On historically low interest rates and world trade

Dr Marc Faber talks about Interest Rates and how they have never been so low for so long.

In terms of interest rates, historically, our standards have been at the lowest level in the history of mankind from say 3000 BC up to now. So, in 5,000 years of history, we have never been this low. In the US, the low for the 10 years treasury was at 1.37% in July 2016 and in Europe, in many cases, there have been negative interest rates.  

Recently, that has moved up a little bit but in Switzerland and in Japan, basically we still have negative interest rates and we have had them essentially for the last eight-nine years. This is a very unusual situation. I do not think anyone could expect interest rate to stay this low for much further. There is a rising tendency but recently the treasury bonds in the US have sold off quite considerably and I believe that we could have one more decline in interest rates as a result of a recession that may happen later on this year or next year. So, I actually went long on some treasury bonds in the US.  

On the original aim of Global Trade and why it may have been unsuccessful for the Western multinational companies.

Concerning global trade, .... the idea was that multinationals in Europe and especially in the US could open up new markets like China and then sell their goods into these markets. But conditions have somewhat changed in the sense that it is the Chinese and other emerging economies that sold their goods into the US. 
So to some extent, it backfired on the US and as you know the US is not the fair player and they reacted negatively. These trade sanctions or trade barriers, in my view are not very negative for China and other countries. Rather they are very negative for the US. This is my assessment of the situation. 

The correction has not happened yet

The Markets may be overdue for a correction

"I was expecting a correction a long time ago. It has not happened but when it happens, it happens in a more severe manner. So far, it has not happened very severely in the US. We are down not even 10% from the January 26 high. A correction would be a 20% decline and the bear market would be something like a 40% decline. It is nothing very serious yet but it may become very serious in future."


via economictimes

Marc Faber interview - Geopolitics and Empire

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Topics discussed are
- Stock market 
- Housing and bond bubbles, central bank manipulation, 
- Gold
- Investors should be diversified. 
- Average salaries vs Asset prices
- Investor sentiment 
- US no longer the dominant economy (adjusted for Purchasing power)
- Chinese applying for more patents around the world than the US
- US economy could go into a recession which could trigger a war to divert attention. That is a possibility. In that situation, Physical Gold and crypto currency could be a good thing to own.

Possibility of a credit crisis between July and December 2018

Excerpt below from Marc Faber's latest commentary on Gloomboomdoom

Justice Clarence Thomas recently opined that, "at some point we’re going to be fatigued with everybody being a victim." Clarence Thomas was influenced by economist and social observer Thomas Sowell’s Race and Economics, which criticized social reforms by government.

Instead Sowell argued for individual action to overcome circumstances and adversity. According to Sowell, "The vision of the anointed is one in which ills as poverty, irresponsible sex, and crime derive primarily from 'society,' rather than from individual choices and behavior. To believe in personal responsibility would be to destroy the whole special role of the anointed, whose vision casts them in the role of rescuers of people treated unfairly by society."

The culture of victimhood has inevitable been accompanied by a culture of "entitlement," for which incidentally, nobody wants to pay. Sowell explains that, "One of the consequences of such notions as ‘entitlements’ is that people who have contributed nothing to society feel that society owes them something, apparently just for being nice enough to grace us with their presence."

An informed investor opined that, "a recession could knock down asset values in the short term but expect them back up heavily in the long term."

I tend to agree with this investor, but remember that in times of monetary inflation asset prices move up irregularly. Despite still loose monetary policies a large number of luxury property prices are down by more than 20% from the peak while the Hagerty Market Index of vintage automobiles is down 17% from the all-time high in August 2015.

Over the last 12 months the growth rate of TMS has been deccelerating, which could bring about the next credit and liquidity crisis in the second half of 2018, with an economic recession and asset price downturn to follow. In this scenario, I would expect risky assets (real estate and stocks), to come under pressure because investors will likely shift funds into (so-called) risk-off assets such as Treasuries with medium term maturities.

I am pleased to include a report by my friend John Goltermann entitled, "Twelve Reasons You May Want to Fire Your Investment Advisory Firm If It Compares Itself to the S&P 500."

Thomas Sowell futher thought that, "There is usually only a limited amount of damage that can be done by dull or stupid people. For creating a truly monumental disaster, you need people with high IQs."

He also asked, "Since this is an era when many people are concerned about 'fairness' and 'social justice,' what is your 'fair share' of what someone else has worked for?"