In 1980, China consumed 2% of the world's industrial commodities. By 2000, it was 12%, and now it is 47%.
Now the growth in China is obviously slowing down. But if you look at the U.S., there were 19 recessions during the 19th century, then the Civil War, World War I, the Great Depression, World War II, the Korean War, the Vietnam War, and the country continued to grow.
So, I wouldn't be too worried about the problems in China for the near term. I think it's solvable. Hopefully, it is painful because the society needs some pain from time to time, then the economy takes off again.
The market in the U.S., from valuation point of view and relative to other markets in the world, is completely unattractive. European stocks represent much better value. And it’s not true that Europe is slower than the U.S. In the U.S., you have a slow down. Europe you have an improvement in margins. So I think European equities will continue to outperform.
We had recently this huge bull market in Chinese stocks with colossal speculation. It doesn’t mean that the whole thing will collapse and make new lows. But after this burst of volume, we could easily see a significant correction.
Marc Faber talks with Alex Jones and asks if we are in the "End Game".
"The only true currency that exists today is Gold, Silver, Platinum and Palladium." - Dr Faber
Even if Greece grows at 10 percent per annum for the next ten years, it will not be able to pay its debts back. It's bankrupt. We better face the reality and not kick the can the can down the road. Greece should default.
Europe, and in particular NATO (the North Atlantic Treaty Organization military alliance), and the U.S. do not want Greece to leave (the euro zone) because if they do, other people are going to knock on Greece's door -- like the Russians or the Chinese maybe. It's very much a geopolitical game of chess that's being played.
I personally think it's not so much of an economic issue as a political issue.
I think that the ECB and European banks will have to take huge losses on their loans to Greece and bond purchases they have made (if it defaults). I think Greece is in a very strong negotiating position. If they don't want to pay what are you going to do, invade and hang them all up?
It has been a long time since commodity prices are down. I don’t put precious metals under commodity. For the past three years, since 2011, precious metals are down and, in my view, they have bottomed out.
Regarding oil, I do not see it going down to $20 a barrel. The people who see it going down to $20 are those who felt oil would touch $150 a barrel when it was at $100. I see oil reaching the equilibrium at current levels and see it moving in a range of $40-60 a barrel.
Some commodities have bottomed out like iron ore and copper, but industrial commodities continue to be in the bear market.
For agricultural commodities, we may see a price rise in select commodities like coffee. Food prices may not see a huge spike as we saw them rising from 2013 till 2014.
The world economy, especially US valuations, isn’t compelling. Interest rates are so low that there is no headroom for further cut. Corporate profits are disappointing as revenues aren’t growing. On the other hand, for a country like India there is still scope for a cut in interest rates. I think India can cut up to 200 basis points. The concern for India is bureaucracy. A socialist attitude is not good for growth. There is huge potential in India but that potential will have to be exploited.
The possibility [of Eurozone breaking up if Greece exits] is high, but it will not happen as the powerful US and European allies will not allow it to happen. Greece will never be able to repay and the allies will still infuse money into Greece. This is not an economic problem, it’s a geopolitical issue. Hardliners in Europe know that if Greece moves out of the EU it will be more damaging for them than Greece as Russian and Chinese are more than willing to help Greece.
My view is that there are many explanations for the weakness in oil, including some theories that Saudi Arabia wanted to weaken Russia or the shale oil production in the US or Iran, and so forth. But my view is that the decline and sharp decline in oil prices signals a weakening global economy.
Now, in the last few days, I received many reports by brokerage firms and banks, and so forth. They all think that next year the economy in the world will be stronger than in 2014. This would not be my view. Reason A, the low yields on government bonds, that would seem to suggest to me that there are still some growth issues in the global economy, and the sharp fall in the industrial commodity prices would also suggest to me that the economy will be weaker than expected.
And I live in Asia. I can say that we’re not in a recession or in a deep recession, but there’s very little growth at the present time. In fact, I would argue that there’s hardly any growth at all. And as far as Russian oil stocks are concerned, and I think the oil price can rebound here short-term, but you might as well buy some oil drillers in the United States or oil servicing firms or oil companies. Why take a huge risk in Russian oil companies?
About six months ago, we had recommended accumulating Chinese stocks. I think we had a big move in Chinese stocks though we are in a correction period now.
Relatively speaking, emerging market stocks look okay. What is inexpensive at this point of time are Russian stocks and assets, precious metals, and mining stocks. I have mentioned in my previous interviews that if you put a gun on my head and say you have to invest for the next 10 years, I would invest in emerging economies rather than ..
