Diversification is the way to reduce investment risk

The whole world believes that because of money printing, stocks will automatically go up. That is far from certain. At one point, this correlation between money printing and stocks going up, will break down the way the correlation between money printing and gold price broke down after 2011. So we don’t know. This is my view.

Now, you listen, and somebody says, “What kind of an idiot do you have in your interview? He doesn’t know,” but this is the fact. I’d rather say that nobody knows for sure. A lot of money will be lost by people who are overexposed in a sector that will collapse in price, and some people will make money because they gambled on the right move, in exchange rates or in bonds or and stocks. But I don’t know. So I’m diversified. There’s one thing I know.

What the world will look like in 5 years

My view is very simple. I have no clue, although I’m an investment advisor, how the world will look like in five years time. Now, maybe some forecaster knows, but I haven’t met them yet, and I’d like to meet them yet. The fact is simply, we don’t know much about the future. We even know little about the present and the past. And my advice to anyone investing is diversification. You have to own some equities. You own some gold. You own some cash and bonds, and you own some real estate. That is what you should do, because we don’t know.

But in general, I believe that investors will be deeply, and I repeat, deeply disappointed by future returns. Some assets will go up, and some assets will go down. Just consider, oil drilling stocks have declined by roughly 40, 50% from the peak.

Iran less dependent on oil prices compared to Saudi Arabia

There is a real tension between Iran and Saudi Arabia. However, supply will have to go back up once the oil price has hit $30-per-barrel because production at this point is no longer sustainable.

Saudi Arabia and Iran are completely different. Iran is three times as big and the people are far better educated. In Saudi Arabia the fear is a lot higher because the economy is so dependent on oil. How do you want to diversify a desert?

China money fleeing to foreign countries because of closed capital accounts

If there is complete opening of the capital accounts, I would imagine that the RMB would rather appreciate than depreciate. A lot of money has left precisely because the capital accounts are closed. If you open it up, some money will flow back, because they know we can do something in China. If conditions change, we can take it out. If you can’t take it out, it’s actually an incentive to take it out.

US Dollar may lose its world wide dominant rule over time

The aim of China and other emerging economies is to start trading and settling accounts outside of the dollar block. The diminishing role of the U.S. dollar within global trade is an ongoing process that is irreversible. So I believe that China’s RMB will become a much more important currency. 

April 2016 GoldSeek Radio interview

Click here if the above video does not play

If governments force us to go Cashless that could threaten physical Gold holders

If they introduce a cashless society, I think it's going to be very likely that the government will try to take the gold away from you. Now, in 1933, this happened and then the government collected the gold and they paid you $20 an ounce. After they had collected all the gold, they revalued it to $35 an ounce. Nowadays, I'm not sure whether that would fly, but one thing is very clear. In the 1930's, it was easier to hide gold. You could buy it and essentially put it a hole in your car or a safety deposit box at home and so forth. Nowadays, with metal detectors and all kinds of devices, it will be difficult to hide gold. Equally, if you walk through an airport, probably it's easier to hide some stamps and diamonds than to hide gold, which would respond right away to a metal detector.

So I think it's important for people to think, "If I have a lot of gold, where do I want to store it?" 

I would say probably gold stored in Asia is in a better, safer place than stored in the U.S. or even in Europe. Mario Draghi is basically working with the Fed so if they collect the gold in America, it's likely they will do the same in Europe.

Central Banks refuse to change their flawed strategy

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.

Gold is an honest currency and that's why governments hate it

I buy gold because I'm fearful that we will still have a systemic crisis, that we will have wars and so forth in sum. So I'm buying gold because I'm fearful.

Basically, gold is an honest currency. You can increase the supply somewhat through the opening of new mines and the exploration and the discovery of new deposit, but you cannot print it and double the supply of gold overnight. That simply doesn't exist. And that quality of gold being a store of value is a disaster for the interventionists that we have at central banks and, by the way, in government. Because if you look at, say, government in 1900 and today, in 1900, U.S. total government expenditure as a percent of the economy were less than 8%. Today, they're over 40%. So do you understand... the government is not representing people anymore – this is what we discussed before about the good showing of Sanders and Trump – but the government is representing itself. It is eating at the economic cake and by eating too much of the economic cake, the remaining economy, the private sector, cannot grow fast enough to boost overall growth rates.

Because the government doesn't do anything to boost growth. It actually is growth-retarding with regulation and laws and all kinds of things. So basically everybody– the media, the government and the financial sector – detests and hates gold because it's honest. The whole financial sector, they love money printing, and let me tell you why. Each time the market goes down, whether after March 2000 until 2002/2003, or after 2007... if the markets didn't recover, the financial sector would earn late fees because they are paid according to the asset values and they're paid according to performances. They love money printing and these are the people that are being interviewed on TV.

The TV, the media, the CNBC, and Bloomberg's office, well, they're not going to interview ordinary people... an electrician, a carpenter, a car mechanic. They interview the people that have a vested interest in money printing because they get performance fees and management fees from money printing. That's why people on CNBC and so on and so forth hate gold.

I agree with Gary Shilling on buying US Treasuries

The late Dutch engineer, Hans Monderman, saw traffic management as a symptom of a deeper ailment. “We’re losing our capacity for socially responsible behaviour. The greater the number of prescriptions, the more people’s sense of personal responsibility dwindles.”

The Telegraph recently observed that, “Europe accounts for just 7pc of the world’s population, and 25pc of its GDP, and yet it also accounts for a massive 50pc of its welfare spending. The point is an important one. Europe’s welfare spending is out of control, and is on a scale that is both lavish and unaffordable compared with the rest of the world.”

The Telegraph further added that, “the trouble is that welfare spending is pure consumption. It does not represent any kind of investment and it doesn’t pay for itself. The money for it has to be found from the productive part of the economy, and it has to be raised somehow – the more you spend on it every year, the more you have to tax or borrow to keep the books in balance. At a certain point, it becomes a drag on the productive economy.”

I believe that this inflection point has been reached a long time ago, and that the drag from welfare spending and in the case of the US also from healthcare spending on the productive economy combined with excessive regulation will only worsen as time goes by.

My friend the economist Gary Shilling makes the case for still owning US Treasuries. I tend to agree with him about holding some money in Treasuries (Treasuries and cash: 25% of assets), but I am far more concerned about the value of the US dollar given my negative view about the US economy.

Similarities between Paradise and Prison 

“A liberal’s paradise would be a place where everybody has guaranteed employment, free comprehensive healthcare, free education, free food, free housing, free clothing, free utilities, and only law enforcement has guns. And believe it or not, such a place does indeed already exist: It's called Prison." - Sheriff Joe Arpaio, Arizona, USA

I hope my readers will not be losing “their capacity for socially responsible behavior” and that their “sense of personal responsibility” will not dwindle, but always remain strong.


With kind regards
Yours sincerely
Marc Faber 


via gloomboomdoom

American voters fed up with the status quo politics

I think that the American people have figured out that both the Democrats and the Republicans are one in the same mafia family. They protect each other. Both parties know so much dirt on each other that they never speak about it. So there is a status quo, it's no progress at all. Because they each have something on each other and so the independent candidates who, I'm not sure they will do it, but at least they tell the voters, "Listen, we're going to do something different." 

And I believe actually that both Sanders and Trump, especially Trump, because he must be very angry at the wealthy Republicans that are so much against him, he's going to go after them. And Sanders, I believe him, that he's going to go after the big banks and Wall Street, because they have really, in good English, screwed the man on the street. What exactly the outcome will be, and whether they will be elected is another question because the establishment both on the Democratic side and the Republican side will fight like mad.

But I think the Democrats realize that the Clintons are over. It's a vicious family and dishonest, and they don't want Hillary Clinton to be the next president. And on the Republican side, they realize that the candidates that the establishment favor, like Rubio, they are not what the people really want. I think the best chance at the present time goes to Cruz. And my view would be that Trump has a very good chance if he can keep rallying people behind him.

Mining company stocks can go much higher

Over the last 12 to 24 months, many sectors have had huge declines. And I see here, there are some opportunities. I still think the mining sector has embarked on a new bull market. This year they had a strong rebound; many gold shares are up close to 100 percent and I think what will happen is that the market is turning to more active management of equities and that will favor managers taking advantage of trends.