Marc Faber Blog

Tuesday, May 3, 2016

Until recently it was inconceivable that a Western country could go bankrupt

The Swiss fought for independence for the last 800 years and now suddenly they accept everything! They have no fighting spirit anymore!

But let´s assume some countries are ready to leave the euro zone. In the case of Greece this would go along with a major haircut or an outright default...

Yes, but a haircut and the default will occur regardless. I mean, even the IMF accepts the fact that the Greek debt has to be reduced somewhat. What they have done lately is the EU lends money to Greece and Greece then can pay the ECB and the IMF. 

It is a complete joke! It is like if you borrowed money from me, a thousand dollars, after one year you say, Marc look I can´t repay you and I can´t pay the interest, but if you lend me another thousand, then I can pay you the interest on the first thousand. But then you owe me two thousand!

And after the third year you come back and say Marc I´m very sorry, I can´t pay you the two thousand maybe you will lend me another thousand so I can at least pay you the interest on the two thousand! And so the game goes on. When you look at Greece objectively, private investors would never have lent all together 300 billion dollars to Greece, never! But governments are the peoples´ money you understand?

The ECB and the ESM and so forth are other peoples´ money, they don’t care.

It would have huge implications, after all over the last 40-50 years it was inconceivable that a Western country would actually go bankrupt.

Tuesday, April 26, 2016

South East Asia starting to look attractive for investing again

Singapore has a well-diversified economy and on its stock market you are getting a yield of 4%. Compared to cash that´s an attractive alternative. The market could go down, but we could also see potential for it to rise.’

‘Since their high in 2013, valuations have come back down again. The stocks are not so cheap as in 2009 for example but given other investment opportunities, they look attractive.

Tuesday, April 19, 2016

A crisis to Central Banks would threaten the entire system


I'd like to make this observation; say, today, the bonds of Deutsche Bank rally strongly and the stock is up something like 12%. Deutsche Bank announced that they will buy back some bonds. 

Now when you think it through, with whose money? They have a capital shortage, that's why the stock has collapsed by more than 80% since the financial crisis in 2007. 

The reason they can buy back bonds is that someone is lending the money. But why would anyone lend them the money to buy bonds that essentially that have collapsed this year by something like 20, 30%? Who is lending them the money? The central bank of Europe, the ECB, or the Federal Reserve, or someone innocent. What will eventually happen is a crisis that brings down central banks. But I don't know when, but it's going to happen.


Tuesday, April 12, 2016

Rapid growth in Asia in the last few decades specially in China

It's very clear that Asia, with more than 50% of the world's population, has been growing very rapidly in the last 30 to 50 years. China, in particular, over the last 20 years. China, with 1.3 billion people and India, with 1.2 billion people are very important countries, economically. And if you look at the standards of living of people in the west, in other words western Europe, the U.S., and I include Japan, are no longer rising but going down for most people. Whereas in the east, I can say that since I arrived in Asia in 1973, just about everybody enjoys a better standard of living. Just look at, say, Chinese. Until the mid 80's they couldn't travel and then in the early 1990's, there were about 3 to 5 million Chinese travelers overseas. In 2000, there were 10 million Chinese travelers overseas and now there's a little bit less than 120 million Chinese traveling around the world.

So there has been a huge improvement and there has been an increase in their economic power. The Chinese, for some reason, believe in gold. My sense is that the Chinese would like to eventually have the world's dominant currency, in other words, replace the dollar as the reserve currency of the world. Whether they manage it this time, I'm not sure, because right now, China has also some of its own problems. But I'd like to tell you, if I have to choose between the problems of western Europe and the U.S. and China, I'd take the problems of China any time.