Wednesday, January 28, 2015

The US Dollar is Not the Ugliest Among Several Sisters

If the US buys its own bonds, then because of the status of being a reserve currency, they basically buy their own currency. If foreign governments would start to ease massively, then I suppose the currencies would weaken.

Now, you may say, “Well, why did the dollar strengthen amidst the fact that the US has printed money?” Well, there are some reasons. First of all, maybe the US dollar is not the ugliest among the several sisters, and two, because of the increase in oil production in the United States, the trade deficit has narrowed, and so the dollar can be strong for a while. I don’t think it will last, but the consensus is that the dollar is the strongest currency around. And these other countries, say if Thailand or Singapore or Indonesia would start to print money, then they would weaken their currencies, or that would be the perception.

- Marc Faber via Sprott Money

Sunday, January 25, 2015

Marc Faber See's Value in Agricultural Companies

Faber has consistently warned since the late 1990’s that this dynamic would come to pass as the West and the U.S. in particular exported its industrial infrastructure and binged on consumer junk fuelled by easy credit while the emerging economies of east Asia used the proceeds to focus on production rather than consumption to become industrial powerhouses.

He went on to say,

“In the countries that opened up post breakdown of the socialist/communist ideology – China, Soviet Union, Eastern Europe - and India of course we have an entire generation who will earn much more and will have a better standard of living than their parents had.”

He highlighted certain factors that are leading to this lower standard of living for young western people. Banks now generally charge more to hold one’s money than the interest they pay out. He cites the yields on Swiss ten year bonds at 0.46% as an example of how people, and especially young people, are disadvantaged relative to previous generations.

“These people will not enjoy the compounding impact that I enjoyed having started to work in 1970 when bond yields were 6% and they went to 15% and so forth. So during that period of time wealth was accumulating very rapidly plus we had a huge boom in real estate and in equities and bonds between 1980 and 2007.”

“That is not going to happen again.”

Agricultural commodities including palm oil and Asian companies processing agricultural produce is where Dr. Faber currently sees value. Some of these companies in Malaysia and India, for example, pay dividends between 2% and 4%.

The young people who invest in these types of company will see their wealth steadily rise as opposed to their western counterparts who rely on the casino of rising paper asset prices.

Faber also likes the stock market in India and thinks it could see gains of 15% next year. The new government is free market and enterprise friendly and Faber believes the central bank in India is the “world’s best central bank.”

Dr. Faber is a long time proponent of owning physical gold. He has consistently urged people to act as their own central bank in acquiring bullion coins and bars as financial security and he believes that storing gold in Singapore is the safest way to own gold today.

- Source, Gold Seek

Thursday, January 22, 2015

Younger Generations Will Earn Less Than Their Parents

“I meant that with respect to western societies and Japan where essentially the younger people – today’s generation – will earn less than their parents and they will have less wealth than their parents, inflation adjusted.

This is because we will have wealth taxes, we will have more estate taxes and we have essentially declining real median incomes in the western world and Japan.”

- Marc Faber via a recent Gold Seek Interview

Thursday, January 1, 2015

Marc Faber: Expect Volatility and Surprises in 2015


“The Gloom, Boom & Doom Report” Editor and Publisher Marc Faber discusses his outlook for 2015 with Bloomberg’s Betty Liu and Brendan Greeley on “In The Loop.” (Source: Bloomberg)

Saturday, November 15, 2014

We Have a Bubble in Everything, Everywhere

Marc Faber, editor and publisher of the Gloom, Boom & Doom Report, has been consistent in forewarning about the growing abundance of bubbles in every element of the stock market and global economy. Where are the bubbles? According to Faber, everywhere.

Speaking in an interview with CNBC on Friday, the contrarian investor warned “we have a bubble in everything, everywhere,” soon after the Dow Jones and the S&P 500 ended the day’s trading session at new all-time highs.

Faber, who has been a staunch critic of the so-called economic recovery in the United States and Europe, believes the Federal Reserve’s intense quantitative easing program and near-zero interest rates have inflated stock prices. If the stock market decreases then it could be because of an interest rate hike “not engineered by the Fed” but rather a spike in bond yields.

In addition, the markets will experience a shock once another recession hits the global economy.

“The big surprise will be that the global economy slows down and goes into recession. And that will shock markets,” said Faber, who added that there would be dire straits and a lack of confidence in the economies of the world if governments and central banks can’t recovery even with all of the money pumping by the Fed.

Right now, Faber is more concerned about the rising cost of living for American consumers: “Their cost of living have gone up more than the salary increases, so they’re getting squeezed. So that’s why retailing is not doing particularly well.”

Others worry about bubble environment

Contrarian investors like Faber aren’t the only ones sounding the alarm when it comes to bubbles. There have been a number of mainstream, establishment economists and entities discussing the various bubbles popping up all over the markets.

We reported last week that a group of Deutsche Bank strategists wrote that the international government bond market is facing a bubble because it is already experiencing quite a bit of frothiness. The concern is that the bond market has nowhere else to go to because it’s already in the hands of governments and central banks.

“The worry is that there is nowhere left for this bubble to go given that it is now in the hands of the lenders of last resort (governments and central banks with regulators ensuring other large captive buyers),” the economists wrote. “Although we think this bubble needs to be maintained to ensure the solvency of the current financial system, the best case scenario is that it slowly pops over time via negative real returns for bondholders. The worst-case scenario being future restructuring.”

Fed Chair Janet Yellen, meanwhile, concurred this past summer that stocks are in a bubble, but noted that the U.S. central bank wouldn’t raise rates in order to burst them. Yellen argued that it should be up to financial regulatory bodies to bring about stability to markets rather than monetary policy, though it’s the Fed’s artificial rates and money printing that’s producing bubbles.

In June, Wilbur Ross, CEO of WL Ross, averred that the sovereign debt market bubble will pop within the next two years, citing the 10-year U.S. Treasury yields hitting a record low in 2012.

“I’ve felt for some time that the ultimate bubble, when we look back a few years from now, is going to be sovereign debt, both U.S. and other, because it’s way below any kind of reversion to the mean of interest rates,” Ross told CNBC. “If you look at where the U.S. 10-year had averaged over the 10 preceding years, it’s around 4 percent. If it reverts back to that level at some point, there will be terrible losses in the long-term Treasury market, and those will probably be accentuated in other areas of fixed income.”

Bubbles, bubbles are indeed everywhere.

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