Higher taxes slows country growth and personal freedom

I oppose higher taxes under any circumstances because higher taxes allow the government to expand and, in the process of expanding, to retard economic growth and curtail individual freedom. We are all aware of how dysfunctional and wasteful the US government is. 

In some European countries, the situation is not much better or is even worse. 

 via Economist

Does anyone really want to give the government more money with which to wage additional senseless and extremely costly wars, and to distribute even more food stamps, and to allow even more people to receive disability benefits ?

Fabers makes market predictions for 2014

Singapore, Hong Kong better now than 15 years ago

The difference between the wealth and income inequality in Singapore and Hong Kong, and that in the US, is that most people in these two cities (the so-called 90%) enjoy better living conditions than 15 years ago and their net worth has appreciated, whereas in the US this is not the case.

Gold shares could go up 30 percent in 2014

Given all the money printing that is going on globally . . . and given that the total credit as a percentage of the advanced economies is now 30% higher than in Year 2007 before the crisis hit, I think Gold is good insurance.

I think Gold shares are very inexpensive. So a basket of Gold shares I think next year could easily appreciate 30 percent.

The state of mind of the Fed

In my view in a few years the Asset Purchases will be substantially higher than they are right now. 

(Watch the video for the full comments)

From Indonesia, Phillipines, Thailand to India

Money is flowing out of countries like Indonesia, Philippines, Thailand into India. We had an under-performance of India compared to other emerging economies until recently. 

And we have this pool of international liquidity that is driven by asset allocators, so they look at India - they see a relative poor performance and they see some marginal improvement in the macroeconomic environment of India. 

Latest Stock Market analysis Interview: Watch now

Faber: Best tax is Flat Tax

The English philosopher and political economist John Stuart Mill took the view that

 “unless … savings are exempted from income tax, the contributors are twice taxed on what they save, and only once on what they spend.”

The Swedish Nobel Laureate, economist, sociologist, and politician Karl Gunmar Myrdal opined: “Taxation is the most flexible and effective but also dangerous instrument of social reform. One has to know precisely what one is doing lest the results diverge greatly from one’s intentions.”

Canadian politician and Cabinet Minister Sir Thomas White had it right when he said, “In such experience as I have had with taxation — and it has been considerable — there is only one tax that is popular, and that is the tax that is on the other fellow”.

Personally, I have spent a considerable amount of time on taxation issues. My doctoral thesis was on the financial reforms of Sir Robert Peel, which when implemented in 1842 included the introduction of an income tax as a permanent tax on high income earners. (The top rate was 7%.) At the same time, numerous indirect taxes and import duties were eliminated, which greatly simplified the tax system.

In my humble opinion, the probably fairest tax is a flat tax on incomes (no deductibles such as the interest payments on debts, children allowances, or investment tax credits, and no subsidies for any interest groups) which is levied on all income earners and corporations, churches, missions, charities, pension funds, government officials and governmental organisations, etc. at a maximum rate of between 10% and 15% per annum.


Source: http://dailyreckoning.com/the-worlds-only-popular-tax/

Marc Faber Interview December 2013

Oil demand to rise rapidly in China, India

They[Different commodities] move in general in the similar direction but maybe at different times. Now, say if the price of corn goes up substantially, the farmers can right away increase the production of corn and a year later the additional supplies will then essentially contain further price increase and the price will go down. 

In the case of the oil industry and also for copper, once you have shortages developing, until new large reserves come on stream and until new mines essentially produce, the response time is very long and we have essentially in the world, coming from emerging economies – those would be China and India – very rapidly rising oil demands.

In China over the last fifteen years, oil imports, they have risen three times. China consumes now almost ten million barrels of oil a day. So the demand is there, if they slow down somewhat, long-term it’s there. Every oil well eventually runs dry. It cannot produce forever. New oil is very costly to produce. In other words you have to go and drill and you have to then extract the oil and there’s a lot of safety regulations and very costly, probably around eighty Dollars a barrel. 

Gloom Boom Doom Report - December 2013 Issue

Marc Faber writes on the December issue of the Market Commentary:

"High valuations, excessive debts, and extremely bullish sentiment do not necessary imply that a US stock market collapse is imminent. This especially not in an environment of unlimited money printing but if we believe in Selling Disciplines then the combination of high valuations and extremely positive sentiment strongly argues for reducing one’s exposure to US equities."

Read the full Gloom Boom Doom report at http://drmarcfaber.blogspot.com/2013/12/marcfaber-market-commentary-dec-2013-gloomboomdoom.html

Large cash depositors can be at risk of haircuts

I think all the investors should consider, what is actually the downside. Say you have a billion Dollars; under normal conditions maybe the safest is to keep everything in cash. Now because under normal conditions, say little inflation and the purchasing power of money is maintained, the banking system is down. So you keep it in cash. But under the present condition, cash could be very dangerous, say if banks had another bailout, I think that the public opinion would shift to penalizing large depositors. 

In other words, if you have 100.000 Dollars on deposit with Deutsche Bank, maybe you get your money back but if you have a billion Dollars, maybe they take the haircut of 50 percent. So in this environment you can ask yourself if you have a billion Dollars. Well, what is relatively safe? 

So I would imagine that real estate is relatively safe because it’s widely owned by a large portion of the population. It may go down in value and it may be taxed away but it’s feasibly safe. If you look at Germany in 1928, the large and the more stable companies from Siemens to whatever it is, say, BASF, they survived. And so you were better off in stocks in the long run to wars and hyperinflation than in cash and bonds. 

When you look at gold, well, gold is very safe. It often has a high return in the long run, per se based provided and this is the proviso, the governments don’t take it away. That is a big issue.

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.

Faber: Eric Rosengren, Janet Yellen are money traders

We have a government bureaucracy class that essentially pursues its own interests and within that class you have the treasury department and you have the central banks. 

The thing is, I know quite a few members and former members of the Fed, this is an institution, it’s a club of, say on paper, educated people but with no business experience. They are not familiar with the problems of the businessmen and they have developed group thinking. All of them are money traders.

Now, some are maybe larger money traders like Eric Rosengren of Boston Fed or Yellen[Janet], and some are maybe less money traders. 

Basically they all trade money or intervene with monetary measures if the economy slows down or has a recession, a recession of degree. 

And my sense is that the government and the central bank will not solve the problem of central banks, only a major crisis that completely discredits the central bankers and the banking system will solve the problem.


(Pictured above: Janet Yellen, Eric Rosengren)


Source: Marc Faber Interview

Government should represent the people

"I would say basically we have democracies but it should be clear to anyone who lives in Western Europe or in the U.S. that the individual on paper he has plenty of rights but in reality he can be stopped by an authority at the airport and kept in custody for a day or two and harassed and so forth and so on. So his rights are actually very limited. And we have today governments in Brussels and also in Germany and in Switzerland, basically everywhere, where they do not represent the will of the people. In other words they don’t care about the people. They care about themselves." 

Source: MARC FABER Interview

The Endgame Is A Total Collapse but From A Higher Diving Board

Marc Faber reaction today during a Bloomberg TV interview is even more prescient. Fearing that Janet Yellen "would make Bernanke look like a hawk," Faber explains that he is not entirely surprised by today's no-taper news since he believes we are now in QE-unlimited and the people at the Fed "never worked a single-day in the business of ordinary people," adding that "they don't understand that if you print money, it benefits basically a handful of people." Following today's action, Faber is waiting to seeing if there is any follow-through but notes that "Feds have already lost control of the bond market. The question is when will it lose control of the stock market." The Fed, he warns, has boxed themselves in and "the endgame is a total collapse, but from a higher diving board."

Faber on Janet Yellen's No taper for now:

    "My view was that they would taper by about $10 billion to $15 billion, but I'm not surprised that they don't do it for the simple reason that I think we are in QE unlimited. The people at the Fed are professors, academics. They never worked a single life in the business of ordinary people. And they don't understand that if you print money, it benefits basically a handful of people maybe--not even 5% of the population, 3% of the population. And when you look today at the market action, ok, stocks are up 1%. Silver is up more than 6%, gold up more than 4%, copper 2.9%, crude oil 2.68%, and so forth. Crude oil, gasoline are things people need, ordinary people buy everyday. Thank you very much, the Fed boosts these items that people need to go to their work, to heat their homes, and so forth and at the same time, asset prices go up, but the majority of people do not own stocks. Only 11% of Americans own directly shares."

On interest rates policy:

    "On September 14, 2012, when the Fed announced QE3, that was then extended into QE4, and now basically QE unlimited, the bond markets had peaked out. Interest rates had bottomed out on July 25, 2012--a year ago--at 1.43% on the 10-year Treasury note. Mr. Bernanke said at that time at a press conference, the objective of the Fed is to lower interest rates. Since then, they have doubled. Thank you very much. Great success."

On what the endgame is:

    "Well, the endgame is a total collapse, but from a higher diving board. The Fed will continue to print and if the stock market goes down 10%, they will print even more. And they don't know anything else to do. And quite frankly, they have boxed themselves into a corner where they are now kind of desperate."

On Janet Yellen:

    "She will make Mr. Bernanke look like a hawk. She, in 2010, said if could vote for negative interest rates, in other words, you would have a deposit with the bank of $100,000 at the beginning of the year and at the end, you would only get $95,000 back, that she would be voting for that. And that basically her view will be to keep interest rates in real terms, in other words, inflation-adjusted. And don't believe a minute the inflation figures published by the bureau of labor statistics. You live in New York. You should know very well how much costs of living are increasing every day. Now, the consequences of these monetary policies and artificially low interest rates is of course that the government becomes bigger and bigger and you have less and less freedom and you have people like Mr. De Blasio, who comes in and says let's tax people who have high incomes more. And, of course, immediately, because in a democracy, there are more poor people than rich people, they all applaud and vote for him. That is the consequence."

Living beyond means may be painful

We’ve lived beyond our means in most countries and to solve that problem is not going to be without significant pain. But effecting the right direction would be to take the depression away from central bankers to increase and cut the money supply and to intervene into the free market essentially with monetary measures. 

I think that would be the first step in the right direction because if you look at what has happened in the economy, one of the safest goals of central banks is price stability. 

Well where has there been price stability over the last 15 years? We had a colossal NASDAQ problem and then a collapse and then a colossal credit bubble and housing bubble and then a collapse and then we had a colossal bubble in commodities in 2008 when the oil price went to 147 Dollars, and so if the goal is price stability, basically the fiscal and in particular the monetary interventions have actually led to more instability rather than stability.

Gold is cheap says Marc Faber

Well, the problem with zero interest rate policies and money printing is that it distorts all evaluation models, it’s very difficult to value something. I could say, okay, this house in Mayfair or on Park Avenue or Madison Avenue in New York is expensive if I compare it to, say a quantity of money that’s been floating around the world, but maybe it isn’t. Is a Warhol painting expensive or cheap? Well it’s up, say 12 times over the last ten years, so it’s gone up a lot but the quantity of money has also gone up a lot and the number of billionaires around the world has also expanded and so forth and so on. So I can say, maybe gold relative to a Warhol painting or relative to the U.S. stock market is not that expensive or relative to Hampton property. Obviously those are up from 250 Dollars in 1999 to now over 1.300, so, expensive or cheap is a very difficult concept in the present environment.

US congress makes Marc Faber depressed

When I look at US congress it depresses me. Sometimes it makes me laugh. 

Marc Faber is an world famous contrarian investor known for his accurate predictions of the stock markets around the world.

Chinese tourism still growing

The chinese tourist group is the largest group in the world. 90 million chinese travel overseas every year. They first goto Macao to casinos. Gradually they are moving to other countries in South East Asia, by the way also US and Europe. For instance in Thailand arrivals from China was up 90 percent. In some months they were up 100 percent.

Consumer confidence to weaken further

With what is going on consumer confidence is going to worsen further. Any common sense man, he looks at congress sees a dysfunctional government, is not going to rush and buy out goods. 

Secondly, according to the Feds own statistics the money that was printed by the Fed has gone to 5 percent of the population. Maximum 50 percent of the population household wealth is still down more than 40 percent from 2007 peak.

Alibaba and the 40 thieves

In Washington we do not have Alibaba and the 40 thieves. We have "Alibama" and the 536 thieves, 436 members of the house and 100 members of the Senate. All of them they are only interested in getting money to their side, for their purposes. 

Faber would not buy US stocks at the present levels

We are coming into the earnings season. The earnings are likely to disappoint.  The markets are not cheap according to many valuations. The returns over the next 5 to 10 years will be very moderate.

source: cnbc

Oil attractive, Middle east to blow up

"I think the whole Middle East will blow up. So, as a commodity I think oil is reasonably attractive and I would not rule out that the price could break out on the upside, I would rather be long on oil than short."

Danger signs flashing for Apple

"I'm not saying it will go bust," but "it could go bust eventually"
-via cnbc

Emerging economies benefited from US money printing

Money printing has been beneficial to people with money in emerging economies because a lot of funds flow into emerging economies due to the huge U.S. trade and current account deficits and it has been rather detrimental to the middle class and the working class because their costs of living have risen more than their wages.

Miracles can happen in financial markets

Faber negative on much of the future

"Well I think we have unprecedented government interventions with fiscal and monetary policies. For me it’s not really a question, it won’t work but miracles do happen, and maybe based on the bailouts and huge monetary inflation that the central bankers have created, maybe it is possible that the financial system heals and that the global economy resumes a, say, trend line growth such that we had in the 90’s and the early parts in 2000 and 2005. But I very much doubt that."

Marc Faber is an world famous contrarian investor known for his accurate predictions of the stock markets around the world.

Yellen is same as Bernanke

Now that Mr Obama has confirmed that Janet Yellen is their nomination for the head of the Fed, the first woman to be in charge, is that a good idea ? I dont think she is qualified because its just more of the same failed policies from Bernanke that she will be implementing.

"Janet Yellen will make Mr Bernanke look like a hawk. In 2010 she said if she could vote for negative interest rate, in other words you have a deposit with the bank at $100,000 at the beginning of the year and in the end you would only get $95,000 back, that she would be voting for that. The consequences of these monetary policies and artificial low interest rates is that government gets bigger and bigger and you have less freedom. That is the consequence."

Economy is weakening, bull market ending

I believe the US economy is weakening, and if it gets worse they will have to even increase the purchases, maybe even to $150 billion a month.

We are in a bull market that is in the tail-end instead of the beginning but that does not mean prices will collapse. I don't think that stocks are the greatest bargain anymore, but it's not that expensive either.

Marc Faber rants: The fed are professors, academics

We are in QE unlimited. The people at the fed are professors, academics, they never worked in a single life of business of ordinary people. They don't understand that if you print money, it benefits basically a handful of people, not even 5 percent of the population, 3 percent of the population. 

Malaysian stocks are stable

Marc Faber comments on Malaysia and its stock markets:
Malaysia may not be seen as an exciting market and the stock market is certainly not cheap, but this is a well-balanced economy and stable enough to let you sleep soundly at night. They are relatively stable, supported by a well-balanced economy coupled with no major downward risks

Also, unlike US banks, Malaysia's are solid and they do not involve in derivatives or gamble.

India is a mess

Marc Faber on India:
The Indian government has created a huge problem, as it has under-reported the rate of increase in the cost-of-living or inflation. And by not measuring inflation properly, the government has kept interest rates negative in real terms. What the government can do or should do is, though it can be painful, it should increase rates substantially, stabilize the rupee. To increase rates would imply lot of pain in the economy temporarily, but in the long term, it would be desirable.

On the Indian Government policies
I am not very optimistic about India on the macroeconomic front, and it has to do with the government policies. The economic policies of the government are by and large a disaster; the government could have done more. The government in India, through its incredible bureaucracy, has retarded economic growth in the last 20-30 years by at least 3% per annum in real terms. It's a miracle that the Indian economy has performed well, considering the quality of its government.

Everything is possible

At some stage, every inflation leads to deflation in that particular sector, whether it’s housing, the NASDAQ, the NIKKEI, or whatever it is. I believe one day, paper money and financial assets will be destroyed, but I’m not saying tomorrow. Maybe it happens from a market capitalization that is much higher. Someone said to me, “The DOW Jones will go to 100,000.”

Yeah, it’s possible. If you print money, everything is possible.

Fed is manipulating price

One of the reasons I would be inclined to believe in some manipulation would be, let’s say you’re a central bank, like the Fed. You don’t have the gold that you declared and you know that you have to buy it back at some point. Then, you may wish to manipulate the price down until you can cover your short position in gold at a reasonable cost. There will still be losses, but you can cover them at a reasonable cost. That is really the only reason I could see why a central bank would want to depress the price of gold.

Few people in US own stocks

Yes, until the system breaks down. My view would be that there will be money printing, and the problem with money printing is always that you don’t control where it goes to. Ideally, it would go into higher incomes of the middle class and of the working class, but this hasn’t really happened.

The real wait is for the typical household or the medium household, they are going down. What is going up is basically selected asset markets, like the real estate market has recovered. In some areas, we’ve hit new highs. The stock market has gone up. But as you know, only very few people own stocks in the United States, so it doesn’t impact the wealth of the majority of people.

China more important than Fed

Faber thinks China is the real deal, not the fed. He recently said, "I think that for now, the US is still the dominant financial market and the dominant financial power. I think we have numerous problems in China, and I personally pay more attention to what is happening in China and in other emerging economies than to what Mr. Bernanke is saying."

Bernanke makes Faber happy

I own equities, and I should thank Mr. Bernanke. 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. The art-auction houses are seeing record sales. Property prices in the Hamptons rose 35% last year. Sandy Weill [the former head of Citigroup] bought a Manhattan condominium in 2007 for $43.7 million. He sold it last year for $88 million.

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. Although I have been a beneficiary of this policy, I can't approve as an economist and social observer.

Large bank depositors are at risk

The mentality before the 2007 crisis and after that the tax payers bailed out the system but now the asset holders have to contribute to the bailout. As we have seen in the case of Cyprus the large depositors are penalized more than small depositors.

Marc Faber is a famous contrarian investor and the publisher of the Gloom Boom & Doom Report newsletter.

Hold money in Singpore Dollars in a Singaporean Bank

If you have all your money in the bank eventually you may lose up to 40, 50 percent  or even 60 depending on the quality of the Bank. If you hold your money in a Singapore bank in Singapore dollars, I think Singapore dollar deposit may be safe. But if you hold US dollar in a Singapore Bank they place it in a Intermarket rate and that deposit may not be safe.

Marc Faber is a famous contrarian investor and the publisher of the Gloom Boom & Doom Report newsletter.

Wealth Redistribution

One day the treasury may decide to withhold taxes on interest payments to foreigners. One day they may print that much money the treasury market collapses.

The well to do people that benefited thru money printing and easy monetary policies from the early 1980's will have to give back some of their money either thru taxation, or revolution or expropriation.

Dangers ahead of a deflationary bubble

The next crisis could lead to a deflationary bubble and a bust in governments. We may have a total collapse in confidence in the system and at the same time have an increase in International tension.

Marc Faber is a famous contrarian investor and the publisher of the Gloom Boom & Doom Report newsletter.

Singapore $, gold only safe havens: Russell Napier - Daily News &Analysis

This is a very pessimistic presentation so I’ll be brief, CLSA strategist Russell Napier said last week, before suggesting that the only two safe havens for investors are Singapore dollars and gold.
Napier’s talk at the CLSA Investors’ Forum on Friday was followed by a lunch presentation by Marc Faber. The contrarian investor, who goes by the nickname of Dr Doom, was only marginally more positive than Napier and ensured that all those attending the final day of the forum went away on a sombre note.

Investors may have been on a high, literally and figuratively, after listening to Christina Aguilera perform several of her hits, including ‘Beautiful’ and a reggae-styled version of ‘What a Girl Wants’, at the CLSA gala on Thursday night. But they were reminded the very next morning that the current environment is presenting few opportunities for cheer.

The primary message that Napier conveyed in his address, which had stolen its apt title ‘Darkness on the Edge of Town’
from another musician, was that the economic environment will get worse, much worse, before it gets better.
“Things in Asia will get better after 12 months,” he said. “The rest of the world will stay bad for 10 to 15 years.”
Napier also argued that the fact that some banks would be eradicated in the next few weeks was a given and beyond debate. “It is amusing when people talk about a double-dip recession,” he said. Napier himself believes the world has been in a recession since the financial crisis started.
In the summer of 2011 the burden of funding the US government shifted to the savers from the printers [of money], Napier said, reinforcing the point with a slide titled ‘Uncle Sam Needs You’.
US Treasuries used to be a safe haven but this year the supply of US government bonds is at a record high. Foreign buyers are still picking up Treasuries, but more slowly. And the onus of funding the deficit is falling on, among others, money market mutual funds, which are dumping corporate bonds and commercial paper in order to do so.
“This represents a structural change, a change in world history,” said Napier. “There is a long, honourable history of running up government debt in the US.” Until 1932 the US government only borrowed money to kill people, he added, but since then it has been not to kill but to keep people alive. I think I should get into advertising, Napier said, noting that an apt slogan for the US Federal Reserve would be: “The Fed: Printing the American dream since 1913”.
“I agree with Churchill who said: ‘America will always do the right thing but only after exhausting all other options’,” Napier said, alluding to the fact that the US is soon going to have to support a generation of baby boomers unless the social contract in the US is renegotiated. Since Napier feels the US is going to be unable to solve the many problems that it is facing, including the social contract, in the near future, he is negative on any investments in US stocks.
He was equally bearish on the prognosis for Europe. Everybody at the conference thinks Europe will deflate, devalue and depreciate, he said, but it is worse than that - Europe will nationalise.
“Get your money into gold and Singapore dollars; keep your powder dry and wait in the next six to 12 months to buy Asian equities,” Napier advised, noting that he expects the Singapore dollar to become the Swiss franc of the 21st century. Napier’s bullishness on the Singapore currency is driven by the fact that the country has a capital account surplus and the government is also unlikely to impose capital controls on inflows and outflows — something he predicts will happen in Europe very soon.
“Wherever Asia is on the spectrum of free-market capitalism and communism will not move much in the next 10 years,” he said as further support of his case that investments in the Singapore dollar and Asian equities are the way forward.
Napier conceded that his suggested investment strategy was inoperable for the majority of CLSA’s clients. The Singapore dollar market is not deep enough and simply investing in gold provides no diversification. But he suggested European and US investors should at least take their money out of existing investments and move it into an Asian currency.
“The biggest risk in Asia is Pakistan,” said Napier in response to a question about whether political instability in Asia could influence his recommendations. “The fact that it is a nuclear state is what keeps me awake at night.”

China and North Korea conspiracy

Dont believe the North Koreans are acting on their own. Its all a test to see the resolution by the US, Japanese and the foreign powers. The Chinese are watching as they will do the same in a few years.

North Korea can hardly produce bicycles. How can they produce nuclear weapons on their own. The Chinese are using North Korea.

Markets could continue higher but watch for crash

Near term the market is overbought, we could make new highs in the S&P500 with very few stocks making new highs.

If we go higher the probability of a stock market crash goes higher sometime in the second half of this year so I dont think its a very good time to buy stocks.

Marc Faber is a famous contrarian investor and the publisher of the Gloom Boom & Doom Report newsletter.

Gloom Boom Doom: April 2013 Monthly Market Commentary

When a government goes bust in a democracy (and most Western governments cannot possibly meet their unfunded liabilities) the majority of people who have no assets or just a few assets will always find it appealing to collect money from the evil “fat cats” (in the case of the US, the 1% who own 42.7% of financial wealth). It should be obvious that if 80% of the population owns just 7% of financial wealth, they will be tempted to transfer at some point in future, part of the wealth of the 5% or 10% richest Americans to the masses that have no savings.

The problems we face today are there because the people who work hard for a living are now vastly outnumbered by those who vote for a living.

Normally, we analyze various asset markets and individual investment opportunities according to their merits. But now, we also need to think which asset classes are the least and which ones are the most vulnerable to wealth taxes.

Future bailouts are dangerous to depositors

The Cyprus incident now shows that, from now on future bailouts can affect depositors as well as tax payers, while in the past the bailouts didn't affect depositors as much.

Marc Faber is a famous contrarian investor and the publisher of the Gloom Boom & Doom Report newsletter.

There should be no deposit insurance

On Cyprus:

The MF global collapse had a negative effect on the depositors.  By having a deposit insurance consumers don't worry about which Banks and Institutions are safer. But without deposit Insurance consumers will be more cautious.

The great caution

When money is printed it doesnt flow equally into the market. My concern is we are going to have a systemic crisis that will may not allow us to even hide in gold.

US stocks dont have much higher to go

I think US stocks wont go too much higher from here and there is considerable downside risks.

Europe has current account surplus but their economy is in a recession and this will affect the US stocks as well. Bulk of the US corporations profits come from Europe. Also at the same time global liquidity is contracting.

Marc Faber is a famous contrarian investor and the publisher of the Gloom Boom & Doom Report newsletter.

Marc Faber: Economic Times Interview Part 3

ET Now: The Indian central bank has cut rates. Can monetary easing help kick-start the economy?

Marc Faber: Basically what the lower interest rates in India might do is to weaken the rupee, and obviously then if the rupee weakens, we might have some inflationary pressures like in other countries. In India, the rate of inflation is vastly understated. So in real terms, probably economic growth is rather slow.


ET Now: But one of the concerns for India has been the large current account deficit which is due to higher imports of both gold and crude. What is your sense on these two commodities? Can gold correct more? Should investors be using this weakness to buy?

Marc Faber: I do not know. I would not use this weakness to buy. I rather think that India has numerous problems. One is the fiscal deficit. One is the current account deficit and the combination of the two argues in the long run for a weaker currency.


|ET Now: What are you expecting from the FOMC meet? Will it be more like a no-event or they are likely to acknowledge the better data flow and hence hey will start making a base for pulling out the QE3 plug?

Marc Faber: I do not expect any plan to exit anything at the Federal Reserve. I rather think that they might plan to extend QE3 for further time because one of the goals was to essentially reduce the asset purchases when unemployment drops to 6.5%. That may be far away.

Economic TImes Interview Part 2

Continued with Economic Times Interview:


ET Now: So what is the bigger risk to the risk-on rally? Will it be China or credit bubble in Japan or a real estate bubble in Asian markets?

Marc Faber: The risk for me globally is really European banks and financial institutions and a market that is already quite high. We are not at the 2009 lows. Many markets have gone up 100 per cent. Thailand is up almost 4 times from the 2009 lows. So we have very extended markets. Many countries in Asia have an asset bubble in real estate and we have the Chinese economy which, I believe, is growing at present at a much slower rate than what the official statistics would suggest.


ET Now: So what is your view on India? Can it get back to 6-7% growth rates, thanks to reforms the Indian government has taken?

Marc Faber: The Indian economy will grow in the long term more modestly than expected. Now can there be years when it only grows at 3% or where there is no growth at all or can there be years when it grows at 7%? Yes, it is possible, but for long term, I think that the Indian economy, by the way also China, will slow down.

Emerging markets depends on China

Marc Faber interview with Economic Times of India


ET Now: Experts do expect the US to clock 4% GDP growth this year and it is trading near record highs. Do you see this factor limit a lot of fund flows to emerging markets?

Marc Faber: For emerging markets, the crucial issue is only China. If the Chinese economy blows down meaningfully or even goes into recession, which is a possibility, then obviously all resource producers of the world will be badly affected. If the economy slows down, obviously the demand would decline and commodity prices would come down and bring about a more hostile environment for the resource producers. I do not pay so much attention to the US or the European economies with respect to emerging markets. The key is really China.

China could have recession in certain sectors

I think the Chinese economy has slowed down a lot...but they will not miss their 7.5 percent target, they will announce it, but the reality will be much lower. If you look at the statistics that are more reliable like Korean, Japanese or Taiwanese exports... then export figures from China don't add up entirely," he said.

The economy in China will slow down and we may even have in certain sectors a recession... The question is about the future. I think China will still grow but there will be bumps along the road and political issues," he added

China export numbers overperformed market expectations

China's recent strong export numbers, which blew past market expectations.

China's export data for February showed a 21.8 percent year on year spike, in contrast to analyst expectations of 10.1 percent. However, the reliability of this data has been questioned due to its inconsistency with neighboring countries' data including South Korea and Taiwan, among other things.

Faber said he expected China's economic growth to be much lower in reality, and even hinted towards a recession in some sectors of the economy.

Buy something that is depressed

Faber has been calling for gold to outperform stocks, but acknowledges that the yellow metal has been in a correction. "I'd rather buy something that is relatively depressed than something that is relatively high," he said.

But while Faber expects a correction for equities, he still owns some stocks. "The equities I own, I bought in 2008 and 2009 in Asia," he said. "The Philippines, Indonesia, Thailand, where I have most of my holdings, are up four or five times since then."

Faber added, "I'm not short stocks. But I'm very worried about it."

Nasty sell off waiting

The stock market's run will result in either a 20 percent correction or a more nasty sell off at some point this year, Marc Faber, publisher of the Gloom Boom and Doom report, told CNBC's "Closing Bell" on Thursday.

Faber pointed out that it's been almost exactly four years since the stock market bottomed out. "We're up very substantially, I think investors who today rush into stocks should be reminded of that," he said.

He sees two possible scenarios. Either a 20 percent correction for stocks and then a move higher, or a scenario that is similar to 1987 or 2000 when stocks rise strongly early in the year only to drop sharply.

March 2013 Gloom Boom Doom- Asset deflation worries

The March 2013 Monthly Market Commentary (MMC) was published on the MMC subscribers only section and emailed on 1-Mar-2013.

"I do not believe in a deflationary Collapse but I am afraid of it"

I worry about the time when the current asset inflation will give way to a serious asset deflation, which will inevitably happen sometime in the future. As an observer of markets I am, therefore, concerned that the decline in gold prices could be telling us that we are about to enter a period of asset deflation.

I should like to make two points very clear. I am not sure when the asset deflation will start. Most likely, different asset classes will deflate at different times and with different intensity. The second point I wanted to make is the following. In a deflationary environment (whenever it will happen), financial assets (stocks, government and corporate bonds especially high yield bonds) would likely be the most vulnerable assets. In fact, in a deflationary collapse, I would envision money to flow into a sound currency and move out of “funny” paper monies. Therefore, I continue recommending the gradual accumulation of physical gold.

Similarly, most societies die because of their ill-conceived fiscal and monetary policies, and not because of their economic problems.

China Commodities and Gold

CHINA'S demand for commodities is set to level out in the coming years, famed contrarian Marc Faber has warned, while China's ongoing reliance on commodities imports is likely to add to geopolitical tensions throughout Asia, the Middle East and Africa.

Dr Faber, the author of the Gloom, Boom and Doom report and a regular speaker on the conference circuit, told the Mining Indaba forum in Cape Town that credit growth in China was beginning to grow at a much faster rate than growth in gross domestic product, with potentially negative implications for commodities demand.

"I think oil consumption in the world will continue to go up, but for some industrial commodities like iron ore and copper, China has probably reached a level where demand may not contract, but won't go up dramatically," Dr Faber said.

Sporting his trademark ponytail and a bright pink tie, Dr Faber noted that while credit in China had grown at about the same rate as GDP between 2000 and 2007, since 2008 credit had grown at a much faster rate.

Much of that credit growth had been "misallocated" into an overinflated Chinese housing market, potentially sowing the seeds for a future economic crisis in the country.

"I think they (Beijing) can again postpone a crisis, but this is probably the last time they can do it. After that, economic growth will come under a lot of pressure," he said.

"I would assume that the Chinese economy will grow at a much, much slower pace in the next 10 years . . . and this will have an impact on the demand for raw materials."

Dr Faber also said he was concerned about the geopolitical implications of China's reliance on oil imports through the Straits of Malacca and the strategic vulnerabilities that come with that.

"What would you do if you were a military strategist in China and you knew all the oil (being imported into China) comes through the Straits of Malacca?"

He warned of rising tensions throughout Southeast Asia, the Middle East and Africa as China looked to shore up its commodities supplies and delivery routes.

"I think there will be on this continent a lot of struggle over resources. We have to live with a lot of volatility," he said.

Dr Faber repeated his long-held belief that money-printing by governments around the world made gold a must-have investment. "I would have 25 per cent (of my investment portfolio) in equities, 25 per cent in bonds, 25 per cent real estate, 25 per cent gold and 25 per cent cash," he said.

"I know it doesn't add up, but I have now the accounting standards of US Treasury."

He said investing in gold and other precious metals was vital. "I would strongly advise you, for your children and so forth, don't keep your money in cash. "I'm not saying rush out the door and buy gold, I'm just saying that over time it's likely that, as has happened throughout history, paper money has always lost value."


source: http://www.theaustralian.com.au/business/economics/faber-tips-tension-from-chinas-demand/story-e6frg926-1226572129326

Marc Faber interview Part 2

Marc Faber interview with MoneyControl.com

Q: Do you think this correction might be equal for markets across the world? The criticism of the Indian market right now is that it was one of the biggest outperformer last year, which is why it perhaps looks more vulnerable this year?

A: In general, I would be careful of markets that have performed superbly last year such as Turkey and Thailand. They are in my opinion, becoming slowly overheated. I am not so sure to what extend India is overheated because currency adjusted, we are still way below the peak in 2007.

But, in general I would argue you should buy equities when everything looks horrible and when investors cannot see why the markets would go down. That is the time to be careful because there is always something that will happen to send stock prices down.

Q: You have described two scenarios. One is a correction now and then maybe a grind of a year and the other one was a rally into summer and then a bigger correction. Which one would you assign a higher probability to?

A: If we had a very strong rally into the summer, as was the case in 1987, I would not then look for a correction. But, I would look for a very significant market decline to follow. However, the more likely scenario is in my view a strong rally into the summer. First, there will be a correction, then this rally and then a more significant top in 2013 which will not be exceeded for a while.

Marc Faber interview Part 1

Marc Faber interview with MoneyControl.com


Q: You sounded a bit cautious of late. Tactically, are you expecting a phase of risk-off in global markets anytime soon?

A: We had a huge rally since November and it has basically begun in March 2009 for most markets. I think that the markets are getting very frothy at present and whether this is approaching a longer term top or whether we have just a short-term peak, the correction remains to be seen. But, in general, I would be careful of buying indiscriminately in this market.

Q: Would you be expecting a 10 percent kind of correction in global equities across the board or do you think it may not be that deep?

A: Yes, we could easily see 10 percent correction. We have seen over 30 percent correction in Apple. So it is a reminder that stocks move up and they can also move down. My scenario for 2013 is either the market will make a peak relatively soon which will not be exceeded or we have a correction of a month or two and then another strong rally into August, such as we had in 1987 when the Dow Jones between January 1987 and August 1987 increased by 41 percent. However, it then lost 40 percent in two months.

I think there is a chance that in order to actually punish central bankers, markets would become extremely overheated and then crash.

Q: What do you think both outcomes are contingent on? Do you think it is the fiscal cliff issue that will be crucial in determining what happens to equity markets or something else?

A: I think that the global economy will be crucial and also what happens to China. Do not forget, if the Chinese economy does not recover or recovers for a while, for say a couple of months and then slumps again or decelerates significantly, it would have an impact on raw materials and in this case on the economies of the raw material producers or the resource producers of the world. We could have a shock for the global economy.

Marc Faber: Stock market bubbles

Marc Faber recently said he was thinks the stock market is in a bubble stage and that this could be a good time to reduce long positions. He said "I am selling shares at the present time. I am reducing positions because there is euphoria building up"

Mild correction in February

Marc Faber thinks the markets are running ahead of themselves and to expect a mild pullback this month February. The pullback could result in a buying opportunity as the markets could go even higher.

However the danger is that the highs could result in a crash similar to the stocks in 1987. Volatility will go up and investors need to be nimble.

Marc Faber predicts a big time market crash

I love this market because the higher it goes the more likely we will have a nice crash, a big time crash. That could be a good time to buy stocks again.

Asian markets are up a lot

Many Asian markets are up over 200 percent from the lows. That is not very inexpensive anymore. The stock market is discounting already a lot of the good news, which could be dangerous.

Collapse of bond to lead stock market bubble

An uneven flow of money could prompt a collapse in the bond market and lead to a stock "bubble".
Either the bonds market will collapse, bonds have been actually very weak considering the unlimited quantitative easing of the Fed. The other thing is that stocks could go into a bubble stage.

Marc Faber: Buy stocks when no one wants to buy

You need to buy stocks when there's no reason to buy them. The time when markets are thriving is the perfect opportunity to sell, and conversely an extremely depressed market presents an ideal buying opportunity.

Faber wants to jump out of the window

Reiterating his bullishness of gold Faber recently at a event in Helsinki said, In the worst case scenario, in the systemic failure that I expect, it(Gold) would still have some value. When the system goes down and only plastic credit cards are left, maybe then people will realize and go back to some gold-based system or such.

Faber said his outlook was so bleak that he is “hyper bearish. Sometimes I’m so concerned about the world I want to jump out of the window.”

European stocks are a long term buy

We may have seen a generational low in European markets last year 2012.

The long term investor will probably earn quite well out of European equities and especially from individual stocks. There are many companies in Europe that at the moment are paying quite high dividends.


Marc Faber is a famous contrarian investor and the publisher of the Gloom Boom & Doom Report newsletter.

Caution on China and chinese stocks

Marc Faber was recently heard saying that he thinks last year was a great year for the stock markets but this year could be tough to be bullish. Also he urged investors to be cautious on Chinese equities.



Marc Faber is a famous contrarian investor and the publisher of the Gloom Boom & Doom Report newsletter.

Buy stocks in Vietnam, China, Japan

Money will shift from some of the relatively high-valued markets into markets that had a horrible performance, he said. So as an investor, if you need to own stocks, then I'd be in Vietnam, in China and in Japan.


Marc Faber is a famous contrarian investor and the publisher of the Gloom Boom & Doom Report newsletter.