Marc Faber, renowned investor and publisher of Gloom, Boom & Doom Report, appeared on CNBC late last week where he discussed the market rallies, the bond market, central banks, inflation and bullion. Faber warned viewers “that markets will punish central banks at some stage through an accident.”
Reiterating his stances he has espoused for several years, Faber argued that printing money (inflation) hurts the even flow of money in an economy. When this transpires, it only transfers to some individuals and some sectors – an idea vicariously discussed in Henry Hazlitt’s “What You Should Know About Inflation” – and since the stock and bond markets have been going up, the money has flowed to equities as of late as well as bonds late last year.
“Either the bonds market will collapse, bonds have been actually very weak considering the unlimited quantitative easing of the Fed,” explained Faber, an ardent critic of the Federal Reserve. “The other thing is that stocks could go into a bubble stage.”
Faber would then promote gold as being part of his portfolio, while also noting that he thinks mining stocks are very attractive, especially in China, Ukraine and Vietnam.
“I buy gold because I’m fearful that we will still have a systemic crisis, that we will have wars and so forth,” added Faber, who asked host Maria Baritromo if she owned any gold in which she responded that she has jewellery and earrings.
“Sorry to say you are in great danger because you don’t own any gold, but you have a golden personality!”
Although he listed Asia and some parts of Eastern Europe as good areas to buy stocks, Faber said global stocks are becoming too expensive. In Asia, for instance, markets are up roughly 250 percent from the lows. However, Faber foresees a tremendous opportunity for investors because a crash in the market will take place soon, which is something he is really happy about.
“For the first time in four years, since the lows in March 2009, I love this market because the higher it goes the more likely we will have a nice crash, a big time crash,” stated Faber. “A year ago, the mood in Europe (owing to the euro zone debt crisis) was horrible and nobody could see how on earth stocks could go up. Now since May 2012, less than a year ago, Portugal, Spain, Italy, France, are up between 30 and 40 percent and Greece has doubled; the stock market in Greece has doubled. So you need to buy stocks when there’s no reason to buy them.”
This isn’t the first time that Faber has warned of severe drops in the markets. In November, Economic Collapse News reported that Faber told CNBC viewers that “there will be pain and there will be very substantial pain.”
One of the reasons why he believes the global economy would hardly grow in 2013 is because of too much debt. He stated that the debt has to go somewhere and eventually be paid off or it will slow down economic growth, adding that the world lived beyond its means from 1980 to 2007.
Even though it may seem the United States wants to avoid its debt problem, the national debt continues to balloon and is still projected to reach greater levels. The sum is already astronomical, but the interest is still rather modest. The interest rate on the national debt will inevitably rise from its current three percent and continue to escalate – in the 1990s it was in the low-teens. This means, a significant percentage of the federal government’s budget will be consumed by interest.
Furthermore, each time a CNBC guest appears on the show and advocates investors to put their money into gold and other precious metals, the hosts seem to undermine that investment strategy, akin to whenever Peter Schiff, president of Euro Pacific Capital, speaks on any of the network’s shows.
The figures usually disprove the hosts’ or analysts’ arguments: gold is up from $238 in 2000 to $$1,663 in 2013, there has been a paucity of major gold discoveries for close to a decade, central banks are buying gold and increasing their gold reserves, especially China, Brazil, Russia and India, and gold only accounts for about two percent of all portfolios.