Friday, November 30, 2012

What Marc Faber Said to the LBMA About Gold - BullionVault

The ANNUAL CONFERENCE of the London Bullion Market Association always includes great presentations from the biggest players in gold and silver, writes Adrian Ash at BullionVault. Being in Hong Kong this year, the world's premier event for the bullion industry also got lots of great insights from genuine Asian insiders – ICBC, Kotak Mahindra, the People's Bank of China no less.

"Continuous interventions by governments with fiscal and monetary measures, instead of smoothing the business cycle, have actually led to greater instability. The short-term fixes of the New-Keynesians have had a very negative impact, particularly in the United States." Faber's big beef is with US Federal Reserve chairman Ben Bernanke. But "numerous Fed members make Mr.Bernanke look like a hawk," he said. Nor does it matter who is running the White House. Because thanks to welfare and military budgets, "spending is out of control, tax is low, and most spending is mandatory."

So Federal Reserve policy is inevitable, Faber went on, and while we haven't yet got the negative interest rates demanded by Fed member Janet Yellen, we have got negative real interest rates. The US and the West had sub-inflation interest rates in the 1970s too, and we got a boom in commodity prices then as well. But with exchange controls now missing from the developed world, "One important point," said Marc Faber:

"Ben Bernanke can drop as many Dollar bills as he likes into this room," he told the LBMA conference in Hong Kong, "but what he doesn't know is what we will do with them. His helicopter drop will not lead to an even increase in all prices. Sometimes it will be commodities, sometimes precious metals, collectibles, wages or financial assets. [More importantly], the doors to this room are not locked. And so money flows out and has an impact elsewhere – not in this room."

That elsewhere has of course been emerging Asia, most notably China (see our video pick of the Top 5 Slides from LBMA 2012 on YouTube for more). But back home, these negative interest rates are forcing people to speculate, to do something with the money, said Faber. These rates artificially low, well below the 200-year average.

That's doing horrible things to the United States' domestic savings and thus capital investment."You don't become rich by consuming. You need capital formation," said Marc Faber. Unlike investing in a factory to earn profits and repay your loan, "Consumer credit is totally different. You spend it once, and you have merely advanced expenditure from the future."

So far, so typical for the doom-n-gloomster. Noting total US debt at 379% of GDP, "if we included the unfunded liabilities then this chart would jump to the fifth floor of this hotel!" said Faber, waving his red laser pointer at the ceiling. After the private sector "responded rationally" to the runaway 20% credit growth of 20% by collapsing credit in 2007-2009, the US government stepped in to take over – and "Government credit is the most unproductive credit of all."

In short, the easy money and bail-outs which got us here – from the Fed's rescue of Goldman Sachs during the early '80s Tequila Crisis in Mexican debt, through LTCM in the late '90s and then the Tech Stock boom and bust – have had serious consequences. "Bubbles are a disaster from a social point of view," said Faber. Looking at his charts of the generational shift in wealth, it would take a Fed voting member to disagree.

"Only at the Federal Reserve they don't eat or drive!" exclaimed Faber as he turned on the central bank's inflation target, produced by "the Ministry of Truth, the Bureau of Labor Studies. It is a complete fraud." But even as the United States' persistently mistaken policies lead to the emerging powers side-stepping it ("We are in a new world. China's exports to commodity-producing countries – such as Australia and Brazil – are greater than its exports to the United States. Exports from South Korea to commodity-exporting countries are greater than its exports to the US and Europe combined!"), there will come a slowdown in commodity demand and leveling off in prices in time.

"I would rather be long precious metals than industrial commodities," said Marc Faber. Which was of course what most people at the LBMA conference wanted to hear. Less welcome was his warning not to hold gold in the United States or even Switzerland. Because "if gold is owned by a minority, then in a crisis the government will take it away." But even Faber said that some of his 25% personal allocation to precious metals is still in his home country, rather than in Asia where he's lived for almost 30 years.

Once the deflationary collapse finally arrives (the impossible question is knowing when, said Faber), there will be great opportunities in real and productive assets. But until then, and as for the Gold Price ahead, "Gold is not anywhere close to a bubble stage," he concluded. And every time he thinks about selling to take profit? "I keep in my toilet a picture of Mr.Bernanke. And every time I think about selling my gold, I look at it and I know better!"

Thursday, November 29, 2012

Marc Faber Believes That Owning GOLD Is A Must For Every Individual and ... - ETF Daily News (blog)

Gold Silver Worlds: Marc Faber is one of the very successful investors on earth. He recently explained his view on the monetary policies of the developed regions in the world. Obviously he is no fan of the  Keynesian way of thinking which is applied by the central banks in the developed regions.

The Keynesian policy considers easy money as a way out of economic recession and deflation. They argue that money creation smoothens out the business cycle. In his presentation, Marc Faber demonstrates that these kind of interventions achieve exactly the opposite: they make the business cycles much more violent, create extreme fluctuations in economic activity and result in far more financial volatility. In his opinion, the essential problem is that the Keynesian way of thinking tries to solve long term structural problems with short term fixes, with an emphasis to create bubbles to help the economy. However, Mr Faber notes that bubbles usually hurt the majority of market participants.

Based on the US Fed philosophy you can’t identify bubbles, but if they burst you can take measures to support asset prices by flooding the markets with liquidity (read: by “dropping dollar bills from an helicopter” in order to prevent deflation). In line with that way of thinking, the Fed has slashed interest rates  and created liquidity over the last 30 years on a continuing basis.

Marc Faber believes that these policies have one big problem: central banks simply cannot determine what will happen with the money that is created. The key point is that inflation does not necessarily occur in wage inflation or in consumer prices. The additional liquidity however can create unpredictable sorts of inflations. For instance, it can result in a housing boom in country X, or in employment wage inflation in country Y, or in commodity price inflation in country Z. Furthermore, not every price increase will occur at the same rate, with the same intensity, at the same time. Those are the “unintended consequences” of money printing, which Marc Fabers discusses in detail with a lot of examples in his presentation.

“High monetary inflation brings distortions in the price mechanisms and volatility.” One of the examples Mr Faber used in his presentation is the Mexican deflation, in which the currency debased sharply against eg the US dollar between 1979 and 1983. From the lows in 1983 till its highs in 1988, the Mexican equity market in US dollar increase  44-fold! See slides 41 and 42.

Marc Faber his conclusion: money printing brings more and unpredictable volatility. We saw a major low in equities in March 2009 which we probably won’t see again because “every drop”  comes with a new round of QE. Going forward, he believes that owning GOLD is a must for every individual and investor. Gold is not in a bubble as we haven’t seen rapid acceleration of prices (as an example, look back at 1979 where the gold price doubled in 3 months).

Related Tickers: SPDR Gold Trust (NYSEARCA:GLD), iShares Silver Trust (NYSEARCA:SLV), Ultra Silver ETF (NYSEARCA:AGQ), iShares Gold Trust (NYSEARCA:IAU).

Tuesday, November 27, 2012

Want an Australian visa? Try investing $5.2 million - Los Angeles Times

While Australia tries to steer boats crammed with immigrants away from its shores, it is beckoning wealthy foreigners with a new visa that smooths the path to Australian residency — for a price. Under a new visa program that goes into effect Sunday, skilled migrants don’t have to pass the usual tests that rate their skills, experience and English ability. The age limit is out the window. But there’s something extra that would-be Australians need to do to be eligible: Invest more than $5.2 million in Australia.

Migration agents are reportedly calling it “the golden visa.” Immigration Minister Chris Bowen has plugged the program as a way to boost the Australian economy and compete for “high net-worth individuals.” Investors can plunk their money into government bonds, managed funds that invest in Australian assets, or Australian companies that meet specific standards and aren’t listed on the stock exchange. It was no coincidence that the visa category number is 888 — an especially lucky number for the Chinese, immigration attorney Michael Sing told the Sydney Morning Herald. Wealthy Chinese have flocked to other countries to enjoy a better quality of life, from cleaner air to less corruption. "We think this visa is aimed squarely at the emerging wealth in China," Sing told the paper.

The idea has received some blowback from critics who say Australia has put residency up for sale. It stands in stark contrast to Australia trying to push other immigrants away. People who arrive on rickety boats are detained on the islands of Nauru and Papua New Guinea while their cases are processed. Bleak and cramped conditions on Nauru, where detained immigrants could wait as long as five years, amount to “a human rights catastrophe,” Amnesty International said Friday. Australians “like the idea of well-dressed refugees arriving on a plane,” RMIT University lecturer Binoy Kampmark told The Times this year as the Nauru plan was debated. “They do not like the idea of being besieged by the sea." Though the hefty financial investment needed for the new Australian visa is striking, other countries, including the United States and Britain, have similar programs to lure wealthy emigres from abroad. Applications for the U.S. program have skyrocketed, The Times reported last year.

View the original article here

Sunday, November 25, 2012

Saudi Arabia Investing $109 Billion Into Solar Energy, Wants 1/3 Of ... - CleanTechnica

Saudi Arabia is planning to invest $109 billion into solar energy, looking to develop a solar industry that can provide 1/3 of its electricity by 2032. Doing so will free up larger quantities of its reserves for international sales rather than for use domestically. With the price of oil expected to rise significantly in the coming decades, such a move makes sense from an economic standpoint.

Saudi Arabia’s first solar farm is expected to begin operations by 2015, and its first nuclear plant by 2020, according to an official at the agency developing the country’s renewable (and atomic) energy program.

Its first solar power plant is expected to begin construction in early 2013, and will take up to 2 years to complete.

Khalid Al-Suliman, vice president at the King Abdullah City for Atomic and Renewable Energy, said that “the project will get underway once the government approves his agency’s plan for renewable energy.” He’s expecting to officially receive approval by early 2013.

He says that they are currently targeting around “41,000 megawatts of solar capacity within two decades,” 16,000 megawatt of which would be from photovoltaic panels, and the other 25,000 from solar thermal technology. The country currently has only around 3 megawatts of solar installations.

It is also still moving forward with its plan to build sixteen nuclear reactors by the year 2030, for a total nuclear capacity of 14,000 megawatts, which is projected to cost the country around $100 billion.

With how competetively priced the solar power is compared to nuclear, it kind of makes you wonder if they have any ulterior interests in nuclear.

View the original article here

Wednesday, November 21, 2012

Investing in an Automated Economy - ABC News

When will the jobs return? That's been the question in this glacially slow recovery.
The answer? Many of jobs won't be coming back, and that's painful news for all of us.
Job creation ebbed for years before the 2007-2008 recession and is likely to fall far short of what it was in previous decades.
Low consumer demand is one reason. Companies have no reason to hire if people aren't buying their products, and recession-wracked Europe, our biggest consumer, isn't consuming as much.
Yet there's another reason for weak job creation that isn't talked about as much. Automation, aided by new technologies, is increasingly replacing labor, changing workplaces and altering the economy in fundamental ways. For evidence of this trend, just look around your house, your office (if you're fortunate enough to have one) and the nearest shopping center.
• IPhones, iPads, and other devices are changing the way we shop, communicate and get news and information, disrupting old labor-intensive industries, such as newspapers and the U.S. Postal Service, while creating new ones that generally employ far fewer people.
• Online banking, brokerage and mortgages are increasingly making it easier for consumers to never set foot in a brick-and-mortar bank.
• Movie-downloading services such as Netflix and Redbox have hastened the demise of video stores.
• Self-checkout aisles at stores and gas stations have eliminated thousands of retail jobs.
Truck drivers' jobs might soon be on the line too. Experiments with computer-driven vehicles have had vastly improved results in the past several years. In 2005, computer-driven cars could go only a few miles. Recently, Google-operated cars went thousands of miles without a mishap, and California Gov. Jerry Brown just signed a bill to allow them on the state's highways.
As technology evolves at an ever-increasing rate, new jobs are created but not fast enough to replace the jobs that are disappearing. This is creating hardship for millions of Americans.
"At some point in the future -- it might be many years or decades from now -- machines will be able to do the jobs of a large percentage of the 'average' people in our population, and these people will not be able to find new jobs," writes Martin Ford in his eye-opening book Lights in the Tunnel, which can be downloaded for free. This book details the challenges that we face and offers some possible solutions, including shorter work weeks, job sharing, and eliminating payroll taxes so employers have less incentive to replace workers.

Tuesday, November 20, 2012

Marc Faber: Global Markets Will implode

“I don’t think markets are going down because of Greece, I don’t think markets are going down because of the ‘fiscal cliff’ — because there won’t be a ‘fiscal cliff,’ ” Marc Faber told CNBC’s “Squawk Box.”
Marc Faber: Actually, I’m so happy to be on your show, because whenever I feel depressed and I see you, you group of people that are so optimistic, I feel enlightened, and again full of life. So I think actually you should open up a psychiatric clinic for depressed people, and you would do very well, because everybody would be good after talking to you.
Host: But would we be fooling them into feeling good?
Faber: I think the point is this: I don't think markets are going down because of Greece, I don’t think that markets are going down because of the fiscal cliff, because there won't be a fiscal cliff. They'll do some patch work, a little bit of tax increases come into play in five years time, and a bit of spending cuts that come in 100 years, and then everybody will be happy and they'll be a rebound in the market. But the market is actually going down because I think that corporate profits will begin to disappoint, and that the global economy will hardly grow next year, or even contract. And for that is the reason that stocks, from the highs in September at 1470 on the S&P, will drop in my view at least 20%. Apple has already dropped more than 20%.
Host: What's causing this global slowdown? Is there any way out of this or is this a mess that we have created and we’ve got to live with right now?
Faber: Each country has specific problems. In some countries we have overcapacity problems. I was in Vietnam. I’ve seldom seen such an overbuilt real estate market. It will take years to absorb everything. And if Vietnam’s property market is a microcosm of the Chinese property market, it will also take years in China to absorb all the properties that are being built. In the western world, including Japan, the problem is we have too much debt and that debt now will have to be somewhere, somehow, repaid or it will slow down economic growth. And so, I think that we live beyond our means 1980 to 2007 and now it's payback period.
Host: It's payback period, but if you have a situation that you expect, where the fiscal cliff is one that we never address, we just kick the can down the road, and deal with it another day, when does it actually start to catch up with us?
Faber: i can't tell you precisely the day, but I think the whole global financial system will have to be reset at some problem. And it won't be reset by central bankers, but by imploding markets; either the currencies or the debt markets or the stock markets, but it will happen. It will happen one day big time and then we will all be lucky if we still have 50% of the asset values that we have today.
Host: So, if we were to handle the fiscal cliff --
Faber: It's a very optimistic scenario.
Host: There are a lot of people who have talked about this scenario. Something that definitely worries me, too. But, do you is it a situation that could be avoided if we tackled the fiscal cliff and actually made some tough decisions right now? If we grasp at austerity the way some of the Europeans have done it, there are people who say we don't want to do it that way, look at what's happened to Europe, they’ve gone back into recession, but is it your thought we need to deal with the medicine and suffer the pain at some point?
Faber: For sure there will be pain, and there will be very substantial pain. The question is do we take less pain now through austerity or risk complete collapse of society in five to ten years time. And in a democracy, they're not going take the pain now. They'll kick down the problems and they'll become bigger and bigger.
Host: So, you think we won't be able to do anything until it's too late, that we won't have the political will to go ahead and at that time tough decisions now, and that's why we'll end up --
Faber: Correct. But, I don't want to leave you without some optimistic words.
Host: Yes, now that you've talked about the complete collapse of society, tell us about the bright side of things.
Faber: I’ve recently been on to Vietnam, Cambodia, Laos, of course Thailand, because I have a house there, and Myanmar. that whole region is known as Southeast Asia, and I think that region of 250 million people will continue to grow regardless because you have a relatively high GDP per capita in Thailand, maybe 3,000 or 4,000 US Dollars, and the surrounding countries GDP per capita less than $1,000. And these countries are opening up now, and I think with the trade links and transportation links that are being expanded regardless of what happens in the world, can grow. Provided there is geopolitical stability in Asia which is a big question mark.
Host: So the situation in Vietnam, you said the housing bubble is going to take years to get through. But you still think the growth statistics will trump that? Yes, but, you see, in Vietnam from the peak exports in 2008 up to today, the export performance of Vietnam has been the best of any emerging market. Better than China, better than Columbia, and much better than say Eastern European economies.
Host: So, your bright spot is that all of western society is going down the toilet but if we move to Laos, we might be able to make $3500 a year? I know I can buy a lot --
Faber: Joe, you're a nice person, but --
Host: That doesn't sound that great, Marc, to me. And I resemble that you said that we're like Pollyanna’s, that we're constantly optimistic. That's the wrap on -- I got to sue for you definition of character.
Faber: Sorry, I didn't mean to insult you. I wanted to say something nice about you that you're an optimistic person.
Host: I'm buying a gun. I’m not optimistic. Don't throw me in there. I’m reading about the U.S. Military forces training for zombie apocalypse.

Tuesday, November 13, 2012

Educating a Nation of Financial Illiterates - Forbes

Washington has an investor crisis that needs attention. The financial literacy of Americans is at a dangerously low level, at a time when more people have become responsible for their own retirement savings and as the future of government subsistence programs have fallen into question.

A recent government study shows that most citizens don’t know much about how the economy works, they don’t know basic investment concepts such as the difference between stocks and bonds, and they lack rudimentary knowledge about risk, return, and investment planning.

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 tasked the Securities and Exchange Commission (SEC) to gauge the level of financial literacy that exists in America among individual investors. The SEC’s goal was to assess general financial knowledge and determine specific knowledge of investment fraud, fees, and risk. The research also evaluated this knowledge based on subgroups defined by age, gender, and race.

The SEC’s published report was sobering. Here is an excerpt from the conclusion:
“Quantitative studies conducted from 2006 to the present on the financial literacy of U.S. retail investors conclude overwhelmingly that American investors lack essential knowledge of the most rudimentary financial concepts: inflation, bond prices, interest rates, mortgages, and risk. Consequently, it is not surprising that investors do not understand advanced financial concepts such as differences between stocks and bonds, the role of the stock market, and the value of portfolio diversification.

Low levels of investor literacy have serious implications for America. We live in an age dominated by defined-contribution retirement plans, where workers make their own investment choices. A lack of basic knowledge will seriously erode individual investment performance in the future and that threatens broad segments of the population who wish to retire comfortably.

Something must be done to increase basic investor awareness, and this effort must come from Washington - because it won’t come from Wall Street. An intense effort to prudently educate investors is essential to the general financial health of Americans and of America.

This help will not come from the for-profit investment industry because product sales are the main driver behind the advice investors receive. Even new ideas that were originally designed to reduce cost and increase return have degenerated into high cost speculative products designed to increase the amount of money the industry takes in.

The exchange-traded fund (ETF) market is a prime example of a good product that has been high-jacked by Wall Street. ETFs were originally created as low-cost index funds designed to generate the return of a market. They gave all investors access to a broad basket of securities and could be used to build affordable portfolios. While many ETFs still provide this benefit, the ETF landscape in general has been heavily polluted in recent years. Many new funds that have launched in the past 10 years are high-cost products that are designed for speculation and to be used as part of a trading strategy.

Wall Street will always figure out a way to turn a product that’s good for investors into a high-fee money machine that aids the industry. I wrote an article about this titled, Thrown Under a Bus With Model ETF Portfolios. Jason Zweig also investigated this issue in a recent Wall Street Journal article titled, When Cheap Funds Cost Too Much.

So, what’s the answer?

Ironically, the federal government’s own Thrift Savings Plan (TSP) doesn’t fall prey to the problems facing the rest of the investing nation. It provides government employees and active duty military an excellent low-fee program. There are no expensive actively-managed funds in TSP, and no fees are paid to advisers for speculating on markets. Most of the investments in the program are index funds, each of which is invested in order to replicate the risk and return characteristics of a particular market.

Washington has already figured out that low-fee index investing is in the best interest of its employees and the military. So, why not take it one step further to help solve the financial literacy in America by giving TSP to the rest of that nation? Require employers who offer a 401(k) or similar employee savings program, to use TSP - or at least use low-cost index funds modeled after it.

Some people will say that mandating employers to adopt the government’s TSP program is too much intrusion. Undoubtedly, the protest will come mainly from financial firms and advisers who have the most to lose. As a compromise, Congress could make the program optional, but give employers who adopt the principles safe harbor from employee lawsuits involving plan investment options.

The financial literacy of Americans is at a dangerously low level and this will create problems for our nation unless something is done. Washington should become more involved. Government already drives K-12 education and is deeply involved in higher education, and tools such as TSP are all ready in place to improve the system on a mass scale. It’s time for Washington to step up and act.

Monday, November 12, 2012

Sensex may not cross 21000 levels anytime soon: Marc Faber - Economic Times


ET Now caught up with Marc Faber, Editor & Publisher of The Gloom, Boom and Doom Report, for his take on the global and Indian markets. Marc says that there can be a year-end rally, but he does not see new highs in the markets. Edited excerpts:


ET Now: Do we brace ourselves for a year-end rally or a year-end fall, given the risk from a fiscal cliff in the US?

Marc Faber: We have peaked out recently a couple of weeks ago and we are in a downtrend. Eventually, the markets will be down 20%, but will be oversold in about 10 days' time to two weeks' time. So there can be a year-end rally, but certainly no new highs in the markets.

ET Now: How real is the possibility of a Euro break-up considering that Spain and Greece are still looking as vulnerable as before?


Marc Faber: Yes, it is a possibility. I do not think it will happen right away because the politicians want to keep the Eurozone intact, but the situation in Portugal, Greece, Spain, Italy and even France is actually unsustainable in the long run because of the unfunded liabilities. So a Euro break up will probably happen sometime in future, but not for another three or five years.


ET Now: Has your stance changed on India because of the slew of reforms that we have seen and do you see the recent announcements call for a rerating of the region?


Marc Faber: Not necessarily. While the government has announced some reforms, there is a huge execution risk in India. A lot of implementation is still to happen, and it will be interesting to see as to what extent they will be implemented and their actual impact on the economy. At present, there is high level of economic activity in India as well as China and Southeast Asia, but India is not growing anymore. Hence, I will take a relatively cautious stance towards the Asian markets.


ET Now: How do you see emerging markets manage the inflation versus growth equation?


Marc Faber: Like in Western countries, Asian central banks will also ease over time and they have done that already in some countries. There are not many countries in the region that are as disciplined as Singapore. I believe that even though there will be some inflationary pressure, but because of the overall weakness in the global economy the energy prices will come down somewhat. Moreover, food prices are already somewhat down after having risen so much, and are currently not as high as they were a few years ago.


ET Now: What do you see in terms of the returns on Indian equities over the next one or two years? Should investors adjust their return expectations?


Marc Faber: I am not exactly a prophet, but we have rallied strongly from the 2009 lows and the outlook for large capital gains at this level is very limited. The high in 2008 and the high last year was around 21000. I do not think we are going above 21000. I would rather expect the market to ease again from here.


ET Now: What regions are you seeing as the most and least attractive for investment right now?


Marc Faber: The Chinese economy is slowing down rapidly. In my opinion, it is not growing at any more than 4% now. The market was at 6000 in 2007, and today we are down to around 2000. Clearly, the market has already discounted a lot of bad news and if a junk country like Greece could rally from the lows of 65%, we can expect a trading rally in China of 20%-30% over the next four or five months. Additionally, the Japanese Yen has begun to weaken and that should be a positive trigger for Japanese equities.


View the original article here


Thursday, November 8, 2012

FABER: Cut The US Government By 50% Now! - San Francisco Luxury News


The debt burden in the U.S. and other Western countries will continue to increase, Marc Faber, author of the Gloom, Boom and Doom report told CNBC on Monday, leading to a “colossal mess” within the next five to 10 years.


“I think the regimes will try to keep the system alive as it is for as long as possible, which means there’s no “fiscal cliff,” there’s a fiscal grand canyon,” Faber told CNBC’s “Squawk Box.”Faber argued that the political systems in place in the West would allow the debt burden to continue to expand. Under such a scenario of never-ending deficits, the Western world would rack up huge deficits.


One day, the system would break, he said. “Eventually, you have either huge changes occurring in a peaceful fashion through reforms, or, usually, through revolutions,” he said. The U.S. is getting closer to such a revolution, he said, as is Europe.


“I think the timeframe would be within five to ten years you have a colossal mess … everywhere in the Western world,” Faber said. “I think the deficit here (in the U.S.) — irrespective of who is in the White House — will stay above a trillion dollars per annum for at least as far as the eye can see.”


Bureaucracies in the U.S., as well as Europe, are far too big, he said, and are a burden on the economy.


“My medicine for the U.S. is: Reduce government by minimum 50 percent,” he said. “The impact would be immediately an improvement in the economy.”


Oulook for Stocks


Faber believes the Chinese and Japanese stock markets could see a rebound, while in the U.S. the S&P 500 is likely to see a 20 percent downward move.


“I think here we’re going to go down 20 percent from the recent top at 1,470. The technical position of the market is poor and the corporate earnings are worsening. And I believe that if the statistics were precise – which they aren’t – (…) I think there’s hardly any growth,” Faber said.


Four months ago, Faber turned his attention to European stock markets, attracted by the low valuations.


“Greece, Italy, Spain, France, Portugal, they were four months ago at the 2009 lows or even lower,” he said.


Faber recommended buying European stocks at the time and for the first time in his life bought them himself.


“I did it simply because the valuations were low. Since then, Greece is up 65 percent,” he said.


He would no longer buy European stocks, he said. “I expect a correction but no new lows,” Faber said.


Now he is focusing on Asia.?


“In Asia, Thailand from the 2009 lows is up 250 percent. Other markets like the Philippines, Indonesia, Malaysia, Singapore, are up by a similar amount,” he said. The Chinese benchmark index on the other hand was at 6,000 in 2007, now it is at 2,000.


“I think China and Japan could have a rebound here. If Greece could rebound by 65 percent the greatest garbage could rebound by 65 percent,” Faber said.


View the original article here


The Nightmare of Government Freebies - BullionVault


Marc Faber on how the nanny state has become unviable...

IN ORDER to exercise control over the population, governments throughout history have made people dependent on government largesse, says renowned investor Dr Marc Faber, publisher of the Gloom, Boom & Doom Report, writing in the Daily Reckoning. A government can make an increasing number of people dependent on its generosity by providing more and more benefits to a larger and larger share of the population.


Because of these "freebies," people will go along with the government's enlargement as a percent of the economy. The masses believe in their free lunch and because the business elite knows it can profit from the growth in government.


However, there comes a point at which the "nanny state" becomes unviable. Raising taxes to pay for the freebies become problematic. Fortunately for the governments, they have a Treasury and/or a central bank that can print money and monetize the government's debts.


As Ludwig von Mises observed in Human Action:


Credit expansion is the government's foremost tool in their struggle against the market economy. In their hands is the magic wand designed to conjure away the scarcity of capital goods, to lower the rate of interest or to abolish it altogether, to finance lavish government spending, to expropriate the capitalists, to contrive everlasting booms, and to make everybody prosperous.


Therefore, the broad population, whose attention will be distracted by the media, won't realize the negative consequences of large fiscal deficits. They will hardly notice their declining standard of living due to the loss of purchasing power of the currency. In the meantime, the media will bombard them with further immaterial news, such as which Hollywood star is divorcing whom, which team will win the Super Bowl, and abortion rights and gay marriage issues.


The government will also become involved in larger distractions, such as arguing for the need to eliminate continuously new (usually invented) threats or foes arising from ethnic or religious minorities, communists, socialists, terrorists, spies, or, as is now the case in the US, the "vicious" 1% of the population that lives well. A political system controlled by an ignorant electorate that is manipulated by a dishonest and controlled media that dispenses propaganda on behalf of a corrupt political establishment can hardly be the path to lasting prosperity.


In fact, I am surprised that economists continue to discuss GDP growth (usually in real terms), when they should be focusing on sustainable growth. Let me explain. Since 2000, US government debt has increased from US$5 trillion to over US$16 trillion. Over the same period, nominal GDP is up from approximately US$9.5 trillion to US$15.5 trillion.


In my opinion, an adjustment to GDP should be made for the increase in government as well as household debt, because both inflate GDP figures, but are not sustainable in the long run, as we now know from some peripheral European countries. I mention this because Eric Fry, writing for The Daily Reckoning, points out the following:


During the last four years, the number of Americans on food stamps has soared by more than 17 million, while the number of employed Americans has dropped by more than 3 million. In percentage terms, the number of Americans on food stamps has soared 60% in four years!… In fact, according to the "Outreach" section of the USDA [US Department of Agriculture] website, the soaring number of food stamp recipients is an absolutely fantastic success story: "SNAP (i.e. food stamps) is the only public benefit program which also serves as an economic stimulus, creating an economic boost that ripples throughout the economy when new SNAP benefits are redeemed. By generating business at local grocery stores, new SNAP benefits trigger labor and production demand, ultimately increasing household income and triggering additional spending."


There you have it. The government increases its borrowings (through fiscal deficits) in order to pay for, among other things, food stamps. In turn, the food stamp recipients go and spend the money in stores (mostly at Wal-Mart), which boosts GDP. But is this real, sustainable GDP growth?


So, not only do fiscal deficits allow the government to expand useless and unproductive programs and expenditures that artificially boost GDP, but they also increase the number of bureaucrats who implement the new regulations that stifle business. To the neo-Keynesians, I can only say: "Well done."


Time to Buy Gold?...


Born in Zurich, Switzerland, and based in Hong Long since 1973, Dr. Marc Faber studied economics at the University of Zurich and obtained a PhD in Economics magna cum laude at the age of 24. From 1978 to February 1990, he was managing director of Drexel Burnham Lambert (HK) Ltd. In June 1990, he set up his own business, MARC FABER LIMITED which acts as an investment advisor and fund manager.


Dr. Faber publishes a widely read monthly investment newsletter 'The Gloom Boom & Doom Report' report which highlights unusual investment opportunities. Dr. Faber is also the author of several books, including 'TOMORROW'S GOLD – Asia's Age of Discovery' which was first published in 2002 and highlights future investment opportunities around the world.


View the original article here


Tuesday, November 6, 2012

Stocks better than bonds: Marc Faber


Equities are a much better investment than bonds despite the rally in the debt of some emerging markets, according to Marc Faber, the bearish investor and author of The Doom, Gloom and Boom Report. Investors have been snapping up sovereign bonds issued by emerging and frontier countries as they search for yield after quantitative easing – massive money printing – in the US, Japan and Europe.


“I would not own sovereign bonds. Maybe in some Asian countries, as they have been more prudent with their fiscal situation,” Faber told Emerging Markets in an interview. “People are chasing yields but I think there is a risk in sovereign bonds. I don’t care what other people do, that’s what I do,” he added.


Stocks rise more in times of inflation, which is already happening in parts of the world, and therefore “between now and the eventual outcome [of the crisis that started in 2007], which will be a disaster, you’re better off in equities than in bonds,” Faber said. He has long argued that quantitative easing measures, taken in order to counteract the deflationary effects of the financial crisis and of the eurozone debt crisis, will lead to high inflation and said prices were already on the rise.


“The costs of living have increased for most people and are higher than the official figures,” he said.


“Some economists say that there is little consumer price inflation. But there is, because the money-printing has lifted asset prices like those for luxury property, art, equities or bonds. There is inflation in the system but it’s not obvious.”


IMF chief economist Olivier Blanchard also said that stocks “look quite good” but not necessarily because of inflation fears but because the interest rate investors get on US Treasury bills is zero.


“I’m not surprised that stock markets are doing relatively well,” Blanchard told Emerging Markets. Strong stock prices at present come from a “cold, hard look at the facts,” Blanchard said. “You are probably better off in stocks than in T-bills at this point.”


Faber said he found stocks in the debt-ridden eurozone countries “rather attractive” as “a lot of bad news” was discounted in these markets. Faber said he bought stocks in Greece, Portugal, Italy and Spain when they were low and was looking to buy more if markets fall again.


“I own some real estate in Asia, some equities, cash and gold,” he added.


Faber said he was pessimistic about the outlook for the world economy and the recent rounds of quantitative easing were adding to the problem.


“To intervene with monetary measures is negative to start with, and right now the same goes for fiscal measures because large fiscal deficits are undesirable,” Faber said. “What is the cause of the crisis? We have too much debt. To create more debt is not solving the problem.”


View the original article here


Global Markets could correct 20 percent

According to Dr Doom, the Markets could drop 20 percent from current levels.

“I believe globally we are faced with slowing economies and disappointing corporate profits, and I will not be surprised to see the Dow Jones, the S&P, the major indices, down from the recent highs by say, 20 percent,”


Monday, November 5, 2012

Markets could fall down 20 percent

“I believe globally we are faced with slowing economies and disappointing corporate profits, and I will not be surprised to see the Dow Jones, the S&P, the major indices, down from the recent highs by say, 20 percent,”

“That is not a big decline. If you can’t take a 20 percent decline, don’t get out of your bed in the morning,” he added.

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