George Soros was short the Chinese currency

In the Fed's statutes, there is a paragraph that says that one of the Fed's mandates is to coordinate – well understood, coordinate – monetary policies with foreign central banks. I'd like to emphasize that the federal reserve talks every day to the Bank of England, to the ECB, and to the Bank of Japan, and that they coordinate monetary policies. 

Now, I don't believe that they talk every day to the Bank of China and to the Russian Central Bank. That I doubt, but basically among the industrialized block, Japan, Britain, Europe, and the U.S... the so-called allies of the U.S... they coordinate monetary politics.

Now, how long this will work and to what extent there is a currency war, basically what happened is that some big hedge funds, including George Soros, were shorting the Chinese currency. And I don't think that the Chinese want to be held hostage by some speculator. Thereafter, suddenly the U.S. dollar began to weaken. You understand, the Chinese basically, they have sufficient reserve where they can basically dump U.S. dollars into the market and depress the value of the U.S. dollar. 

At the same time, they can embarrass, say, the Bank of Japan by pushing up the value of the yen. So I believe it will become very interesting, what happens internationally. We have this colossal liquidity bubble that was created through printing.

Why Gold can beat Currencies around the world including US Dollar

Gold vs US Dollar and other currencies

I don't understand why the world is so enthusiastic about the US Dollar. I think in the long run will be a weak currency. I think the most desirable currency will be gold, silver, platinum and palladium. I still think the mining sector has embarked on a new bull market. 

China

I think that in Asia, the sentiment turned very bearish at the end of last year and especially concerning China and the Chinese economy. And as a result of that, Macau gaming companies got slaughtered.

I don't think it's a bargain by any means, but I believe that China despite its near-term problems that could be very substantial, will in the long run be a rewarding investment destination.

 

It is not going to end well BUT the central banks have plenty of ammo left

The magicians at central banks, they always come out with a new trick and these negative interest rates that we have today, this is for the first time in recorded human history from the times of Babylon up to today that we have negative interest rates, and it's not going to end well. That, I can tell you.  But the sequence of how it will not end well, I'm not so sure.  But they still have a lot of ammunition.  What they can do is helicopter money. In other words, they can send you and Mr. Bloomberg and me and everybody, say a check for $10,000, and that is like throwing gasoline into a fire.... will it help the economy?  That is the question.  It won't help in the long run.  

You cannot grow an economy by just throwing money at people.

Negative interest rates are coming to USA and here is why

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Marc Faber: You can buy the Singapore stock market with a four percent dividend yield. Well, Singapore is a relatively sound economy.  It's diversified and it's well run, unlike the U.S., unless, of course, the U.S. is run by Mr. Trump.  Then the U.S. will improve.
     
Bloomberg News:  But Mr. Faber, I mean, we're seeing from Donald Trump's potential policies that he wants to slow international trade between the United States and other countries.  Surely that's going to be a block upon free markets.    

Marc Faber:  Well, I agree that it is negative if you have restrictions on a free market.  That, I agree entirely.  But you have to equally see that the U.S. has essentially given in on a lot of things that benefit other countries.  If you look at, say, the growth, 2000 to today, which countries have done relatively well?  The emerging markets have done fantastically well.  Their GDP has gone up substantially.  The standards of living have gone up substantially.  They have accumulated large reserves, and so forth.  The U.S. and Europe and Japan, relatively speaking, have been declining, and that, the statistics are visible from industrial production in emerging economies.  It's doubled in the last 12 years.  Global trade, you look at the share of emerging markets, it's gone up.  The developed world, the U.S., Europe, Japan, it's gone down and so forth.  So I think that maybe we have to find a way to have a more balanced approach to global trade.  I'm not saying protectionism, but the more balanced approach that is fair to the developed world.

     
Bloomberg News:  Are you really a fan of Mr. Trump, Marc?  

Marc Faber:  It is all relative.  Given the alternatives, I would vote for Mr. Trump, because he may only destroy the U.S. economy, but Hillary Clinton will destroy the whole world. Look at her nation building in the Middle East, how successful that has been. 

The end game could be socialist economies around the world instead of free markets

I could see a situation where at the end the government owns all the corporations and all the government bonds and then we are back into socialism, into a planning economy.

The central banks aren't interested in what works, they're interested in their own prestige. And they are so deep into it already and it didn't work. They will increase the medicine. Eventually, they'll buy all the government bonds; they'll buy all the corporate bonds, all the shares outstanding. Afterwards the housing market goes down, they'll buy all the homes and then the government will own everything.

The governments in my view, with their agents the Federal Reserve and other central banks and with the treasury department, they will do anything not to let asset prices go down. If the stock markets go down, I'm convinced all the central banks will buy stocks. All of them.

Donald Trump can defeat Hillary Clinton

They basically hate Trump because he's not the party insider. He brings some fresh air into the whole process. I would vote for him for the simple reason that I think he's the only one that can really defeat Hillary Clinton and I would do anything if I were an American not to get Hillary Clinton as a president, anything.

Central banks wrong to think rising asset prices will create sustainable growth

I would like to point out it is a great fallacy by central bankers to believe that by pushing up asset prices you can create sustainable growth, it is the greatest fallacy.

And the BIS, the Bank of International Settlements, they made a study about all the periods of inflation, deflation for the last 200 years and they came out with the conclusion, having studied all these periods of inflation and deflation in the world for 200 years, that there is very little relationship between consumer prices going up or consumer prices going down and growth. But they came to the conclusion that when asset prices come down sharply, especially in a system that is indebted that this causes very serious recessions, depressions. That is the conclusion.

Stocks are relatively attractive given the alternatives and negative interest rates

If you look at the stock market, I think we declined sufficiently in many markets a buying range. Maybe we will go somewhat lower, maybe there is a global depression and we buy too early. But given the alternatives of negative interest rates on so many government bonds, stocks are relatively attractive.

In the last 30 years, since 1980 we had globally a huge asset inflation - properties, stocks, bonds, commodities and so forth. And I don't believe this asset inflation will continue forever. So it could be the future gains from asset prices will be relatively low or in some cases non existent. That would be my view.

Janet Yellen made a big mistake in raising rates at the wrong time

In my view, there would not be more rate hikes in the US. They will probably cut rates and it will be followed probably also by negative interest rates, whereby we have to considerate an election year. Maybe they have some, let us say, reluctance to cut rates to below zero in an election year. So it could be interpreted as a political kind of maneuver but anyway my view is before the end of this year we have QE4.

.... the thing is in 2004, they started to lift the Fed, from rate from 1% to 5.25% in August 2006. They cut the rates after September 2007 again to zero percent essentially in December 2008.

So, in December 2008 to December 2015 we had a period of essentially zero interest rate. The economy in the US was actually expanding at quite healthy rate in 2010, 2011. That is when the Fed should have increased rates. But no, they kept rates at this artificially low interest rates until December 2015, three months ago.

My view is Ms Yellen, she will have huge portrait in the museum of great financial errors, because she increased interest rates exactly at the time the global economies entering a global recession.

Oil prices may have bottomed

The oil prices are down from say $100 to $30 and many energy related companies are going to go bankrupt. There is no question about that.

The whole Middle East is in kind of depreciation and the whole resource sector is badly affected, and the resource producing countries whether it is Brazil or South Africa or Russia, and suppose they all are suffering, so we had already some big-big cracks.

I believe it is conceivable that the oil price will stabilize here and not go down to $10, $20, because the same analysts who predicted when oil was at $100 that it would go do $150. They now say it will go down to $10, $20. So who knows.

Nobody knows exactly, but my sense is in the western world which includes western Europe, Japan that I count in the advanced economies and the US, we will have practically no growth for the next 5 to 10 years.

The governments are much too large as percentage of the economy and they are not spending on productive things like infrastructure or education, but they are spending on transfer payments. In other words, they take out your pocket and then give it to my pocket, better out of your pocket into my pocket.

Precious metals, mining companies, Russia, Vietnam are possibly good investments

I think there may be a rebound in oil and the sector that I think is the most attractive are basically precious metals and in this environment of money printing I think precious metals are part of a portfolio and the precious metal stocks, the mining companies they have declined something like 90% from the peak, they have now doubled from the lows but you understand you go down from a 100 to 10 and you go to 20, you can still go to 30, 40 so I think we are in the initial stages of a bull market for mining companies.

And then in terms of countries, some countries stock markets are quite inexpensive like Russia, they have some problems but I believe this year the sanctions of Western Europe towards Russia will come off and that things will actually stabilize in the Russian economy.

So I am not that bearish about Russian assets. And then as I told you relatively speaking, I think emerging economies are okay. Similar to India, I think, Vietnam is a more attractive country because there is a lot of foreign direct investments pouring into Vietnam from the US and also politically from Japan, South Korea, Taiwan and China.



-In Russian via Google Translate

Я думаю, что может быть отскок в нефти и сектор, который я думаю, является наиболее привлекательным в основном драгоценные металлы и в этой среде печатания денег я думаю, что драгоценные металлы являются частью портфеля и драгоценные запасы металлов, добывающие компании, они имеют отказался что-то вроде 90% от пика, они не в два раза от минимумов, но вы понимаете, вы идете вниз от 100 до 10, и вы идете до 20, вы все равно можете перейти к 30, 40, так что я думаю, что мы находимся в начальной стадии из бычьего рынка для горнодобывающих компаний.

А потом с точки зрения стран, некоторые страны фондовые рынки весьма недороги, как Россия, у них есть некоторые проблемы, но я считаю, в этом году санкции Западной Европы по отношению к России оторвется, и что все будет на самом деле стабилизации в российской экономике.

Так что я не то, что нисходящее о российских активов. А потом, как я сказал вам, собственно говоря, я думаю, что страны с развивающейся экономикой все в порядке. Как и в Индии, я думаю, Вьетнам является более привлекательной страной, потому что есть много прямых иностранных инвестиций вливаются в Вьетнам из США, а также политически из Японии, Южной Кореи, Тайваня и Китая.

Near term rally will lift the markets a few percentage points higher

The market in February became extremely oversold, and from this extremely oversold position, we can have a relatively strong rally. First of all a lot of momentum stocks got hit hard in first 4 weeks of the year. They are oversold and can rebound. Secondly many stocks are down 25 to 30 percent from their highs in 2015. And the oil sector could easily rebound 10 to 20 percent. That could drive the market up to maybe around 2050 [on the S&P500], but I don't necessarily see new highs, and if new highs happen, they will happen with very few stocks participating.

War on cash will fail - Governments want a cashless society to watch you

 If you look at the world over the last 100 years, you have a group of people that want to have more and more control over you and me. They want to know where you are, what you do, what you're looking at. Basically, we're moving into an Orwellian society where they can check everything. And cash will still be one of the means where you could go somewhere and buy something and nobody would really know about it. Now they want to abolish it. Of course, if you have negative interest rates, you want to essentially prevent people from hoarding bank notes in their safes at no cost. So you want to deprive them of that privilege, of that freedom, so you introduce a cashless society. In my opinion, it will not work, and let me explain to you why.

Let's say you and I live in a small town of a thousand people and suddenly the government says, "No more cash." Say, I'm the baker and you're the butcher, and a friend of ours is the pharmacist. We can then barter among each other and effect the balances every month or every 3 months and so forth. Then, some kind of paper money comes back up. These are vouchers. So the war on cash would have the exact opposite effect. You will have a voucher system in every small city, and even in big cities, some smart people will develop the voucher system. So instead of having just one currency, paper currency, you'll have hundreds of paper currencies. Number two; if they want to really launch a cashless society, they would have to take your gold away. That, in some countries, will simply not fly. In other countries, a cashless society is simply not practical because 80% of the population doesn't have a bank account and doesn't have cash to start with. So in my view, this cashless business is going to fail very badly.

The argument is, of course, "Oh, we want to move into a cashless society because we want to prevent criminality." This is all nonsense. They want to move into cashless society so they can control you.

Reality has set in for the stock market

The financial markets have been sick for quite some time. Emerging markets either never made a new high above the 2006, 2007 highs, or they peaked out in 2011, or some even later in 2014. Basically after about February/March 2015, they started to drift. 

And in the U.S., the indices were strong, but the average stock was down substantially in 2015. This is called weakness beneath the surface of the indices because an index, theoretically, could have 500 stocks and 499 decline, but one stock goes up a lot and drives up the index. So this happened last year, to some extent, in the U.S... you have the strong stocks, Facebook, Amazon, Netflix, Google, and maybe another 20 stocks that were going up. And at the same time, you have thousands of stocks that were acting badly and going down, which accounts for actually a horrible performance for most investors. 

Now in January, reality set in with the strong stocks, they're all down 20, 30, and sometimes even more percentages.

Central banks are all insane

The question should be, "Which central bank is the most insane?" Because you understand, the central banks have been manipulating just about everything. They manipulate the currencies, they manipulate interest rates, they manipulate stocks. It's interesting sometimes if you observe in the U.S., when the market is very weak overnight, in other words the S&P futures go down 20, 30 points, suddenly, a buyer emerges and pushes up the market. I believe that the Fed has not just intervened in bonds through Operation Twist, in interest rates through QE programs but occasionally they step into the stock market to stabilize the market and try to push it up. I think other central banks around the world; in Japan, they announce it, the central bank, the Bank of Japan, is buying shares through ETFs.

So there's a gigantic manipulation and you and I, as an investor, we just don't know how far these insane people will go with the manipulation of markets. Now, already 7 trillion dollars' worth of pounds are trading at less than 0 interest. 

The talk is that, even in the U.S., they might introduce negative interest rates. Negative interest rates will not help the world, I guarantee you that.