Marc Faber, editor of the Gloom, Boom & Doom report, delivers a stark warning about the global economy and financial markets, urging caution and sharing strategies for investors to protect their wealth. In this thought-provoking conversation with James Connor, the renowned contrarian investor—also known as Dr. Doom—explains why he believes markets are in a bubble, driven by years of easy money and misguided central bank policies, and predicts they will deflate by 50% in real, inflation-adjusted terms. Faber also explores the disastrous societal impacts of consumer versus asset inflation, the unrealistic return expectations of today’s investors, and the declining standard of living in the West.
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Marc Faber 0:00
If someone tells me the economy is strong, then he believes in nonsense. The financial market is a huge bubble like this, and the real economy is just like this. The GDP is a meaningless figure. What matters is the standard of living of people. Are they better off then 10 years ago.
James Connor 0:25
Hi and welcome to wealthion. I’m James Connor. Well, I think you would agree with me when I say 2024 is shaping up to be one of the most interesting years in a very long time. We have this ongoing debate on whether or not the US is in a recession, an ongoing debate on whether or not the Fed is going to cut interest rates. We still have a war in Ukraine. We also have conflict in the Middle East, and of course, we have an election coming up in November, which is providing a lot of uncertainty. How do we navigate all these cross currents, and how should we prepare for what might be coming? To help answer these questions, my guest today is Marc Faber, editor and publisher of the gloom boom in Doom report,
Marc, thank you very much for joining us today. How are things in Thailand?
Marc Faber 1:12
Well, thank you very much for having me. And things in Thailand are bad like usual. They seem to be improving. We have a new government, and in my opinion, the new government is sort of business friendly, and has businesses and has some experience in managing affairs, and the the stock market was in a downtrend for many years and has underperformed the US massively. And just in the last few months, the report about Thailand by the financial media and especially also brokerage firms has been extremely negative, and for me, as a contrarian investor, I don’t want to buy any asset that is highly recommended by the media and is in the night in the limelight. I like to buy neglected sectors where foreigners have been heavy sellers for a long time, and that has been the case in Thailand and, by the way, also in Malaysia and in Indonesia and so on. So I see some value emerging in so called value type of investments, as opposed to the gross investments that are represented by the Magnificent Seven in the United States.
James Connor 2:48
So why don’t we dive into that in a little more detail? And this is why I always enjoy speaking to you, because of your contrarian approach. And as you just alluded to, that there is so much money in the US and in the US financial markets right now, and I want to get your opinion on that. And before we discuss the financial markets, I first want to discuss the US economy. And we saw a very strong q2 GDP number came out at 2.8% much higher than was was expected, much higher than q1 which was only 1.6% but what’s your take on this q2, numbers, the US economy heating up again? Or is it as strong as we think it is, or maybe weaker? Was this number a fake number?
Marc Faber 3:30
I mean, what fascinates me about the investment industry and the financial markets is that financial people, in general, the economists who work for Wall Street firms and so forth, with very few exceptions, they rely on statistics that are published by the government. Now I have sources that would indicate that inflation, and this is not just one source and one kind of mysterious economist in the background, but numerous sources indicate that inflation over the last 3040, years has been much higher than what the government is saying It has been. And so if you take nominal GDP figures, and you say, the GDP grew at 3% or 2.5% and inflation was a three or 4% instead of what the government is calculating at one and a half or 2% then suddenly, in real terms, GDP is down. And I can tell you that the majority of Americans say the median household in America is struggling. We have this from all sorts of companies that sell retail goods to people and services that consumer. Are not as strong as they used to be. They’re struggling even to pay their grocery bills. Over 70% of US households depend on paycheck to paycheck to check to pay their bills. If someone tells me the economy is strong, then he believes in nonsense. The economy is not strong. And if you measure the GDP, is a meaningless figure. What matters is the standard of living of people. Are they better off than 10 years ago, or are they worse off? And I can tell you, in the whole of Europe and the United States, the typical household is not as well and earns less than his parents used to earn in real terms, inflation adjusted.
James Connor 5:51
You raised a very good point about the standard of living for the typical person. I’m in Canada, and it’s the same thing here. There’s been so much government printing going on in the last four years, and a point that a lot of people don’t realize is because of this printing that’s been going on, it distorts the value of a lot of our assets. So for example, if I bought a home in 2020 for a million dollars, now my home’s worth $2 million I’m thinking, Oh, great, it’s gone up by a million dollars, but it really hasn’t because of this excess money printing that’s been going on, it’s resulted in the purchasing power of my dollars being cut in half.
Marc Faber 6:29
Yes, to some extent, but in Canada and the US, in some areas, homes have gone up more than the rate of consumer price inflation. But I want to make one thing very clear, the Fed and American economies look at inflation as an increase in the cost of living, say, grocery bills and consumer goods and services and so forth. But I look at inflation also at the increase in the in the value of assets. So I distinguish between consumer good inflation and asset inflation. When consumer goods go up, all the housewives, they complain, when the prices of homes and stocks and bonds and collectibles and baseball cards like the recent one, like the memorably of Babe Ruth was sold recently a t shirt for 23 or 26 million. That is also inflation, but the Fed closes its eyes because it’s an inconvenient inflation which is not obviously visible, so that they don’t count in but the true inflation is actually an increase in the quantity of money and credit, that is inflation. And then you have all the symptoms, commodities go up. Stocks go up. Last year, the price of cocoa went up this year, the price of coke, the coffee, is up 37% but then they make adjustments to the weighting of things. You know, I mean, in the CPI, the Fed calculates that in the last few years, health care costs have come down. What a joke. Everybody can see that the cost of health care is up meaningfully. Everybody can see that except the academics at the Federal Reserve. That upsets me. And what upsets me is that Wall Street economies, they just rubber stamp what the Fed is saying and doing. Because, of course, this financial sector, I also I love inflation, because my assets go up in price. But as a social observer and as an economist and as a historian, I can tell you, the consequences of high inflation on a society are disastrous, disastrous, and inflation is a tax. Nobody should make the mistake to think that it’s anything else. It’s a tax, but it’s an unfair tax on the lower classes of society. That’s why the rich love inflation like me. Tax touches other people,
James Connor 9:31
so the cost of living far exceeds what we’re being paid right now, and this is one of the things that’s really hurting everybody, is that the prices of goods is going up, but our wages are basically the same. When I look at my own personal scenario, I’m making the same that I did 20 years ago, right? And so the purchasing value of my dollars is significantly less. But for somebody who’s in their 20s or 30s, what would you suggest to them? How do they survive this current economic and. RM, and especially when it comes to affordability, because they can’t afford to buy a home.
Marc Faber 10:05
A bank recently made a survey, and the clients of the banks are investors. They expect listen to this returns of 15% per annum. Inflation adjusted over the next 10 years, 15% per annum. The Dow Jones over the last 100 years, has returned something like almost 5% per annum inflation adjusted, you understand the expectations of investors, especially young investors, is completely unrealistic, completely unrealistic. I think people should sit down and consider the possibility based on the following, we had for the last 40 years, since 1981 for bonds and stocks, since 1982 August 82 when the Dow Jones was below 800 we had a huge bull market in stocks And in bonds and in real estate and in everything. This asset inflation, which is especially pronounced in, say, art prices and in collectibles, and also in cryptocurrencies and so forth, this whole asset bubble may deflate. That is a possibility that investors should entertain. And if it deflates, the thinking should be, everything drops 50% How do I only drop 20% because if you, if everybody loses 50% and you only lose 20% you like the king, because you lose less than the other. So in real terms, your wealth increases. And to do that, in my opinion, you have to be light on equities, on stocks, I think financial assets are the most vulnerable, because if you look at the financial market in the say 50, 60, 70s, the real economy is this big and The financial market is tiny, is like this finger. In other words, the real economy was much larger than the financial market, but now the financial market is a huge bubble like this, and the real economy is just like this. And this bubble in assets, in my view, sooner or later, will be deflated. In my view, if Kamala Harris is elected, it will be deflated very badly, but it may not be deflated in nominal terms. You understand, if you print enough money, you can keep the illusion up there, but the reality is that, in real terms, inflation adjusted, your wealth will shrink. I give you an example. The Dow Jones hit almost 1000 in 1964 and then it hit more than 1000 in 1973 and in 68 but in 1982 it was no higher than in 64 in other words, it was at the same level in nominal terms, But inflation adjusted, it was down 70% 70%
James Connor 14:03
and I just want to go by I want to ask you about that before we move on. But I want to go back to my original question. You don’t believe the 2.8% number is real? So you and you alluded to the fact that the US economy is a lot weaker than we’re led to believe. Do you think the US economy is in a recession right now, and if it’s not, is it going to go into one?
Marc Faber 14:25
I’m embarrassed to say that the economy is not in recession for me, because compared to the last few years, now, on my deposits, I get 5% return, and before I got less than 1% so for the rich people like me, the economy is not in recession, but for the lower income recipients say you can structure your society in the 20. 50% lowest income recipients, 40% lowest 60 for the 60% of Americans, their wages and their income inflation adjusted and inflation adjusted by people like John Williams, who actually calculate how much the household spends on this and that and so forth, or the cop box coppoc index in in these terms, 60% of Americans are less well off than their parents were 3040, years ago and the last few years have been disastrous. The Fed will tell you, Oh, now we’ve beaten inflation nonsense. The cost of living today is approximately 30% higher than in 2018 that hasn’t come down. I agree that right now, prices are going up at a lower rate than before, but the prices haven’t come down. The home prices are still high, and you pointed out talked about home prices, the result of high home prices is that most Americans can’t afford to buy them. That is the problem. They can’t even afford to buy the groceries, even I had to cut down on the consumption of beer and cigarettes.
James Connor 16:38
You mentioned that prices are up 30% since 2018 I would argue that’s a conservative number. I would say it’s 50 to 60%
Marc Faber 16:46
yes, you’re right. I mean, you know, I don’t want to destroy the illusions of the Americans about their income, but Irving Fisher, who I regard as one of the most important economists. I’m not talking about this character because he was a president of the eugenic society in America, but I’m talking about his ability as a monetarist and as an economist, not as an investor. He wrote about the monetary illusion. The money illusion, it’s very important to understand when you print money for a while, people feel wealthier and so forth. And they say there is a boom during the process of money printing, but very shortly it changes, and that is the viciousness of inflation you can have for a while, home prices and stocks going up, and then suddenly consumer prices go up, and suddenly commodities go up. Is not and this was observed by Copernicus already, because he was actually he wrote economic books as well. It’s not that the price level goes up evenly in a society. No goes up here and then there and so forth. So members of society get hurt at different times, but the faith one quality they have, they will always protect their friends on Wall Street that you can bet upon what the single worker does in the factory in middle America, they don’t give us sh i t about that, you can be sure.
James Connor 18:36
So let’s talk a little bit of more about the Fed. I know this is one of your favorite topics. So your good friend Jerome Powell was hanging out in Jackson Hole with all his buddies living the high life a taxpayer’s expense, and the message he communicated was that the chain a change in policy is coming, which implies a cut in interest rates at the next meeting in September. Inflation is still running, whatever the number is, let’s just say it’s still running at 3% but so but and we both, we already said that the prices of everything is significantly higher over the last four or five years. But do you think the Fed is making a policy error by cutting rates now? Do you think that they should maybe hang on and leave rates a little bit higher just to keep that economy slowing down a little bit and try to keep inflation under control.
Marc Faber 19:23
I think this is a very intelligent question, and we have to consider that there is no clear cut answer to this question for the real economy, for the people who work every day. They are farmers. They are working grocery stores. They are people that borrowed money to buy a home. They have children that pay fees to send the children to schools or to kindergarten and so forth and so on. For these people in. Interest rates should be cut, but I’ve never seen a central bank cutting interest rates when the stock market is near an all time high, when Bitcoin was moving up strongly, when gold was making new highs, and when there was still a huge quantity of liquidity in the system, there’s no liquidity crisis at the present time, it’s just that the liquidity has begun. I wrote now three reports about turning points in asset markets. Whatever happens, I think we are at a very important juncture where stocks of the popular sectors, semiconductors, the funds, stocks, The Magnificent Seven and so forth, they are going to sleep for the next few years, and they will sleep very deeply, in other words, by going down and other stocks, value stocks will tend to go up. And other markets around the world, notably emerging economies, will start to move up in their performance. Because I just so this is what the history books, financial history book, the bank credit analyst and I followed their services for the last 50 years. It’s a very interesting say. Organization like ALPA and macro, they do macro work. They published a chart showing the market capitalization of The Magnificent Seven stocks and the market cap of all Chinese stocks, including Hong Kong, Magnificent Seven have a higher market value than the market of a country with more than a billion people and some very successful Companies. That’s why the American State Department is always an embargo, these embargoing these companies.
James Connor 22:08
So let’s talk about the financial markets now, in these valuations, we had a pullback in the markets in early August, but it recovered rather quickly. The S&P is up 20% of the year, give or take, the NASDAQ is up the same bitcoin is still up, I think 50 or 60% Nvidia. I got to bring this one up, by the way, just for the sake of our viewers the report today, after the close, and who knows what’s going to happen, but Nvidia is up 150% market caps, $3 trillion it’s trading at I think, 30 or 40 times sales. What’s your take on the valuations you’ve alluded to. You think the market is way overvalued. But why don’t we do a deeper dive here? Tell us what you think about these valuations, and maybe how these valuations compared to 1999 and 2000
Marc Faber 22:57
Well, my view is simple, and I’m not a technology analyst, but in the world of investments, there are some principles that have in the long run, provided higher rates of returns, say Warren Buffett and Charlie Munger, have not been much more intelligent than other people, but they have been more disciplined and more focused, and especially more patient than other people, and their philosophy was always to buy assets when their market price was Selling at the discount of the intrinsic value of these assets. A you have property companies. The property companies, they have a value, and they said net asset value. But the property stocks, they frequently drop way below the value of the existing properties, and at that stage, they become attractive. Similarly, growth stocks, they occasionally become attractive. Like technology stocks in the early 1990s were very cheap, or technology stocks in America in the years 2003 2005 were cheap because investors at the time were focusing on other sectors, and the Nasdaq had declined by 70% but this is not the case now. Now technology stocks must deliver miraculous returns to justify the evaluation, miraculous and I can tell you, in technology and in everything, you’d always be surprised how many new technologies come up and compete with the existing technologies. So I wouldn’t touch a single. A Magnificent Seven stock, not one. I don’t have anyone. But I want to remind my readers that or viewers that when the market, when the asset markets go up, everything goes up, but some assets go up more than others. When the asset markets go down, the tendency is for everything to go down, but with some assets going down much more than others. So now I can argue, well, in this environment, you should own gold, yes, but I tell you, if the asset markets go down meaningfully, gold will probably also go down, but less than the other assets, or value stocks will also go down, but less than the others.
James Connor 25:56
You mentioned earlier that you’re expecting a big pullback in the US financial markets, I think you said 50% what would be the catalyst to take it down.
Marc Faber 26:07
If I knew the catalyst, you would know it as well, and everybody else would know it. We never know precisely in advance what the catalyst could be. But I can tell you, if I look at all the potential wars that we have, I look at say, nobody in the world and even experts in real estate, expected commercial buildings to collapse in the US by 50% nobody expected that. And it happened. And I know many people who are involved in real estate, the billionaires they own properties, incredible quantities. But it happened, and you never know why. And I’m not saying the US market will go down by 50% in nominal terms, but I think it will go down at least by 50% in real terms inflation adjusted, that I am quite sure about minimum when the Japanese market was 50% of the world’s stock market capitalization in 89 I placed many bets, including in put options, that the market in Japan would drop by 50% I was I was Much too conservative. It dropped by 70%
James Connor 27:42
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Okay, so let’s look at the this market compared to the one in 99 in 2000 Okay, so the NASDAQ started to crack, I believe it was March of 2000 and then it proceeded to go down for, I think, 10 years, okay? And it probably lost 70% of its market cap. Do you envision the same sort of thing happening now in the NASDAQ? And when I say the same sort of thing, I mean, will it be a contracted bear market?
Marc Faber 29:19
The US has also a debt problem, as have all the other democracy in the Western world. But the debt problem is, of course, much larger than what is told by the media to the public, because they never talk about the unfunded liabilities. The unfunded liabilities are astronomical, and when you consider the fiscal deficit in the US now, you just look superficially at the policies of Kamala Harris and Donald Trump, both of them will not reduce the fiscal deficit. Rate. In fact, under both, I would expect the deficit to go up for different reasons, but under both, it’s likely to go up and the Fed will now cut rates. The big question is, of course, on the cut of interest rates coming now in September. Is it quarter percent? Half a percent? What will the impact be on the bond market? Because I’m long bonds, and I have been recommending bonds for the last few months because they became very oversold as of April of this year, and so they’ve rallied now 10% long term bonds. But interest rate cuts will undermine my confidence in the bond market, quite frankly, and it undermines my confidence in the US dollar. It’s not that I have a lot of confidence in the US dollar anyway, but as a bond owner and as $1 owner, I want tight money. As a stockholder, I want money printing. You understand now we at the juncture in asset market where different people will benefit, not everybody will benefit. And the Fed is in this very difficult position that they know the markets are high. They know that people can’t afford to buy homes. There’s an affordability issue. Kamala Harris will make the affordability issue, even worse by subsidizing home buyers. I mean, the economic policies of both candidates, in my opinion, are disastrous, but of course, much worse. In the case of Kamala Harris, much worse.
James Connor 31:57
So there’s a couple of things I want to touch on there. First of all, you made mention of the fact when I asked you what the catalyst would be for a pullback in the markets, you’re not too sure. And you touched on commercial real estate. And so I live in the city of Toronto, 5 million people. Even now, it’s been a few years since we got over the pandemic. But even now, there’s only 50 or 60% of workers going to their office in downtown Toronto on a Tuesday, Wednesday or Thursday, on a Monday or Friday. It’s five to 10% and I think it’s like that in most major cities throughout North America. But as a result, a lot of these commercial real estate properties, they’re dropping in value, in some cases dropping significantly. Do you see commercial real estate as being a potential Black Swan?
Marc Faber 32:47
It is a very good issue to discuss, and we could spend a long time about it, because I’ve argued for years and years, and I’ve written a book about the rise in the fall of cities. Because if you travel the world, it’s remarkable how many cities have vanished. They disappeared. They were thriving cities, and how many cities that were the center of the world for a long time. Venice was the commercial center of the world, in the Mediterranean world, not in the Chinese world, but it was very important trading center and cultural center and political center. What is the value of Venice today? It’s a museum, an open air museum. It’s a wonderful city, but it has no political power anymore. Ditto for Rome. Rome controlled most of the world between, say, 200 BC to roughly 300 BC, 80 or 500 years. The Roman Empire then migrated to Byzantine and they controlled a large portion of the world until, 1400 sorry, I get confused with speakers.
James Connor 34:15
So you talked about the election, and what might happen if Harris becomes elected or Trump becomes elected. And so I want to do a deeper dive here. And in my view, regardless of who wins, it’s going to be bad because they Harris wants to spend more money. She’s just going to continue on with what Biden’s done, engage in massive fiscal spending, like Trump wants to cut taxes, so therefore you’re not going to have revenues coming in. He’s hoping that’s going to stimulate the economy, but whatever strategy you take, you’re still going to have an excessive amount of debt, and you’re not going to be servicing the debt. Why do you think if Harris becomes president, why do you think that would be worse for the economy
Marc Faber 34:59
Yes, we have to wait and see. But from what I read so far, and I mean, the the idea to introduce price controls in the year 2024 is absurd. It’s is absurd, because it’s been tried so many times, and each time, the results have been disastrous. You can go on YouTube and just click in the search engine. Milton Friedman, there is an interview of three minutes. Every investor should just listen to this Three Minutes interview. He won’t waste his time for three minutes, and he explains exactly why it doesn’t work. But Kamala Harris, she’s clueless. Clueless. That is the danger of her being president. But I always say, whatever you have in the world today in terms of quality, whether it’s just in Trudeau or in New Zealand, the kick drought, but this Jacinta before, and in Germany, baerbock, Scholz habeck, are all completely ignorant and at the same time arrogant people. That is the danger. They’re arrogance, their interventionist intentions, the market functions based the capitalistic system functions based when it is left alone, and not when politicians who never worked a day in their lives, they never worked in a business, have no clue what hardship the small businessman goes through and it has to fight against the government for everything, because the government officials, they don’t care whether the small businessman survives or not, and the politicians, they don’t care about the small businessman. They care about the rich donors. That is the fact at the Wall Street economies, they will never tell you this, because they are all afraid to lose their jobs. That is the problem. People have become enslaved by the system. They all need their jobs. They are afraid to lose it. They are not free agents anymore, and half of them are paid by the Federal Reserve or bribed by some other organization, so they don’t tell you the truth.
James Connor 37:51
So we spoke a lot about the US, and we can’t talk about North America without talking about Canada. What are your views on Canada?
Marc Faber 38:00
No, I apologize, because I started to rant about the cities and the rise in the fall of cities, so I did not answer your question, but I think it is conceivable that in the new world, people will sit at home in the middle of nowhere and not travel to cities anymore, and they can do their jobs from their their homes. Because at the beginning, I have to say, I underestimated the impact of the internet on the lives of people. But you see, for instance, 30 years ago, it would have been impossible for me, who is involved in finance, to live in Chiang Mai, which is the second largest city in in Thailand, but I wouldn’t have been able to interact with the financial community and transact 30 years ago, but now with the internet and with Zoom, we can talk like this, and I can talk anywhere in the world. I have an office in Hong Kong for administrative issues, but I can be anywhere in the world. And you can be anywhere in the world. And so why would we be in the most expensive cities of the world, in financial centers, and pay high taxes and have all the homeless people in front of our door and cutting off our throat. That is the reality. So it is possible that there is sort of a secular decline in the demand for commercial properties. I mean, in Hong Kong and in Asia less because in Asian cities, people want to go to the office because they live in this small. Conditions in the homes they live in, tiny homes they don’t want to spend the whole day with their wives. I mean, you have to be mad to spend the whole wife with your partner, whether it’s a husband or a wife or whatnot. So people like to go out to an office. I have a house where my wife and daughter stay, and I have an office building next door, and basically my wife is not permitted to come and disturb
James Connor 40:27
Yeah, you raised an interesting point about the internet and the impact it’s had on our lives. And when I look at my kids, because they grew up with an iPad in their hands, the one of the things that really stands out to me is their attention spans, and if they were to watch this interview mark, they would watch it at 1.5 or two times speed. Everything they look at is like contracted and of course, a lot of the content they look at online, whether it’s YouTube or Tiktok or whatever it is, like, everything’s 20 or 30 seconds long.
Marc Faber 41:00
I agree with you, but you can see quite a few books, second library in the other books, and the third library in the attic. But this is clear to me that the world has changed dramatically in terms of, you know, attention, time, of people and what people want. They love Tiktok like I think it’s wonderful, and I try to adapt to this new ideas. But I think in life, is very important to be to have time for yourself to be alone and to look at things and not to look at your mobile. Because if I go, say across the street, and I go to a shop or I go to restaurant or I go to a bar, I’m interested to observe people and what do they do? I do that mostly from the perspective on of an economist. So I want to see, are people in a bar buying champagne for the girls or throwing money away, or are they becoming cautious, you understand, and how do they treat girls and so forth, and other people, this is very important in life, to reflect on things and not be distracted by the noise. And in investing, it is the same. I know so many people. They came to Chiang Mai and they said, Oh, we’re going to day trade and make our life, make our living out of day trading. Not one has made it. Not one. I’m sure they are people that make money out of day trading, but one out of 1000 and I ran a casino Drexel Burnham in Hong Kong in 1978 during the ball, gold, silver and commodities boom. At night, people came to gamble in commodities. They bought and sold commodities from a gallery. Visit this gallery, and they trade. Trade. They traded. Not one made money. At the end, not the one the broker made the money as a broker.
James Connor 43:27
brokers always make money.
Marc Faber 43:29
Yes, yes.
James Connor 43:32
We talked a lot about the US economy, and I think we both agree the US economy is definitely slowing down. I want to ask you about the global economy, and in our previous discussions, we talked about what’s happening in China. And when I look at some of these commodities, like oil, for example, it’s stuck in this very tight range, 70 to $80 a barrel. Copper was at five bucks. It’s now closer to $4 both of these commodities are considered barometers of the economy, and because of their falling performance, do you think the global economy is also getting weaker?
Marc Faber 44:09
I have to say you have very good questions, because again, it’s not simple to answer. If you look at the demand side of the real economy. It is poor. So based on the real economy in the world, which hasn’t recovered back to the 2018 level, I have looked just now because I’m writing a report that I have to write tonight, unfortunately. But what I want to say is, if you look at the statistics of Asian economies, none of them has recovered to the 2018 2019 level. But so the demand side is weak. Also China is weak. The demand in China and this. 50% of demand for commodities in the world, approximately, but the financial markets are in the sky. So what you have a negative impact from the real economy on commodity prices, but a positive impact from the money printing that is still going on, no matter what the Fed tells you, you could have interest rates at 20% and money money wouldn’t be tight. The absolute level of interest rate does tell you nothing about whether money is tight or not. In Turkey, they had 100% interest rates and money was loose in Argentina the same. So we have to be very careful. We have two conflicting forces. The global demand is pushing commodity prices towards downside, but the money printing and the forthcoming money printing, I tell you, the Fed has no other option but to print. They must. They don’t want to destroy the asset markets. So that will be supportive of some commodities. We have some commodities. They are strongly coffee is 37% plus this year.
James Connor 46:16
So let me ask you, how should an investor prepare themselves for what’s happening and what might be coming. You mentioned earlier, you like bonds. What about gold? You touched on gold? Do you still like gold? And if so, where do you see it going?
Marc Faber 46:29
I want to be very clear about the bond position. My bond position is a tactical short term trade. I’m still holding the bonds, but I’m concerned that on rate cuts, the Fed is cutting too soon. They shouldn’t cut from an from a financial point of view and from an inflation point of view. So my bonds, I will reduce the positions within the next two months. But gold I hold, I’ve hold. I’ve been buying and holding gold for the last 40 years. My concern about gold is, you know, these governments are so bad and so arrogant, and they locked in people in their homes, and you couldn’t go out and you had to take vaccines. I mean, in it, when you think about it, I grew up in a school system where people were told, Oh, democracies which means freedom. It’s nonsense. Democracies don’t mean freedom at all. Otherwise we wouldn’t have censorship about everything you say, unbelievable. They locked in a Russian in Paris. It’s been released in the meantime. But just to say that they can come where they lock in Zuckerberg and all these businessmen you know and holding gold, you never know when the government will come and say, We have to collect the gold like they did in 1933
James Connor 48:17
And so if you’re bullish on gold, where do you see it going? It’s currently trading at or near all time highs, 2500 bucks. I’m always asking myself, why isn’t it significantly higher, given the current economic situation and inflation and so many other reasons, but what’s your target price?
Marc Faber 48:33
I have no target and I don’t even value the gold I own, but I believe that if I look at the characters that are in at the Fed and that other central banks, I have no confidence at all in their ability and their willingness to see to it that paper money is a store of value. This is a very important function of money. It should be a store of value. I do not think that any central banker today is like Paul Volcker, who had the courage and the prestige to actually restore paper money as a store of value. I define paper money as a store of value if interest rates in real terms, inflation adjusted, are relatively high. And I regard paper money to be a dishonest currency. If the interest rates are below the rate of inflation, which I think at the present time exists, we have a in. Most markets, we have interest rates that are too low should be higher.
James Connor 50:06
let’s dig into that a little bit. So if the Fed cuts, or they start cutting in September, you think they’re that’s a massive policy error.
Marc Faber 50:15
Well, I’m sorry to say I don’t think that. Since the time of Paul Volcker, the Fed has ever done anything right. But to be fair to Alan Greenspan, who is frequently, say, targeted by critics, Alan Greenspan, he had the courage to increase the fed fund rate in the late 1990s to six and a half percent, and the rate of inflation at that time was much lower than it is now number two. He also increased interest rates too slowly and not enough, but he increased interest rates to five and a half percent in 2007 2008 so after they slashed the interest rates. But I think by then, Mr. Greenspan didn’t care much about it anymore, and listened to Ben Bernanke, who is the money printer per excellence, number one in the world. He went to school in the economic School of Zimbabwe, which was at the time, run by Mister Mugabe. Is there a threat that it’s a school of Mister Bernanke
James Connor 51:36
Marc Is there a threat that interest rates go up in 2025 because the economy heats up again, or inflation takes off again?
Marc Faber 51:44
I urge your viewers to pull up a chart that can go on Google. It interest rates in the 1970s and you will see the first peak of interest rates was in 69 the second one in 1973 and so forth. And after these peaks, interest rates fell by roughly 50% each time, and they kept on going up for 10 years. In my view, we will see in this cycle which interest rates and inflation move in long term cycles. The long term cycle peaked out in terms of interest rates in 81 when 10 years treasuries were over 15% and bottomed out in May, August, 2020 since then, we are in a secular increase in interest rate cycle that may last 20 or 30 years. And in this cycle, the interest rate will go to maybe 100% or 200%
James Connor 52:57
very interesting point and mark before I let you go. As we can see, you have a very extensive library or prolific reader. Are you reading any interesting business books or economic books?
Marc Faber 53:09
I’m reading all the time interesting books. But I have to admit that as you age, reading is more inconvenient as when you’re young, and because I write reports, I like to read nowadays, I had to get used to it before I didn’t like to do it a I had to get used to writing on the computer. I used to write everything by hand and hand it over to an assistant, and she was make the corrections and so forth and type it out afterwards. But now I type everything on the computer. I rely on AutoCorrect, among others, and I also read books because I can copy and paste paragraphs that interest me, and then I file it into files. I have hundreds of files, history of each country and so forth and so on. I spend a lot of time collecting information, but I’ve always done that in my life, partly because I’m interested, and partly because I think that as a human being, you should actually study every day something new. You should also travel to new places and see new things, because you never cease to learn. I mean, I never used mobile phones before, but now in nightclubs, the girls, they don’t speak English, but they can go and type in whatever language is. What they want to tell you, and then they translate, and I can read it here, and then I respond in English here, and they can translate it into the native language and read it. I mean, I think it’s an amazing saying that you can just translate everything here, and I I can send you a picture here. I for me, when I took pictures with a camera in the 1970s and already 60s, I had a Nikon camera, which was actually rather expensive, but for me, I would never have thought it’s possible to transmit a picture through mobile networks. This is something I just didn’t believe it could happen, and Kodak didn’t believe it either, and Polaroid didn’t believe it. That’s why both companies essentially went past.
James Connor 56:02
you’re right. I forgot about Kodak. That used to be like the company when it came to photography.
Marc Faber 56:07
It was there. I mean, we had that white world where I worked in the 70s, an analyst, and she said, the Chinese have a population of this many people, and they will take so and so many pictures over time and so forth, and Kodak will grow at this and this rate and so forth, and Polaroid as well. And then she joined Morgan Stanley. She was a leading photographic analyst Brenda Lee laundry. She was also probably a girlfriend of one of the white wealth partners at the time, but anyway, she was underestimating the demand for pictures, but the technology changed, and that’s why I don’t like to invest in all these technology stocks. They’re like mining stocks. One becomes successful and the 100 fail.
James Connor 57:01
Marc, that was a fascinating discussion, as always. And as we wrap up, if viewers would like to learn more about you or find out about your various services, where can they go?
Marc Faber 57:12
They shouldn’t learn more about me, but I have a website, gloom, boom, doom.com, and I publish two reports per month, one is more expensive and one is a bit less expensive. But I think in about a year’s time, I will just publish one report a month, because the newsletter business is, as you say, people don’t read anymore. But I think for me as an investor, I like to write because it forces me to actually sit down and to think about issues that are important. You understand my readership, mostly very wealthy people and people who are much more capable than I am. So the if I want them to read what I write, it has to be special. That forces me to think about many different things, and not just do blah blah, what CNBC is saying and Fox, but I think you’re making you’re doing a public service that is very important. Because, as you know, the media cancels people all the time. I’ve been canceled. That’s okay. And so the media, like you, allow other people, including my friend Bill Fleckenstein, to actually have a platform and have viewers and express their views which they cannot express on CNN and CNBC and so forth.
James Connor 58:56
Very good points you cannot beat the power of YouTube. Well, listen, Marc once again, thank you very much, and I wish you well.
Marc Faber 59:07
Well, I wish you and your viewers all the best. And I would remember to be prepared for assets markets that would go down, and not to be overly optimistic, because when markets go down, everything goes down.
James Connor 59:28
Great advice once again. Thank you.
Well I hope you enjoyed that discussion with Marc Faber to give you some insights on what might happen in the coming months, if you’re trying to figure out how to prepare for your financial future, consider having a discussion with a wealthion endorsed financial advisor@wealthion.com after providing some basic information, wealthion will put you in touch with that vetted advisor. There’s no obligation to work with any of these advisors that free service that wealthion offers to anyone who has an interest. Don’t forget to subscribe. To our channel wealthion.com and hit that notification button to be kept up to date on upcoming events. Once again, I want to thank you very much for being with us today, and I look forward to seeing you again soon.
