, people will look at 2012 and think 2012 could be a very bad year because the policies applied are not sustainable and create a lot of instability. Investors may look at 2012 and 2013 with horror.” Not Wall Street thought. By the end of 2011, bankers will most likely be looking at the second consecutive record bonuses year, and by then will have enough gold safely stashed away in non-extradition countries to where the host organism may finally be allowed to die in peace.

Marc Faber was on Bloomberg TV sharing his thoughts on China's 5th RRR tightening in 2010. While the man whose on the ground perspective affords him a good sense of what is really happening, does not anticipate major adverse developments out of the recent round of tightening posturing, he does warn that unless China manages to control commodity inflation, things could get ugly, essentially reiterating what Albert Edwards said yesterday. "Inflation is a dangerous situation everywhere in the world. I think in general that Consumer Price Indices published by China and the US do not reflect the real cost of living that households in these countries have. In Emerging Economies it is worse in the sense that if you have a per capita income of $1000 per year, food accounts for 50% of our expenditures... Even if China tightened, interest rates are still far below the true rate of inflation, and I spoke to a lot of people in China - my view is that inflation in China is running at 10% per annum." On Bernanke's overnight defense of his failed policies: "All I would say is that the problem of the world is that the US overconsumed and spends too much on consumption, and as can be expected some currencies didn't want their currencies to appreciate too much. I think that China and the US are on a collision course, both economically and politically." In other words, our speculation that China and the US are playing a global game of chicken is validated, the problem is that billions of people will suffer no matter who blinks first.

Democrats--"sadly enough"--would get a shot at still retaining the majority, which would mean the monetary and fiscal policy will most likely stay on its current course. Meanwhile, the 0.25% interest rate hike effective Oct. 20 by the PBoC is "meaningless," because of skyrocketing property prices, and the cost of living inflation has gone up much more than the official figure.