Thursday, December 22, 2016

Merry Christmas and a Happy New Year

I wish all my readers Merry Christmas and a Happy New Year. Since year-end is visiting time, remember that, "Some cause happiness wherever they go; others whenever they go" (Oscar Wilde) and that, "To keep your marriage [or a relationship] brimming, with love in the loving cup, whenever you're wrong, admit it; whenever you're right, shut up" (Ogden Nash).

With kind regards
Yours sincerely
Marc Faber 

Monday, December 19, 2016

Hillary Clinton was much more dangerous to world peace and world trade than Trump

Eventually the victory of Trump is geo-politically more favorable than a victory of Clinton because Trump understands that Russia has a different perspective of the world - that the Russia has a sphere of influence, that the Chinese have a sphere of influence. He understands that the US doesn't need military and naval bases in 200 different countries around the world. Nobody wants to attack the US.

Wednesday, December 14, 2016

Britain - then vs now

In the 19th century a small country like Britain controlled a large portion of the world because Britain was a naval power and they had technology and so forth. 

They could go into China and punish the Chinese to the extent that the Chinese had to gift them an Island - Hong Kong in 1842 or 1843 and get the Chinese to pay them a huge quantity of silver coins. When you think of it nowadays Britain wants anything, the Chinese will tell them to go to hell. Its a different world. There has been a huge change structure of global power. 

Monday, December 12, 2016

Elites and Media will blame any future economic problems on Donald Trump

Before Brexit the elites and political class warned it would be a disaster. It has been a disaster for the Pound Sterling but economically not that much has changed. And similarly the elite in America, both the media, democrats and republicans warned that a Trump victory would be a disaster for the economy. Well so far the stock market has made a new high, it remains to be seen how the economy does. But in this context what will happen is if the economy goes into recession in the next two years, the media will blame Mr Trump. If the economy of Britain goes down, the media will blame it on Brexit.

The recovery in US has been in an expansion admittedly of poor quality and of poor growth but its nevertheless been in expansionary mode since June 2009. So in other words next year will be eight years into an economic expansion which is by historical standards is twice as long as the typical expansion in America. So a recession is overdue regardless. And I think the recession is going to be triggered by a rise of interest rates. Basically interest rates began to rise in July of this year, and the bond market was weak before Trump was elected and would have been weak if he had lost the elections to Hillary Clinton. 

Monday, December 5, 2016

December 2016 market commentary

I am assuming that all of you must feel a certain Trump election victory fatigue. Still, since so many of you asked me about Mr. Trump and his future policies I wanted to share with you an article by Edward Chancellor about the election, which reflects almost entirely my views on the topic. Chancellor refers repeatedly to the economist Mancur Olson, whose book The Rise and Decline of Nations, (published in 1982) I have read several times. Mr Chancellor is well-known for his economic-historical book Devil Take the Hindmost: A History of Financial Speculation (1999).

Chancellor concludes that, “at heart, Olson was an optimist: ‘it takes an enormous amount of stupid policies or bad or unstable institutions to prevent economic development.’ If - and that’s a big IF - Trump were to succeed in assaulting the ‘growth-retarding’ forces within American society, he could well end up surprising his legions of right-thinking critics.”

I am far less optimistic because as Noah Smith of Bloomberg writes, Even Trump Is a Keynesian. Furthermore, the stock bulls believe that stocks will move up while bonds will continue to weaken. However, higher interest rates would have a negative impact on the auto and housing sector, on commercial real estate, as well as on corporate earnings. Hence higher rates could more than offset any potential benefit of expansionary fiscal policies.

In other words, stock market bulls and bond bears may overlook the fact that higher interest rates seem to be incompatible with a strengthening highly leveraged US economy.