Faber wishes they would Audit the Fed's gold

I dont value gold, I just weight it every year to see if its the same weight. I wish they would do that with the Federal Reserve, because nobody has audited these governments who claim they have that much gold. Maybe they dont have it, maybe they have lent it already.

Problems in Asia- Household debt, asset prices....

Most of the Asian economies are not growing much. Some may even be contracting. Moreover over the last 5 years, everywhere in Asia, the household debt as a percent of the economy has exploded, in other words a lot of growth was driven by unsustainable credit growth. 

The household debt levels are relatively high, the asset prices are high, the affordability of buying homes has diminished and many countries have had currency weaknesses and their currency account surplus has turned to deficits. 

Some countries like India, Indonesia had to push up interest rates to support their currencies. I'm not overly negative in the Asian regions but if a bubble bursts in China it would have a devastating impact on the surrounding countries.

Its a crazy world

Libya is already in civil war. Partly due to countries intervening such as North America, Qatar. It is very clear that money going to Rebels ends up in the hands of Al Queda units. We are in a crazy world. 

China growth to slow down

Marc Faber when asked about China's economic challenges in the future:

"Well I mean there are many challenges. Basically they have a misallocation of resources, they have a credit growth, there’s a lot of (expected?) capacities in some industries. And that present time the economy, in my view and based on some corporate results, it would appear that the economy is hardly growing. So, this very strong growth we had in the last say 10, 20 years is going to slow down regardless, to a range in my view of between four to six percent. If you’re lucky they grow at that rate. But the question is, from this ten-percent growth rate plus minus to say your range to four to six percent is that transition going to be a smooth transition or interrupted by some kind of a crisis? I think some kind of a crisis scenario is quite likely."

Marc Faber owns Newmont, Freeport McMoran stocks

I have some holdings in shares like Newmont, Freeport McMoran.

Credit rise unsustainable

If we take total credit as a percentage of the most advanced economies, then total credit of the economies is now 30 percent higher than in 2007 when the last crisis occurred. 

Similarly in China credit as a percentage of the economy has been growing the last few years by 50 percent. This is unprecedented. It is a gigantic credit bubble. I admit it may go on but it will end badly.

Faber praises Paul Volcker, Karl Marx

Marc Faber thinks Marx may have a point. He says "Karl Marx might prove to have been right in his contention that crises become more and more destructive as the capitalistic system matures and that the ultimate breakdown will occur in a final crisis that will be so disastrous as to set fire to the framework of our capitalistic society."

Dr Faber then comments on Paul Volcker by calling him a "man of impeccable personal and intellectual integrity". And he adds "he was the best and most courageous Fed chairman ever."

Central banks will be destroyed by market forces, Gold to be linked to paper money

I think, what will eventually happen is that the market forces will destroy central banks. It’s actually interesting, based on the losses that the Federal Reserve already has, they have now negative equity. Of course they don’t go bankrupt because they can basically print money – but it is where the commercial enterprises would be bankrupt. 

I believe one day the financial system including derivatives, whole leverage and so forth, will go up in the air and then voices will come up and say, well who actually created this whole mess and at that point the central bankers and Mr. Bernanke say well, he is the John Law of the 21st century.

And then I think we will go back, probably to some kind of an agreement between countries whereby gold plays a role. We never had a fewer gold standard in the sense that there was only gold used to transact. You always had gold, but also the paper money, in 19th century also. But paper money had the linkage to gold. And I think we will go back to that system eventually.

Boom Bust cycles are normal

"My view is that capital spending booms, which inevitably lead to minor or major investment manias, are a necessary and integral part of the capitalistic system. They drive progress and development, lower production costs and increase productivity, even if there is inevitably some pain in the bust that follows every boom." 

via thedailyrecoking

Marc Faber hopes gold prices is manipulated downwards

There are lots of theories about manipulation in the gold market. I always say, this doesn’t concern me, and I hope that the central banks manipulate the price down because if that is the case – don’t forget that every manipulation eventually leads to a move in the opposite direction that is very violent – so in other words, if someone manipulates the price down, in my view eventually the price will shoot up very dramatically. 

It’s like if you have wage control, eventually the wage control falls apart and wages go through the roof. Similarly if you have in the commodities market price support like coffee or oil or what not, eventually the price falls through the price support and so forth and so on. 

Market force is always more powerful, so I hope the gold price was manipulated down because then it will go through the roof eventually.

Money printing is a vicious cycle

Marc Faber on the topic of the current fed policies of money printing, bailout of companies and fighting deflation:

 If a central bank prints a sufficient quantity of money and is prepared to extend an unlimited amount of credit, then deflation in the domestic price level can easily be avoided, but at a considerable cost.

It is clear that such policies do lead to depreciation of the currency, either against currencies of other countries that resist following the same policies of massive monetization and state bailouts or against gold, commodities and hard assets in general. 

The rise in domestic prices then leads at some point to a “scarcity of the circulating medium,” which necessitates the creation of even more credit and paper money.

US economy is not real

"I should like to point out that as late as the early 1980s, the U.S. resembled far more a “real economy” than at present, which I would definitely characterize as a “financial economy.” In 1981, stock market capitalization as a percentage of GDP was less than 40% and total credit market debt as a percentage of GDP was 130%. By contrast, at present, the stock market capitalization and total credit market debt have risen to more than 100% and 300% of GDP, respectively."

Chinese people encouraged to buy Gold

We all admire the economic growth in China over the last decade. China has the potential to overtake the US one day in the future to be the number one economic power. So what does it tell you when they are encouraging their citizens to invest in gold ? Surely they are not trying to trick them. Here below Dr Marc Faber talks about this.

"Basically, the Chinese are encouraging Chinese people to own gold and the government has probably been a heavy buyer of gold because China is probably the world’s largest producer. So they buy the gold maybe directly from their own mines and it’s obviously a source of demand. That’s why it’s interesting that the price of gold fell so sharply from 1.921 Dollars in September 2011 to below 1.200 when actually the physical demand was relatively high."

Interview: Faber sleeps on a round bed

Marc Faber video interview on CNBC Asia. In the interview, Faber talks about his round bed, Eric Rosengren, the economy, Fed, Interest Rates.

Further he thinks the Singaporean government is honest but they could be forced to ease their monetary policies.

Hold gold in Asia- Singapore, Hong Kong

I would hold physical gold. Preferably probably in Singapore, Hong Kong or other Asian countries. And gold shares are a trading opportunity because they’re so oversold and along with the performance of gold prices they should re-bounce quite strongly.

Global monetary collapse is inevitable

Marc Faber says protect yourself with asset diversification. He further compares the current stock market with the Titanic ship about to hit the iceberg. Watch the video for full comments.

Something fishy about the gold market

All I want to say is, something is fishy about the gold market in the sense that if the Germans demand to have a part of the gold received in Germany, I think it would take eight years, we should put gold on three Boeings 747′s and you ship it to Germany and that’s it.

Marc Faber been thru two gold bubbles already

Well, I lived through the bubble in gold in the 1970′s and by 1979, November, the gold price was around 450 Dollars and within three months it went up to 850 Dollars, so within three months, actually two months, November, December and early January, we made it big. It went up almost 50 percent. So a bubble usually characterized by a terminal upwards move in these real estate or gold or stocks or collectables that is almost vertical. In other words, an acceleration on the upside. And that hasn’t happened yet.

Moreover, one of the symptoms of a bubble is widespread public market invasion, in other words most people are one way or the other involved in the market, in real estate, like in the U.S. in 2007 or in NASDAQ stocks in 2000 or on other … Or in the 70′s, in the 70′s, when I was running Drexel Burnham at that time, our office was like a casino; people came in to trade gold 24 hours a day. That doesn’t happen today.

Okay, we have now better communication so we have the internet on which you can place orders through the internet and through phones and others but if I go to conferences and I talk about investments, I frequently ask the audience, how many of you own gold and how many have, say more than five percent of your assets in gold? Most, I mean, if at most three to five percent of the audience owns any gold, that’s about it. So where, say 12 years ago, if I had asked, who of you owns NASDAQ stocks, maybe 80 percent would have said, yes. So based on the ownership of gold from financial institutions and also based on the public participation, I don’t think we’re in a bubble.

Faber on Gold, US Stocks could drop 30 percent

There’s no earning growth to speak of at the present time. There has been a lot of speculation and evaluations are relatively stretched. So, I don’t think that U.S. stocks offer great value and that they could easily drop. 20, 30 percent wouldn’t surprise me at all. 

Gold shares are in a different position because they’ve been correcting essentially since 2011 and many gold shares are down 50 percent from those highs. So like emerging stock markets they have grossly underperformed the overall indices in the U.S. and with all the money printing – and I have to point out, I don’t believe in any tapering – maybe they reduce asset purchases somewhat, but I think it’s actually quite likely that they will increase asset purchases. For the simple reason that the economy doesn’t recover, stock market goes down, the bond market goes down, and then the people at the Fed will say, we didn’t do enough. And then they will go and increase their asset purchase. Including the Fed in theory would buy you off the stock markets. 

So I think that in this environment of money printing you want to own some physical gold held outside the U.S. I don’t understand why it would take eight years for the U.S. to deliver the gold. The German Bundesbank would be possible to do it in one week, but maybe the gold is not there.

Emerging economies currently in no growth environment

Well, basically the U.S. market is in the sky, we have a very strong outperformance of U.S. stock vis-à-vis Europe until a year ago and vis-à-vis emerging markets until now. But the European economies are a large portion of the U.S. corporate earnings, but they’re not growing. The U.S. is hardly growing. Growth came from emerging markets and these emerging economies are essentially today in a no-growth environment. I live in Asia, so I am quite familiar on my observations on the ground. We have no recession that is visible. It is often seen like a pain. But we’re just at the high level of economic activity; no longer growing.

Market forces are more powerful than central bank action

In my view, the earnings of multinationals will disappoint, and don’t forget, we had this huge increase, it integrates on a percentage rise. 

The 10-year Treasury note has now gone up from July 2012, from 1.43% to now 2.88. So we have essentially doubled in yield. This is remarkable, especially in view of the fact that in September 2012 Mr. Bernanke said, the purpose of QE 3, which then became QE 4, is to lower interest rates. 

So the safest goal of the Fed has badly expired in the sense that interest rates are up essentially, and not down. That is for the first time in many years that the market forces are more powerful than the central bank action. And so the U.S. market is high, relative to other markets.