Marc Faber: 30 percent correction by September 2014

I think that we will make a peak sometime within the next 30 [Thirty] to 60 [Sixty] days and then we go down meaningfully [20 to 30 percent correction]. 

Don't forget many stocks are already down 10 percent. Home-builders are down roughly 15 percent. Airlines have just dropped 10 percent and you have lots of individual stocks such as Twitter and Yelp that are down 30 - 40 percent already. So we are not in a uniformly strong market. The Russell 2000, which represents 2000 companies is down 2 percent for the year.

Luxury properties, stocks, bonds have benefited from Money Printing [VIDEO]

Marc Faber criticizes the fed and states his like for Hong Kong shares. 


[Watch above Video]

Paper money cannot protect its true value, hold some gold

With practically Zero percent interest rates and cost of living increases of about Ten percent per annum, paper money at zero interest rates loses its purchasing power.

One of the functions of paper money is to be a store of value. [Hence] I have argued again and again that investors should hold some assets in precious metals as an alternative to cash

The Fed will not change its monetary policies

It’s pointless to talk to Fed members about economics because they are academics who believe in money printing. 

Some of them believe they didn’t print enough, and so with these kinds of people, it is like running to the pope. What do you want to tell them? It’s pointless to spend time with these people trying to convince them that their monetary policies have been very destructive. They bailed out Mexico in 1994, and there was an EM bubble until 1997. They then bailed out LTCM (Long-Term Capital Management), which gave a signal to leverage up. Then they had the Nasdaq bubble, then they printed again and had the housing bubble. 

David Hume(an economist) and Irving Fisher( an economist) said bubbles are very destructive to the majority of market participants. They lose money, the minority makes money. The Fed doesn't see it that way so it is pointless to talk to these people. 

US Dollar crisis can occur under the following scenario

I believe that the following scenario could actually lead to a dollar crisis. Let us assume that the stock market continues to go up and the economy does not respond much, but prices begin to rise and so rents, insurance costs, medical costs, food costs and energy costs rise.

The Fed will at that time have to choose if they increase interest rates and tighten monetary conditions in order to combat inflation, or continue to ease and print money in order to avoid asset markets from declining. At that point, there could be a crisis of confidence in the US dollar which would then weaken the US dollar considerably.

Fed should include Food and Energy prices in inflation data

In the US, the Federal Reserve bases its monetary policies on core inflation that excludes food and energy prices, but the reality is that people live and have to eat. And they need transportation, and transportation costs something.

Walmart indicator shows consumer sales are not growing

Wal-Mart shares peaked out in February and since then, the stock has been moving sideways. As as an economic indicator, Wal-Mart is a very good say symptom of what is happening to the consumer and if their sales are flat or down, or Coca-Cola’s  in the U.S., it tells you something about the consumer. 

Gold, Silver, Coal mining shares attractive

Gold and silver mining stocks are very depressed relative to the rates of the market and in absolute terms, in terms of valuations. So that sector is quite attractive.

I also think that coal shares have been oversold and they are now at a reasonably good value, but other than that, I do not see any particular value from a long-term perspective.

Now if you tell me that the market can go up another 10%, that may be the case, but it does not make for good value. Therefore if I look at the total return that I can expect from US shares over the next 5 to 10 years, it will be very disappointing. I would rather buy emerging market shares, which in terms of valuations are reasonably priced.

Why now could be a good time to buy Gold

At the beginning of the year, we were at $1200 [on gold] and then we rallied to $1393 and since then, we have had a correction again to around $1200 and now we have rallied again.

My sense is that this latest rally has been accompanied by a lot of skepticism among investors and a lot of negative sentiment. In other words, people are not buying the bull market yet and this is a good sign. I would be accumulating gold from here onward down to around $1250.

Marc Faber bullish on oil and commodities

My view regarding oil is similar to that on other commodities. We had a huge increase in crisis after 1999 when crude rose from $12 a barrel to over $100 a barrel and a peak was made in July 2008 at $147. It came down again and then rallied again.

In general, regarding crude and other commodities, the cost of exploration and extraction has gone up and I do not foresee a meaningful decline. Now, can the oil price temporarily drop to $80 a barrel?

That is a possibility, but in general, unless the oil price is above $80 to $100, exploration will be curtailed. So my outlook for oil is rather positive, especially given the geopolitical situation that we are faced with.

Asset markets are bursting, this may just be beginning [Video]

"I think it's a colossal bubble in all asset prices, and eventually it will burst, and maybe it has begun to burst already."

Marc Faber issues Bear market warning and admits his previous mistake

Obviously I've been wrong in the sense that I expected a correction to occur over the last two years, and it hasn't happened since October 2011, when the S&P was at 1,074. We've gone up in a straight line, without a larger correction than 11 percent, and I think we're not going to have a correction, but we're going to have a bear market.

Three reasons markets will under-perform

I don't believe that the global economy is strengthening; I rather think the global economy is weakening. There are other issues that may put the weight on the markets that will push prices lower. 

A, I think that we have in the White House, a very poor president, and that may lead to some political issues in the U.S. domestically. 

B, we have numerous political issues to consider, 

And C, we could have, potentially, a much higher oil price." 

Value of money depreciating over the years

In 1970, I started with a salary of $1295 a month, plus I had a living allowance of $300. But with that you could live quite well... not with luxury. I had a nice one bedroom apartment on 52nd Street East Side and we could go skiing on the weekends and on summers we went to the Hamptons for fun. 

Im just saying the value of money has depreciated dramatically over time.

Gold storage safer in Asia according to Marc Faber

I'm worried that one day if the US does the same as in 1933, mainly seize the gold. They didnt expropriate it, they paid for it after they revalued the price of Gold. If that happened again, they would go to the European's and to the Swiss governments and say you have to do the same, and probably they would oblige. But in Asia I dont the Americans would do that. So I keep some gold in Asia and the bulk is still in Switzerland but I am thinking of moving it more and more to Asia.

Marc Faber July 2014 Market commentary

Science fiction author Frank Herbert opined that, “All governments suffer a recurring problem: Power attracts pathological personalities.”

Friedrich Hayek thought that, “the more the state ‘plans’ the more difficult planning becomes for the individual,” and John Stuart Mill wrote already in Principles of Political Economy (1848) that, “In all the more advanced communities the great majority of things are worse done by the intervention of government, than the individuals most interested in the matter would do them, or cause them to be done, if left to themselves.”

Economist Richard Rahn, the eponymous creator of the Rahn Curve, makes the connection between the rate of economic growth and the size of government. The Rahn Curve suggests there is an optimal level of government spending (as a share of GDP) that maximizes the rate of economic growth. As government begins to rise from zero percent of GDP, initially it spends to protect life, liberty and property; as this happens the economy surges. When government makes people safe, enforces contracts, protects liberty and enforces property rights great things begin to happen. As government continues increasing, it next spends on infrastructure. Such spending further accelerates economic growth. It is clear that a little government does a lot of good. At this point government’s share of GDP is between 10% and 20%. From its founding to circa 1930, total US government spending was around 10% on the Rahn Curve.

In general, I have great sympathy for the Rahn Curve, which essentially states that the larger the government becomes beyond a certain point (about 20% of GDP) the slower economic growth will be. Under the influence of the neo-Keynesian interventionists and the professors at the Fed, the public has been brainwashed into believing that governments can revive economic growth. But as Ronald Reagan pointed out, “Government is not a solution to our problem, government is the problem.” Barry Goldwater warned that, “The government that is big enough to give you all you want is big enough to take it all away.

My friend Simon Hunt, the principal of Simon Hunt Strategic Services has a deep knowledge of the copper industry, China’s economy, and history and geopolitics. He has kindly given me permission to share his thoughts on the recent upheaval in the Middle East under the title: “The Middle East: Expect the unexpected.” I have the highest respect for Simon’s intellectual integrity and vast historical knowledge, and I highly recommend his advisory services. I am pleased to enclose his report with this mailing.

It’s holiday season. Therefore please remember that, work is the greatest thing in the world, so you should always save some of it for after your holidays.

And if you are visiting friends don’t forget that, as Oscar Wilde remarked, “Some cause happiness wherever they go; others whenever they go.”

I wish all my readers you a wonderful summer
Yours sincerely
Marc Faber




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