Marc Faber: "People With Financial Assets Are All Doomed"

Tyler Durden's picture




 

As Barron's notes in this recent interview, Marc Faber view the world with a skeptical eye, and never hesitates to speak his mind when things don't look quite right. In other words, he would be the first in a crowd to tell you the emperor has no clothes, and has done so early, often, and aptly in the case of numerous investment bubbles. With even the world's bankers now concerned at 'unsustainable bubbles', it is therefore unsurprising that in the discussion below, Faber explains, among other things, the fallacy of the Fed's help "the problem is the money doesn't flow into the system evenly, how with money-printing "the majority loses, and the minority wins," and how, thanks to the further misallocation of capital, "people with assets are all doomed, because prices are grossly inflated globally for stocks and bonds." Faber says he buys gold every month, adding that "I want to have some assets that aren't in the banking system. When the asset bubble bursts, financial assets will be particularly vulnerable."

Excerpted from Barron's:

On the error of the Fed's ways:

The Fed has been flooding the system with money. The problem is the money doesn't flow into the system evenly. It doesn't increase economic activity and asset prices in concert. Instead, it creates dangerous excesses in countries and asset classes. Money-printing fueled the colossal stock-market bubble of 1999-2000, when the Nasdaq more than doubled, becoming disconnected from economic reality. It fueled the housing bubble, which burst in 2008, and the commodities bubble. Now money is flowing into the high-end asset market - things like stocks, bonds, art, wine, jewelry, and luxury real estate.

 

Money-printing boosts the economy of the people closest to the money flow. But it doesn't help the worker in Detroit, or the vast majority of the middle class. It leads to a widening wealth gap. The majority loses, and the minority wins.

 

...

 

The neo-Keynesians would argue that if the Fed hadn't flooded the system with money, things would have been much worse. That might be true, but they would have been worse for a shorter period of time.

On the Bubble:

I am suggesting that in the fourth year of an economic expansion, near-zero interest rates will lead to a further misallocation of capital. I thought the U.S. market would have a 20% correction last fall, but it didn't happen. I also said the market might explode to the upside before the correction occurred. We might be in the final acceleration phase now. The Standard & Poor's 500 is at 1650. It could rally to 1750 or even 2000 in the next month or two before collapsing. People with assets are all doomed, because prices are grossly inflated globally for stocks, bonds, and collectibles.

On China:

There has been a huge credit bubble in China, and it isn't going to end well. Its economy officially grew 7.7% in the first quarter. In reality, it is growing 4% a year, at best. Figures on Chinese exports to Taiwan, South Korea, Hong Kong, and Singapore don't agree with the import figures of those countries. In each case, reported exports are much larger than reported imports.

On wealth divides and Social Unrest:

Again, the economy of the rich is booming. There has been huge wealth accumulation in Asia in recent years. But the middle class has experienced diminishing purchasing power. Throughout history, growing wealth inequality has been corrected either peacefully, through taxation and wealth redistribution, or by revolution, as in Russia.  I am not sure we will have a revolution in the Western world, but I can see European voters turning against the arrogance of the bureaucracy.

On Europe:

Investors don't fully comprehend what happened in Cyprus. In the event of future bailouts, bank depositors will lose a percentage of their money. Money in the bank isn't 100% safe anymore.

On Gold:

Gold is down 30% from its 2011 peak of $1,921, but has far outperformed financial assets since 1999. A correction was overdue. I have about a 25% allocation to gold and buy some every month. I want to have some assets that aren't in the banking system. When the asset bubble bursts, financial assets will be particularly vulnerable.

 

Gold is easier to carry than a Lamborghini.

 

Most of my gold is in a safe-deposit box in Switzerland, but I am shifting it to Asia.

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Sat, 06/01/2013 - 18:22 | 3617114 DaddyO
DaddyO's picture

FRN's into tangible assets like Ag, Au, Pb makes sense then?

DaddyO

Sat, 06/01/2013 - 18:45 | 3617141 SRSrocco
SRSrocco's picture

Marc Faber is totally correct.....

ENERGY DRIVES THE WORLD'S ECONOMIES, NOT FINANCE.

This is exactly what I discuss in my new post:

The Greatest Fundamental Reason to own Precious Metals

 

http://srsroccoreport.com/the-greatest-fundamental-reason-to-own-precious-metals/the-greatest-fundamental-reason-to-own-precious-metals/

Total Global Pension Funds are $33.9 trillion and the United States hold $17.6 trillion of that amount.  This will end badly,,,

Sat, 06/01/2013 - 18:57 | 3617150 Richard III
Richard III's picture

Aye, verily -- the S&P 500 is currently near nominal all-time highs; yet, in constant dollar/inflation-adjusted terms, we are still 20% below the "Winners of the New World" levels of 2000.

Never underestimate the backstopping potential of QE. The House always wins.

Sat, 06/01/2013 - 19:06 | 3617171 DaddyO
DaddyO's picture

Steve brings up the very important reality of what really drives the world economy. If you think not, just look back at the timeline of history around the discovery of and exploitation of oil and see how the world economy, technology and politics to control said oil take off like a solid rocket booster. The US domination of the oil industry has brought us all sorts of historical blips on the map. The escalation and exportation of the MIC, the FED, OPEC and the list goes on...

DaddyO

Sat, 06/01/2013 - 20:09 | 3617292 cifo
cifo's picture

Marc, not that fast. This is going to be a looooong battle.

Sat, 06/01/2013 - 23:06 | 3617586 francis_sawyer
francis_sawyer's picture

"the majority loses, and the minority wins,"

~~~

Hmmm ~ Isn't that the francis_sawyer 'asymmetry' argument?

Sun, 06/02/2013 - 00:49 | 3617707 StychoKiller
StychoKiller's picture

Shoulda patented it...

Sun, 06/02/2013 - 07:00 | 3617888 GetZeeGold
GetZeeGold's picture

 

 

Gold <--- because it's worked for Germans, Vietnamese, and countless others fleeing oppression for 6000 years....and counting.

Sun, 06/02/2013 - 11:00 | 3618068 jbvtme
Sun, 06/02/2013 - 12:17 | 3618227 AldousHuxley
AldousHuxley's picture

Catholic church recommends relics made in gold.

 

They've seen enough throughout ages.

 

So do Buddist and Hindu temples. All the gods are carved in gold not in bernanke bucks.

Sun, 06/02/2013 - 16:11 | 3618656 Motorboat
Motorboat's picture

Glad to see francis_sawyer didn't get banned by the thought police for certain views on clowns,  like others I know.  

I'm giving francis a thumbs up every time he says anything from now on, he was right all along.  

Sat, 06/01/2013 - 19:02 | 3617159 Greyhat
Greyhat's picture

Faber is funny! "Money in the bank isn't 100% safe anymore."

It never was! Did he believe in this muppet show?

Sat, 06/01/2013 - 20:39 | 3617351 Anusocracy
Anusocracy's picture

"Money-printing boosts the economy of the people closest to the money flow. But it doesn't help the worker in Detroit."

What a relief - there's a worker in Detroit.

Sat, 06/01/2013 - 21:14 | 3617415 akak
akak's picture

Hey, those drugs don't sell themselves, you know.

Sun, 06/02/2013 - 10:46 | 3618074 cro_maat
cro_maat's picture

Mayor Bloomberg quoted in the NY Post yesterday agrees with you in his argument against legalizing medical marijuana:

“The bottom line is I’m told marijuana is much stronger today than it was 20, 30 years ago,” Bloomberg said on his weekly WOR radio show. “That’s one problem. No. 2, drug dealers have families to feed. If they can’t sell marijuana, they’ll sell something else.”

So I guess what he is saying is that if you legalize marijuana then you take away the fat profits of the drug dealer which would impede his / her ability to feed his / her family. So maybe his "Stop & Frisk" policy is to ensure limited supply on the streets and high prices. Nice to know he is doing his job to support local farmers and distributors!

Sun, 06/02/2013 - 00:16 | 3617677 prains
prains's picture

Where do you think they make the Chevy Shitstain?

Sun, 06/02/2013 - 02:02 | 3617744 Never One Roach
Never One Roach's picture

Dear Valued Client:

Just a brief notice to inform you all your financial assets held with AAA+ Korzeen High Quality Triple Return Millenium Trust Fund were Rehypothecated yesterday (while you were sleeping soundly).

Your balance is now -0.00-

Please accept our deepest....

Sincerely,

The Honorable Korzeen, Esq, CEO (and Big MoFo as far as you're concerned)

Sun, 06/02/2013 - 04:39 | 3617820 Ghordius
Ghordius's picture

you are confusing rehypothecation (a status which applies to a lot of assets while their owners were sleeping) and corzined (the act of losing client money)

Sun, 06/02/2013 - 09:19 | 3617975 Its_the_economy...
Its_the_economy_stupid's picture

(the act of "stealing and then" losing client money)

-fixed it

Sun, 06/02/2013 - 21:43 | 3619258 MeelionDollerBogus
MeelionDollerBogus's picture

ALMOST genuine but if I recall, Gerald Celente said they actually reported negative balances on positions and had the gall to ask for MORE money to "keep your account in good standing".
No shit.

Sat, 06/01/2013 - 19:20 | 3617191 franzpick
franzpick's picture

Let's see: u.s. pension fund assets of $17 T, and national debt of $16 T. Wonder if oBamy, Valerie and Lois are taking lessons in doing the danse macbre of pensions, the 'argentina'.

Sat, 06/01/2013 - 19:46 | 3617242 thefedisscam
thefedisscam's picture

Yeah, right, as if that Pension figure is a constant. Wait until the stock market crash, then tell me what is the Pention fund assets

Sat, 06/01/2013 - 20:19 | 3617304 Totentänzerlied
Totentänzerlied's picture

They control stock market levels... If you believe the pension confiscation 'hypothesis', record nominal highs make perfect sense, they will take the the money and run while the bullshit nominal number is high, duh, sell, and convert to something else with a bit less counterparty risk. Then resume the stock market slaughterfest.

If you believe that 'hypothesis'.

Sat, 06/01/2013 - 21:12 | 3617413 tyler
tyler's picture

Roco what came first the chicken or the egg?  I'' cede you youre undying desire to pronounce energy God itself.  OK maybe not God but I seen your monthly presentations enough times to confidently ask, money buys energy?  No money, no currency at least no energy.  Currency keeps energy afloat.  No energy with money chasing it?  Currency wins.  Energy new maybe so is found?  You ever seen somebody starve to death, probably not I've seen some shit.  You take away a mans currency you can predict the unpredictable.  Like when they locked my road dog up took away his alcohol.

 

www.thetalkativeone.com 

 

 

Sun, 06/02/2013 - 12:01 | 3618203 tango
tango's picture

In one sense you are correct.  ZH posters ALWAYS choose the simplistic argument because it's....simple.   Resources alone do nothing.  These same resource so incredibly exploited today to give us this modern world have always been there.  It took curiousity, capital, wealth,  science and an atmosphere suited for investing.    If owning resources was all it took then Nigeria and Russia should be ruling the roost.  Japan and Singapore should be on the bottom.  Obviously that is not the case because different societies have different outcomes and policies.   After all is gone, the Middle East will rapidly return to its pre-modern tribal lifestyle and continue to make zero contributions in the worlds of science, entertainment and art. 

Sat, 06/01/2013 - 21:45 | 3617469 PiltdownMan
PiltdownMan's picture

Look at Treasuries, MBS and MBS risk over the past month. They have gotten clobbered. See this guy's charts.

http://confoundedinterest.wordpress.com/2013/06/01/treasury-yields-risin...

Sun, 06/02/2013 - 07:05 | 3617890 GetZeeGold
GetZeeGold's picture

 

 

So plunging into Greek bonds may not be a wise idea at this juncture?

Sun, 06/02/2013 - 11:06 | 3618113 Hulk
Hulk's picture

With everything you got!!!
Sell the couch too !!! 

Sun, 06/02/2013 - 00:18 | 3617679 Paul Bogdanich
Paul Bogdanich's picture

People like Mr. Faber make me ill.  They can see that financial assets are a bust and they think of everything but the one thing they will nevr do is take some of their goddamn money and invest it in a productive asset that employs people.  Buy a cattle ranch for gods sak and eat you mistakes.  A vinward, oil wells, a machine shop, a resteraunt, a shop that makes furniture - anything.  But Noooooooo.  And then these same assholes lament the state of the real economy.  Hate to be a jerk and ascribe the behavior to a particular religous minority but he sure behaves as one in the classic sense ala the Brothers Grimm.      

Sun, 06/02/2013 - 03:42 | 3617799 Oracle of Kypseli
Oracle of Kypseli's picture

All the alternatives you mentioned require hard work and life time commitment.  You cannot invest in them without participation. 

Faber likes to invest in less intensive ventures that he can control from his mini ipad while participating in enjo kosai

 

Sun, 06/02/2013 - 07:08 | 3617893 GetZeeGold
GetZeeGold's picture

 

 

People like Mr. Faber make me ill.

 

It's called normalcy bias. The world is pumping out paper full tilt.....but there can only be one Zimbabwe.

Sun, 06/02/2013 - 10:34 | 3618053 Citxmech
Citxmech's picture

Faber has advocated buying remote farmland away from cities for years.

Sun, 06/02/2013 - 09:08 | 3617965 debtandtaxes
debtandtaxes's picture

Hmmm. You're right! I'll cash out the $5K of PMs I managed to hive away just in case it all falls down and I'll buy a "productive" asset. Let's see I can afford a ......hmmm. Guess that's why some of us believe in PM's. It's all we can afford!

Sun, 06/02/2013 - 09:29 | 3617988 optionsman
optionsman's picture

-1

what about clearing price for any of what you listed as productive assets? too high! what about expectations for the future state of the economy? what are you even talking about when you say real economy? financialization of the developed world economy leads to rentier nation states and this has been in the accelerated phase for at least 20 years. for any of what you are suggesting to happen the Fed needs to stop QE, unwind the balance sheet. This goes for every central bank of the world involved in easy monetary policy. This would lead to all assets' prices correction to free market clearing levels. free price discovery once again would support the notion that markets reflect economic fundamentals. and then and only then you'd be correct.

Sun, 06/02/2013 - 10:35 | 3618032 fockewulf190
fockewulf190's picture

Faber´s message has always been that the current economic system worldwide is terminally sick and cannot be saved.  The evidence is everywhere to see.  Debt has risen so high, not only can it never be payed back, it is being increased by trillions per year on a worldwide basis.  Underneath the entire financial system ticks the derivatives time-bomb which has ballooned to over $700+ trillion alone.  There is ongoing massive printing of money, backed by nothing but the thinnest of air.  On top of that, there is also uncovered healthcare and pension iabilities amounting in the tens of trillions. Governments have been proved woefully irresponsible and ineffective in dealing with this crisis.

Faber, and others like him, are warning people to protect your wealth now so that when the Great Reset hits, and it will, you won´t be totally wiped out holding worthless fiat and the paper instruments linked to it.  Those holding phyzz and other hard assets will be in a better position to survive fiscally and do the investing again after the Phoenix rises from the ashes of the old system. 

It is every mans choice to believe the Mark Fabers of the world or not.  He has stated that he holds 25% of his assets in gold.  Frankly, I´m surprised his phyzz position is that low, but still, considering the shit storm heading our way, having at least a 25% buffer in real money can only be judged as being prudent. The Chinese, judging from the massive amounts of phyzz they have been accumulating, are  clearly trying to position  themselves to be the dominate economic power post Great Reset  They understand the message of Marc Faber well.

Sun, 06/02/2013 - 23:50 | 3619528 webspin
webspin's picture

"Debt has risen so high, not only can it never be payed back, it is being increased by trillions per year on a worldwide basis. "

Debts priced in dollars can easily be repaid in more printed dollars. It's only when the debt holder refuses to accept your fiat currency as payment that you start having 'a situation'.

Sun, 06/02/2013 - 20:05 | 3619068 MeelionDollerBogus
MeelionDollerBogus's picture

How the fuck do you know? Do you run Marc Faber's portfolio? Does he want a crowded investment / trade?

Who today would you employ, what would you invest in and be sure of a safe return, even if marginal?

If you invest in just ANYTHING odds are 100:1 you will lose it all. You have to be smart or to hold off.

Sat, 06/01/2013 - 18:26 | 3617121 terryfuckwit
terryfuckwit's picture

gold silver bitcoins and asian women bitchez

Sat, 06/01/2013 - 19:03 | 3617165 Greyhat
Greyhat's picture

Can you eat em? :D

Long farm land, seeds and the needed tools to protect these.

Sat, 06/01/2013 - 19:14 | 3617184 DaddyO
DaddyO's picture

Dining at the Y?

+1 on farm land, seed and tools!

DaddyO

Sat, 06/01/2013 - 19:35 | 3617221 Titan Uranus
Titan Uranus's picture

Can you eat farmland, seeds, or tools?

Sat, 06/01/2013 - 19:54 | 3617253 Fish Gone Bad
Fish Gone Bad's picture

You can eat the vegetables, just not their wheelchairs.

Sat, 06/01/2013 - 20:22 | 3617312 CrashisOptimistic
CrashisOptimistic's picture

We've already covered this. 

If society reaches a state where the collapse is so pervasive that gold is even remotely considered a medium of exchange, that severity defines a situation where no one with things of actual value, like calories (farmland), will trade those things for yellow metal.

Think about it.  When collapse is that extensive, only food and warmth matters.  Calories and joules.  Not ounces.  I have no axe to grind here, but it's pretty obvious.

 

Sat, 06/01/2013 - 20:46 | 3617366 I need Another Beer
I need Another Beer's picture

True enough, but we stack pm simply because of lack of faith in governments.

By the way, it is easy to put down a shallow well in the back yard and connect a hand pump.

 

 

Bury that shine here bint !!

Sat, 06/01/2013 - 21:56 | 3617486 BoNeSxxx
BoNeSxxx's picture

Still useful as a medium of exchange. Don't over think it.

Sat, 06/01/2013 - 22:54 | 3617569 CrashisOptimistic
CrashisOptimistic's picture

You didn't read it and are probably talking your book.

No one will exchange calories in a calorie scarce world for yellow metal.  Period.

Sat, 06/01/2013 - 23:23 | 3617613 Goner
Goner's picture

This is argument always misses the point.

PM's are what you buy AFTER you have the necessities taken care of. After that you buy a few extras, a few wants each month and some shinny's

I have enough access to calories. If you show up with with some gold coins I would trade with you then see about maybe trading more food for some work on the garden.

And after the collpase and we are rebuilding I have a head start. See Daddy-O's port just below this

ps - I did not ding you

Sun, 06/02/2013 - 03:49 | 3617802 Oracle of Kypseli
Oracle of Kypseli's picture

One more point on that is no matter how bad things may get there will always be rich people who would prefer to give you  what you want in exchange for PM's as these people have enough other assets.

A current example is Argentinians buying BMW's to preserve some of their money as PM's and hard currency can not be had.

Sun, 06/02/2013 - 07:19 | 3617894 GetZeeGold
GetZeeGold's picture

 

 

Can you eat farmland, seeds, or tools?

 

Take some paper cash out of your wallet. Are you going to eat that?

 

Any other stupid comment you'd like to make?

Sun, 06/02/2013 - 09:01 | 3617960 Acet
Acet's picture

If the outcome is a Mad Max style world, then indeed PMs won't be very usefull during the worst period - you're better of owning the means to produce food in a highly defensive location plus the weapons and men to defend them against the raving, starving crowds which will come down from the cities.

However if the outcome is a slide down to 2nd or 3rd world economy status, out of control monetary system and maybe even some kind of represessive regime, then PMs will be very useful because they're well understood and have a history of use as units of exchange in trade, are outside the control of the state and, at least in the case of Gold, are highly portable stores of wealth.

 

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