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ECONOMICS AND ESOTERICA FOR A NEW PARADIGM

In his gloomiest prediction yet, Marc Faber sees big financial bust leading to war

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Source: Business Intelligence, Middle East
Originally posted: November 20, 2009

MARC FABER, THE SWISS FUND MANAGER and Gloom Boom & Doom editor, said eventually there will be a big bust and then the whole credit expansion will come to an end. Before that happens, governments will continue printing money which in time will lead to a very high inflation rate, and the economy will not respond to continued stimulus.

Speaking at a conference in Singapore on Wednesday, Faber said: “The crisis has not solved anything. On the contrary there is less transparency today than there was before. The government’s balance sheet is expanding, and the abuses that have led to the one cause of the crisis have continued. I think eventually there will be a big bust and then the whole credit expansion will come to an end,” Faber added.

“Before that happens, governments will continue printing money which in time will lead to a very high inflation rate, and the economy will not respond to  stimulus”. In one of his gloomiest predictions, Faber, referred to as Dr Doom, said “the average family will be hurt by that, and then in order to distract the attention of the people, the governments will go to war. People ask me against whom? Well, they will invent an enemy.”

“At some stage, somewhere in future, we will have a war – that you have to be prepared for. And during war times, commodities go up strongly,” said Faber.

“If you want to hedge against war, you don’t want to own derivatives in UBS and AIG, but you have to own them physically, like farmland and agricultural commodities. That is something to consider for you as a personal safety and hedge. You have to own some commodities,” he added. In a Bloomberg television interview in Singapore on Wednesday, Faber said  “What will continue to happen is that the S&P 500 and the Dow Jones will go down relative to gold. “I think gold will go up more,” he added.

“Will it go US$2,000, US$200,000 or US$2 trillion? I don’t know,” Faber said. “But if you have money printing in the world, then the price will over time rise. It will go up more for things that you just can’t increase the supply, and the supply of precious metals is very limited.”

Faber expects the US government to increase its stimulus spending should the Standard & Poor’s 500 Index fall toward 900. The US budget deficit under President Barack Obama’s administration reached a record US$1.4 trillion in the fiscal year that ended Sept. 30. Debt amounted to 9.9% of the nation’s economy, triple the size of the 2008 shortfall. “I don’t think the S&P will drop below 800 or 900, and eventually will go higher in nominal terms, but not necessary in real terms,” he said, predicting a correction in the measure in the “near term.”

Faber has been warning about a collapse of the capitalistic system ‘as we know it today,’ massive government debt defaults and the impoverishment of large segments of Western society. In a May interview with CNBC, he said central banks will continue to print money at full speed, but long-term this strategy will lead to a fall in purchasing power and living standards, especially in developed countries. The years 2006 and 2007 were “the peak of prosperity” and the world economy is not likely to return soon to that level, he added.

Unless the system is cleaned out of losses, “the way communism collapsed, capitalism will collapse,” according to Faber. “The best way to deal with any economic problem is to let the market work it through.”

“I repeat what I have said in the past,” Faber said. “No decent citizen should trust the Federal Reserve for one second. It’s very important that everyone own some gold because the government will make the dollar (in the long term) useless.”

Marc Faber says economy not responding well to money printing
Source: Business Intelligence, Middle East
Originally posted: November 19, 2009

Marc Faber, the Swiss fund manager and Gloom Boom & Doom editor said, considering the size of the stimulus packages and the monetary printing, the US economy hasn’t responded well. What have responded well are asset markets, he said. Speaking in an exclusive interview with India’s CNBC TV-18, Faber said: “The benefit of quantitative easing has essentially flowed into Wall Street, into investment banks, into the banking sector but it hasn’t flowed into the typical household in the US”.

Unemployment is still horrible at the present time with a lot of people being either unemployed or under employed, he said. As a result, “we have a very strange economy,” Faber said, adding “We have booming financial markets, but at the same time the average household – the man on the street is basically suffering.”

Answering a question on dollar carry trades, Faber said: ” The dollar carry trade is frequently misunderstood in the sense that there are big short positions in the dollars. But one shouldn’t overestimate the short positions in dollars because the world is basically awash in the dollars”. Faber believes that following the strong gains in equities so far this year, the risk/reward is no longer that favourable. We can see another 10%-15% rise but “it’s very difficult to value assets when you have zero interest rates and when you have a central bank like in the US that has acknowledged and assured investors that they will print money,” he said.

Warning against a kind of lose lose nightmare scenario, the legendary investor said: “What you may end up with is that the weaker the US economy is, the more the share market goes up, the more the dollar goes down because of another stimulus package, and further money printing”.

On the S&P 500, he says, it is unlikely to break below low of 666. It may however go up to 1200 next year after revisiting 900 levels, he adds. He expects to see weakness in corporate profits in 2010 and believes that it is unlikely for the developed markets to outperform emerging markets.

Turning to his position on gold Faber said: “We’ve broken through the US$1000 per ounce level with quite conviction and heavy volume. I believe that whereas in the past the US$1000 per ounce level was kind of a resistance level, now it becomes a support level. I don’t think that you’ll see gold below a US$1000 per ounce probably ever again.”

“So I’m actually quite positive. Maybe gold at this level is a better buy than it was at US$300 per ounce in 2001,” he added. In the latest issue of the Gloom Boom & Doom Report, Faber had expressed some short-term concerns about commodity prices including gold. “I would regard a failure to hold above the “upside breakout points” in the period directly ahead with great caution. In the case of gold a decline below US$1,000 would likely lead to further more meaningful weakness, possibly down to between US$800 and US$900,” Faber wrote.

Gold prices having held above the upside breakout, Faber now clearly sees the US$1,000-mark as the new floor. Stating a view on crude oil likely to please proponents of ‘peak oil’ Faber said: Basically the world consumes more oil than the world is adding in terms of reserves every year. So the level of oil reserves in the world is basically going down and we could have at some stage a more acute shortage of crude”.

Will it go up to a US$100 right away? I’m not so sure about that, Faber said.

Marc Faber sees collapse of Capitalism as we know it
Source: Business Intelligence, Middle East
Originally posted: September 26, 2009

INTERNATIONAL. Marc Faber the Swiss fund manager and Gloom Boom & Doom editor said the current crisis is just an appetizer for a future one because the weaknesses that created it have not been addressed. Speaking to CNBC’s Worldwide Exchange on Friday, Faber said: “It’s a total and complete disaster and the crisis we had is just the appetizer to the big total breakdown of financial markets and of governments in five or 10 years time when the whole system goes bust.”

Reiterating a long-held belief, Faber said he didn’t expect much from the G20 summit as the real issues of “uncontrolled, unbound credit growth,” are not addressed and the people who are supposed to implement new measures are the same people who were unable to foresee this crisis.

“My view is that this G20 meeting is a complete and total waste of time,” he said. “Nothing will be achieved except that they will implement regulations that are even worse than the regulations that brought us all these problems.”

“If you have interest rates at zero essentially you discourage people to save and encourage them to speculate,” he said. “I look at the US dollar. Whenever a currency is weak, it’s weak because of some inflationary pressures.” Emerging markets are the place to be in the long term, because their economies are gaining importance in the world, but this will lead to geopolitical tensions, Faber warned.

“I think that people will have to rethink the world and that they should have little money in the US and have 50% of their funds in emerging economies,” he said. In his latest issue of The Gloom, Boom & Doom Report Faber writes: “The future will be a total disaster, with a collapse of our capitalistic system as we know it today, wars, massive government debt defaults and the impoverishment of large segments of Western society.” Faber has been warning for some time about the consequences of printing money.

In a May interview with CNBC, he said central banks will continue to print money at full speed, but long-term this strategy will lead to a fall in purchasing power and living standards, especially in developed countries. The years 2006 and 2007 were “the peak of prosperity” and the world economy is not likely to return soon to that level, he added. Unless the system is cleaned out of losses, “the way communism collapsed, capitalism will collapse,” according to Faber. “The best way to deal with any economic problem is to let the market work it through.”

“With a chairman like Mr. Bernanke, I would assume that cash will be worth zero,” Faber said earlier this week. “I repeat what I have said in the past,” Faber says. “No decent citizen should trust the Federal Reserve for one second. It’s very important that everyone own some gold because the government will make the dollar (in the long term) useless.”

Written by aurick

12/12/2009 at 12:23 am

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