Wednesday, September 30, 2015

Many vested interests in rising asset prices

Greece has defaulted before and repeatedly. Greece is relatively small compared to, let’s say, Italy. For a country like that to go bankrupt it would have huge consequences...

I mean I am less concerned about say Spain, Italy, France, and Greece defaulting than a big one defaulting. You understand? The US is not in a very good position either, if you look at their unfunded liabilities.

I mean the whole system in the world is in a complete mess.

But so far the central banks and the authorities were able to paint fresh paint on the cracks and so they are not that visible. And don’t forget; who actually has something to say in economics? Most of the people are university professors but they are somewhat linked to the Federal Reserve or to another central bank through consultancy arrangements and so forth.

Basically they are bribed to support the system. Number two, the financial system consists of money managers, hedge funds, the large long bonds, long equities funds like Fidelity and PIMCO and so on.

All these guys are interested in money printing because it lifts the asset values and with rising asset values the fees go up and the performance fees go up so nobody has interest actually in an honest economic policy, they all are in favour of Bernanke´s bailout of problems that occurred in 2008.

Monday, September 28, 2015

Marc Faber on Kondratieff and where we are right now

Irving Fisher the economist who essentially became famous because of his book Booms and Depressions in the 30's, said well [its] a very difficult issue with knowing where in the cycle you are because basically it is like you are sitting on a ship and there are waves that will move the ship but then there is also wind that may come from another direction and the waves are not all regular and so forth, so the ship can have many different motions.

My view regarding the Kondratieff is that first of all it is important to understand that it is not really a business cycle but a price cycle. The price cycle obviously in the 19th century when economies were much more commodities related because agriculture until the beginning of the 20th century was the largest employer, so when agricultural prices went up, the farmers had more money and it benefited the farming population and so the economy picked up and when the farm prices went down especially in the US with cotton obviously the economies that were producing these commodities suffered.

So in the 19th century we had several cycles, upcycles and down cycles. Basically the last down cycle as I mentioned would have been in essentially 1980 to around 1998-1999, so approximately twenty years. The up cycle before was between the 1940s and 1980s. You can’t measure it precisely. My sense is that one missing element in the Kondratieff in the late 1990s and early part of 2000-2005 was that normally when the Kondratieff bottoms out, Schumpeter, he built his business cycle theory around the Kondratieff and he explained that usually in the trough of the Kondratieff, in the depression, you have a massive liquidation of debts, and that hasn’t happened, it hasn’t happened.

And so it is conceivable that we were in a downward wave of the Kondratieff after 1980 and then we had within the downward wave this upward wave because of the opening of China, between 2000 and 2008. And as the Chinese economy weakens and as the debt level today is globally as a percent of the global economy 30% higher than it was in 2007.

So we can´t say that there has been deleveraging, on the contrary! The debt level is even more burdensome today than it was in 2007. Therefore it is possible that the big debt deleveraging is yet to occur and when it occurs then obviously commodity prices will still be weak for a while.

Therefore it is possible that the big debt deleveraging is yet to occur and when it occurs then obviously commodity prices will still be weak for a while.

The question is then, if we follow through and say ok, the price of copper went from 60 cents a lb to over 4 dollars a lb and now we are around 2 dollars a lb, if it goes back down to 60 cents a lb, which I don’t believe it will, but say if it did, or if gold went back to 300 dollars and oz., if it did, what about financial assets?

Where would they be? Because that decline in commodity prices would signal a huge problem in the global economy and under those conditions I doubt that financial assets would do well, there would be massive bankruptcies among governments and massive write offs in sovereign debts. Greece should write off at least 50% of their debts and even then the debt would probably be too burdensome for an economy that hardly produces anything! So these are signals that I take very seriously and I quite frankly given the recent weakness in commodity prices, I can´t see how the global economy is getting stronger. I just can´t see it.

Wednesday, September 23, 2015

Money printing not helping the intended people much

The Fed and other central banks have misjudged the global economy. The global economy is not accelerating as the other economies were expecting. It’s badly decelerating. In many countries, we’re already in recession.


I don’t believe that money printing and artificial low interest rates have actually helped much except for asset prices. But the concentration of assets is very limited. It’s not among the broad public. It’s among wealthy people like you, me and the financial people you just interviewed at the Milken Institute.

Rising prices for consumers symptom of QE ?

If you look at rentals in London where you live or in New York or in other cities in the U.S., they have of course been going up much more than the CPI [consumer price index] would suggest. Even the day before yesterday, Donald Trump was interviewed... he said Obamacare is a disaster because the premiums have gone up close to 50 % for some people.

We have to define what inflation is. Inflation is basically the increase in the supply of money and credit. There are symptoms. You can have wage inflation. You can have commodity inflation.

Monday, September 21, 2015

Fed created the housing bubble

One of the problems with this artificial low interest rates is the following. We all know one of the problems is the size of the governments in the western worlds, they have become larger and larger. This was enabled by low interest rates because governments could borrow more and more money. 

Thursday, September 17, 2015

Mining company bankruptcies could lead to a beginning of a rally in miners

"Mining stocks are extremely depressed, I mean if someone says what is cheap in the market place then I would say the miners are incredibly low, next station is bankruptcy and maybe one of the big ones still goes bust and that would probably signal the end of the bear market in precious metals. Possible."

Mining companies cheap but could get cheaper

"I would say the miners are incredibly low, next station is bankruptcy and maybe one of the big ones still goes bust and that would probably signal the end of the bear market in precious metals. Possible."

Wednesday, September 16, 2015

Tuesday, September 15, 2015

QE4 has to be really big to be effective | VIDEO

Marc Faber believes if the Fed will need to implement QE4, it will need to be of $1 Trillion otherwises it wont work

Monday, September 14, 2015

Marc Faber on Bloomberg Malaysia | Interview

Dr Faber shares his wisdom on various topics including QE, China, the Economy, Asset Markets and much more.

Friday, September 11, 2015

2016 US Presidential Race needs more qualified candidates

Going into the year end and the next year, I only have to look at the presidential candidates and then I know I have to be bearish. It's a pity that a country like the U.S., with so many highly intelligent and educated people, can only produce the kind of candidates we have.

Marc Faber's pick of the best candidate for stocks

He's [Republican Ted Cruz]  a relatively conservative person and that may be good for stocks.

Thursday, September 10, 2015

Inflationary policies similaritaries to Socialism

Today, I would like to focus on two observations by Ludwig von Mises. According to Mises, “True, governments can reduce the rate of interest in the short run. They can issue additional paper money. They can open the way to credit expansion by the banks. They can thus create an artificial boom and the appearance of prosperity. But such a boom is bound to collapse sooner or later and to bring about a depression.

I wished central banks would understand this issue clearly.

Mises also noted that, Inflation-ism, however, is not an isolated phenomenon. It is only one piece in the total framework of politico-economic and socio-philosophical ideas of our time. Just as the sound money policy of gold standard advocates went hand in hand with liberalism, free trade, capitalism, and peace, so is inflation-ism part and parcel of imperialism, militarism, protectionism and socialism.

I believe that inflation-ism is not only part and parcel of socialism but also of increased regulation, diminishing personal freedom and, therefore, of lower economic growth potential.


Wednesday, September 9, 2015

China in short term trouble but longer term growth exists

I think China from a cyclical point of view is in a very serious downturn but from a secular point of view I think there is still tremendous growth opportunity in the long run.

Don’t forget the US after 1800 had numerous financial crises and depressions, a civil war and went through World War One and the depression years and the country continued to grow.

Tuesday, September 8, 2015

There are no SAFE ASSETS

I think that because of modern central banking and repeated monetary policy interventions there is no safe asset anymore.

When I grew up in the 1950's it was safe to put your money in the bank on deposit, the yields were low but it was safe. [But] nowadays you don’t know what will happen next in terms of purchasing power of money, but what we do know is it’s going down.

I would say if I had to turn anywhere where the opportunity for large capital gains exists and the downside risk in my opinion is limited, it would be the mining sector, specifically precious metals. Commodities may still go down for a while but I don’t think they will go down forever. I would rather focus on precious metals [such as] gold silver and platinum because they don’t depend on industrial demand as much.

*Sept 11, 2015 Update - Fixed Video playback

Tuesday, September 1, 2015

China may be the excuse for no rate hikes in September