Tuesday, March 10, 2020

The Corona Virus could create a Severe Recession

Last month, I opined that, a severe coronavirus pandemic could tilt the global economy into recession and that therefore, it would be favorable for US Treasuries. Over the last twelve months, the long-term Treasury ETF (TLT) is up 30% and year-to-date 13%. By comparison, the S&P 500 Index is up 6% over the last twelve months, and is down 8% in 2020. US Treasuries remain inexpensive compared to European sovereign bonds and they are a great hedge against a further stock market decline. Near-term, Treasuries are very overbought but I continue to hold them because of my belief that the Coronavirus will tilt the global economy into a serious deflationary recession/depression.

In recent reports I have explained that I was reducing my equity exposure to around 20% of assets and increasing my cash holdings. I want to warn my readers not to be complacent. If the Coronavirus is going to be as bad as I believe it will be, I would not be surprised if all asset prices declined.

Most importantly, I suspect that the Coronavirus could be the event that pricks the monetary-inflationary credit bubble for good, depresses all asset prices, leads to severe economic hardship, and destroys central bankers.

Lastly, remember the words of the late Leon Levy: 
“For most people, the most dangerous self-delusion is that even a falling market will not affect their stocks, which they bought out of a canny understanding of value.”


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Monday, March 2, 2020

QE Infinity - Marc Faber interview in 2020



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Tuesday, February 18, 2020

February 2020 Monthly Market commentary

Marc Faber talks about UBI and the uncertainty in the equity market in the February 2020 Monthly Market commentary

The other day, I came across an essay that aroused my interest because of its title: Universal Basic Income: A Dream Come True for Despots by Antony Sammeroff (he is the author of Universal Basic Income - For and Against. According to Sammeroff, although there are “heated disagreements between economists on just about every issue under the sun, there is probably one point that they are all actually unanimous on. That is the fact that every policy has winners and losers. Given that human wants are infinite but our means towards attaining those wants are limited, policies, by their nature, advantage some groups at the expense of others.”         

In the case of the Universal Basic Income (UBI) one potential drawback would be that the government debt would increase even more than it is currently expanding. I am well-aware that numerous economists including Narayana Kocherlakota have pointed out that the Federal Debt Is Nothing to Lose Sleep Over - because the government can borrow as much from taxpayers as it wants. Kocherlakota argues that, “Policy makers and voters often express concern about the level of the federal deficit, which topped $1 trillion last year, and the national debt, now more than $23 trillion. But, unlike a household that owes money to a bank, the U.S. government has the ability to tax its creditors. This power means that the federal government can afford any level of debt that is owed to American taxpayers.”         

In theory, Kocherlakota’s views are correct. I am less sure that his views work in practice. Moreover, a rising government debt combined with a UBI program would, as Sammeroff explains, “institutionalise the state as each of our patrons — and us as wards of the state. Once this relationship is established, we will enter into a frightening era where the government is our provider and the UBI can easily be weaponized by our rulers to shape us into compliance.”        

Paul Tudor Jones exclaimed recently that, "We’re just in the craziest monetary-fiscal [policy] mix in history. It’s so explosive, it defies imagination.... It’s crazy times…..The train has got a long, long way to go if you think about it.”

I am less sure about for how long the train has to go….. I am therefore reducing my equity exposure.       



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Monday, December 30, 2019

Marc Faber interview with BigEye



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Tuesday, November 5, 2019

Marc Faber November 2019 interview on the state of markets



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Topics discussed in the video include the US Fed, Swiss Francs, MMT, US Dollar, Gold and MORE

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