US prosperity has peaked

The US reached a peak in prosperity and influence in the world in the 1950s or 1960s.

Marc Faber on government statistics

Governments will always publish the statistics that they wish to show irrespective whether that is in China or in other countries. 

Governments control basically the statistical offices, so they can show whatever they want. 

As Stalin said, it's not important who votes but who counts the votes. And the government counts the statistics.

Marc Faber: Mr Putin is correct

Mr. Putin did the right thing from his perspective. We have to look - put ourselves into his shoes. He did absolutely the right thing at the right time. By that I mean that there was interference by foreign powers in Ukrainian politics that were unfavorably from the perspective of Russia.

The Crimea is strategically most important for Russia. It has practically no meaning strategically to the United States or to Europe. But for Russia it's very important. 

I don't think that Russia will move further into Ukraine unless there is serious provocation. But I doubt it will happen. But I think the wider implication is that we have now border lines. In other words, the US would intervene if a foreign power would establish bases in Haiti and in Cuba and so forth and so on, and the Chinese will react if foreign powers threaten Chinese access to resources.

This is very important because the occupation or say the referendum in Crimea and Crimea moving to Russia gives essentially a signal to China that one day they can also move and seize some territory that they perceive that belongs to them.


via - Bloomberg 
http://www.bloomberg.com/video/faber-china-s-unwind-will-be-a-disaster-yXOcq5KCTqWpgrBNrznSoA.html

Why marc Faber joined Eric Sprott company board

A while ago, I think five or six years ago, Eric Sprott asked me if I would consider being a board member. Eric was a subscriber to my newsletter to The Gloom, Boom and Doom Report.

And I had written a book in 2001, called Tomorrow’s Gold: Asia’s Age of Discovery, which was not specifically about gold, but it was about the coming bull market in commodities driven by the incremental demand from China.

So I think that he saw a fit philosophically and also considered my abilities as an administrator and so asked me to join the board.

Government is like cancer

If we have an economic crisis in the Western world it's because the government makes up 50 percent or more of the economy. This is a cancer that is taking away people's freedom.

Chinese stocks saying this about their economy

Look, the fact is simply that Chinese stocks have been just about the worst performing stocks since 2006. Now analysts will dismiss that and say everything is prefect in China, but the stock market does not seem to believe everything that the government is saying about the economy. And clearly there are strength signs in the Chinese economy. In particular, as I said, we have this huge explosion of debt. Debt as a percent of GDP has increased in the last five years by more than 50 percent. Total debt is now over 215 percent of GDP, and a lot of it is trade finance that is being rolled over.

In addition to that, there are lots of funny deals. A friend of mine who analyzes China very carefully, Simon Hunt (ph), he pointed out that trade finance between one state-owned enterprise and a private company has amounted to over $5 trillion by continuing to roll over the same collateral several times. There's lots of funny things that are happening in China. And when the whole thing unwinds it will be a disaster.

China unwind to be a disaster

I think that we had a colossal credit bubble in China and that this credit bubble is now being gradually deflated. If I look at export figures from China, and they are very closely correlated to overall economic growth, then there is a huge discrepancy between what China reports and what China's trading partners are reporting. 

There's lots of funny things that are happening in China. And when the whole thing unwinds it will be a disaster.

via MarketOracle

Good management in companies should adapt to change

I think in every company, you want management that is skillful, that has talent, and preferably that has their interests aligned with yours as a shareholder. In other words, ideally, they own a lot of shares in the company you invest in.

Good management is management that can adapt to change. That is key because when I started to work on Wall Street, the favorite stocks among institutional investors were companies like Sears, JC Penney, Kodak, Xerox, Polaroid, and so forth. Most of these companies have disappeared because management was not able to adjust to the changes in the world.

There was at the time an analyst who followed the photographic industry, in particular Polaroid and Kodak. On the periphery she followed Fuji photo film as well.

Her projections depended on how many people in the world would buy a Polaroid camera over the years, how many pictures the world would take with Kodak cameras, and how much film Kodak would eventually sell.

Eventually, her projections were all surpassed—just not with Kodak film and Polaroid cameras. But with mobile phones that were taking pictures electronically. Nowadays, you see every idiot taking pictures all the time to put on Facebook, or to look at him or herself (nobody is interested in these pictures except themselves!) but it didn’t benefit Kodak and Polaroid.
That is why I always am skeptical about these studies. 

Help countries solve water problems rather than gifts

I suppose there is a lot of risk; but if you want to aid development, if you want to improve the standard of living of people, water would be a good place to start. I would rather address the water problem – with proper water distribution and irrigation — than to give these countries vaccines and gifts.

Coworkers can be a 'fake family'

I also advise my younger readers who come out of school or university to first work in a successful company in order to learn the ins-and-out of an industry. And while working for a company, it is important to make the best out of it either by joining or by forming a “fake family.” 

Some of your colleagues will be close friends for life even if you work somewhere else, while others will become your customers or will be in a position to help you in many different ways (the Goldman Sachs people seem to be very good in this respect). 

In fact, whereas my life improved after starting my own business (although I worked harder than when I was an employee), the one and only thing that I occasionally miss working on my own is the daily interaction with colleagues or as Kellaway puts it, working and living within a “fake family.

Healthy bull markets need decent corrections

These types of bull markets without a correction usually lead to more than just a correction. Just in the last six months there has been euphoria for U.S. equities. 

My view is that it's not a good time to buy U.S. equities. It's a better time to get out of stocks than into stocks. 

Social unrest comes from money printing

I am of course completely against the money printing that the central banks do. They basically only enrich people that own assets. For people that don’t own assets, their wealth or their standards of living go down. This creates growing wealth and income inequality that leads to social unrest or geopolitical problems.

Asian conflict partly due to US military bases

My view is this: we wouldn’t have a conflict in Asia if not for the intervention by the U.S. The U.S. has a security pact with Japan and has military bases and naval basis all over Asia.

The Chinese economy is highly vulnerable to interruptions in the supply of metals and of oil. 47% of global metals consumption is from China. It’s up from 4% in 1990 and 10% in the year 2000. So they have become a huge factor.

For their industrial production, they need resources; they need iron ore from Australia, copper from Australia and elsewhere, and oil from the Middle East. That’s their only source of oil — the Middle East –, compared to say the U.S. that can source oil from Canada, from Mexico and who have a rising domestic production.

So the Chinese are very concerned about interruptions of supplies; I think that over time, the Chinese will want to control the East and South China Sea. I do not think that they have any plans for aggression, but the U.S. wouldn’t be particularly happy either if, say, the Chinese or the Russians had military bases in the Caribbean, in Mexico, in Canada and so forth.

The Chinese cannot accept to be encircled by U.S. military bases in Central Asia, South East Asia, and North Asia. I think those tensions will increase over time.

Owning assets essential

When central banks print money, all assets go up. When they pull back, we could see deflation in asset prices but a pickup in consumer prices and the cost of living. Still, you have to own some assets. 

Asia problems to lead Gold higher

Why Gold could go higher

We have an economic slowdown in emerging economies that is very pronounced.

I think some emerging economies may be submerging soon, and have significant economic problems. The question arises, “Will they continue to buy gold?” 

Say if there was a recession in China — a downturn — would people buy gold?

I think if the Chinese economy imploded, it is likely that the currency, the Yuan, would begin to weaken. Or the government would devalue the Yuan.
If that were the case, then I think that Chinese investors would shift some of their money into gold rather than keep their funds in the local currency.

So I think that a problem in Asia — and geopolitical problems in Asia and in other regions of the world — may lead to higher rather than lower gold demand.

Water scarcity and poverty linked

As you know, we still have colossal poverty in the world. Extreme poverty usually occurs in areas where you have no water. Water is very important, it’s a scarce resource. Countries that are endowed with a lot of water, like Canada, or part of the U.S., or some European countries like Switzerland (we have a lot of water), are very fortunate.

Countries that have no water like those in Sub-Saharan Africa are very unfortunate.

A difficult employee

I was fortunate because I always had a close relationship with my co-workers, and all my superiors were always most courteous toward me, my wife and my daughter. 

In fact, they always went out of their way to support and help me. This, despite the fact, that I was probably their most “difficult” employee. But my bosses took my unpleasant character in stride and told me smilingly that if I were not “difficult,” they would not have hired me in the first place.

via www.gloomboomdoom.com

Marc Faber Barrons 2014 Long/Short picks

Marc Faber's Barrons Roundtable 2014 Picks

Investment	1/10/14 Price/Yield
LONG:
10-year Treasury Notes	2.86%
Market Vectors Junior Gold Miners ETF/GDXJ	$32.70
Wilmar International/WIL.Singapore	S$3.35
SATS/SATS.Singapore	3.21
SIA Engineering/SIE.Singapore	4.99
Hutchison Port Hldg Trust/HPHT.Singapore	$0.68
HaNoi-Hai Duong Beer/HAD.Vietnam	41,800 VND
FPT/FPT.Vietnam	48,700
Vietnam Dairy Products/VNM.Vietnam	138,000
Short:
iShares Russell2000ETF/IWM	$115.52
iSharesMSCIMexico Capped ETF/EWW	67.08
Turkish lira (spot)	$1=2.16TRY
Tesla Motors/TSLA	$145.72
Netflix/NFLX	332.14
Facebook/FB	57.94
Twitter/TWTR	57
Veeva Systems/VEEV	32.53
3DSystems/DDD	94.45

Need to be selective investing in Asian stocks

In dollar terms, the Indian market is still down about 40% from the peak, because the currency has weakened. 

In the 1970s, stock market indexes performed poorly and stock-picking came to the fore. Asia could be like that now. It is a huge region, and you have to invest by company. Some Indian companies will do well, and others poorly. 

Some people made 40% on their investments in China last year, but the benchmark index did poorly.

Faber Market update March 2014

I do own some long-term Treasuries because I believe that owning them is an inexpensive and relatively low risk strategy for shorting the stock market. 

However, since the beginning of the year, both long-term Treasuries and most commodities rebounded strongly. Long-term Treasuries are up 5%, gold is up 12%, and the Junior Gold Mining Index (GDXJ) is up 52% from the late December 2013 low. 

Also, as I explained in previous reports, I would reduce my US equities positions altogether because valuations (and profit margins) are stretched.

via - GloomBoomDoom.com

Marc Faber prefers Hong Kong stocks to Nasdaq

Property companies are a big component of the Hong Kong stock market, and they are selling at 40% to 50% of asset value. Property values may fall further, but a lot of the bad news has been discounted. I would rather buy Hong Kong shares and short the Nasdaq.