Friday, August 30, 2013

Cure for Indian Rupee

The Indian government has created a huge problem, as it has under-reported the rate of increase in the cost-of-living or inflation. And by not measuring inflation properly, the government has kept interest rates negative in real terms. What the government can do or should do is, though it can be painful, it should increase rates substantially, stabilize the rupee. To increase rates would imply lot of pain in the economy temporarily, but in the long term, it would be desirable.

Thursday, August 29, 2013

Dr Faber not optimistic about India

I am not very optimistic about India on the macroeconomic front, and it has to do with the government policies. The economic policies of the government are by and large a disaster; the government could have done more. The government in India, through its incredible bureaucracy, has retarded economic growth in the last 20-30 years by at least 3% per annum in real terms. It's a miracle that the Indian economy has performed well, considering the quality of its government.

Wednesday, August 28, 2013

So-called Keynesian policies

One of the goals of so-called Keynesian policies would be to stabilize economic activity. In other words, you don’t have huge business cycle fluctuations and you have relative price stability. But please, tell me, where is economic stability nowadays, and where is price stability? Oil prices move up and down like crazy, home prices move up and down like crazy, and the stock market does the same. There’s far less stability than there ever was before, complementary of the Federal Reserve and essentially of the US Treasuries fiscal policies.

Tuesday, August 27, 2013

Unrealistic expectations about returns from the Indian markets

Over the past few years, investors have built exaggerated, unrealistic expectations about returns from the Indian markets. If you look at India's macro economy, it has not done well compared to China. But on the corporate level, many Indian companies have done well and have rewarded shareholders. If you ask me,

India as an investment destination, there are still opportunities. I have maintained my outlook that in 2013 the markets will not perform well because they had a strong rebound from the 2008 lows to hit the 2011 peak. After that, economic conditions began to disappoint investors, but it has not disappointed me because I expected it to worsen.

Monday, August 26, 2013

Serious discussion

I don’t think they will come to their senses for the simple reason that insane people don’t realize that they are insane. They think they’re doing a great job. I talk to these people from time to time, and I know some of them. If you have a serious discussion with them, they lean towards the view, “Had we not implemented the QE programs, we would be in the greatest depression ever, so we’ve done a fantastic job.” The view is also, “If anything, we need to do more, not less.”

Friday, August 23, 2013

Every inflation leads to delfation

At some stage, every inflation leads to deflation in that particular sector, whether it’s housing, the NASDAQ, the NIKKEI, or whatever it is. I believe one day, paper money and financial assets will be destroyed, but I’m not saying tomorrow. Maybe it happens from a market capitalization that is much higher.

Someone said to me, “The DOW Jones will go to 100,000.” Yeah, it’s possible. If you print money, everything is possible.

Thursday, August 22, 2013

Dont know the end game

 I don’t know what the end game will be, and whether we’ll still be alive or whether we’ll be in wars or in revolutions as the worst. That’s why I want to hold some physical gold. There’s no point to hold physical gold somewhere in the sky. I would hold some physical gold in my proximity. In other words, I own some in Thailand and some in Hong Kong. I still have too much in Europe, but over time, I will move it to Asia.

Wednesday, August 21, 2013

Gold correction was deeper than expected

To tell you the truth, I was expecting gold to be in a correcting mode after 2011, but I didn’t expect the price to come down this much because had I expected it to happen and had I been sure about it happening, I probably would have sold my gold and bought it back more recently. Equally, I have an asset allocation and I don’t feel comfortable holding cash with banks. I don’t feel comfortable with any paper currencies, so at all times, I want to have some of my money in metals.

Whether it will go lower or not, that I don’t know. Actually, my physical gold, I don’t even value. I know that I have it, and whether it goes up or not, it doesn’t change the fact of my decision to own it or to sell it. My decision is to at all times hold gold.

Tuesday, August 20, 2013

Convinced it will end badly one day

I’m convinced. It will end very badly. It doesn’t mean it has to be tomorrow, you understand. I’m a car mechanic and I tell you, “Look, your car has several problems.” In a week’s time, you’re telling me, “Look, I’ve been driving and it still works perfectly fine.” The car may still work for another year, or two years, or three years, and one day, you have a crash. And then, you will think back, “Maybe back then I should have repaired my car.”

The problem is the car mechanic. He’s not completely stupid like a central banker. He knows how to repair a car, but the central bankers don’t know how to repair the complex financial system we have today.

Monday, August 19, 2013

Money printing created financial wealth, impoverished the working class

For investors, Bernanke comes out very well as the man who saved the financial system. Why did we have a financial crisis in the first place? Because the central bankers, mostly the Fed in the US but also the Bank of England and incidentally, also in Canada and Australia, they paid no attention to excessive credit growth, and so you end up with an over-leveraged system and with boundless speculation in financial assets.

Then the crisis happens and they print money, and everybody applauds. Of course, they applaud the funds manager because the water level in the bathtub has increased by money printing. The asset values of portfolios go up and the fees fund managers earn also go up. So they’re all very happy.

But the man on the street, he’s a little bit less happy because his wage is going up less than the cost of living increases. In real terms, he’s losing out. That’s why, if you look at, say, corporate profits, they are extremely elevated in the United States as a percent of the economy.

On the other hand, wages and salaries as a percent of the economy are at record lows. So you have, essentially, through money printing, created financial wealth and impoverished the working class, like you and me.

Sunday, August 18, 2013

How gold can be confiscated ?

They won’t confiscate it and not pay anything. That would be, I guess, completely against the law. But say the price today, say around $1,200-something, then what they can do is they could essentially say, “Okay. We collect all the gold and pay $800.” More likely is that they would first try to depress it to $800 and then do it, then they’ll pay $800. Once they collect all the gold, like in 1933, they reevaluate to say, $10,000.

Friday, August 16, 2013

A financial collapse of dimensions

 Like the aristocracy in Europe in the 18th Century, they didn’t give up just the power. They kept that power, same as the aristocracy in Russia in the 19th Century. They didn’t give up the power. Eventually, they were slaughtered. I believe what will eventually happen is that you have a financial collapse of dimensions so bankers can’t do anything.

Thursday, August 15, 2013

Marc Faber comments on Eric Sprott and Gold

In the Western world, the central banks and the academics hate gold because they personally never owned it. Especially since 1999, despite the recent setback, gold has significantly outperformed equities. The central bankers and the academics at universities that are neo-Keynesian, in other words, the idea of more and more government intervention and more and more expansionary fiscal and monetary measures, these people hate gold. If they have the opportunity to take it away, especially if, as Eric Sprott maintains, that the gold is not even there, they would have an incentive to buy the gold at the low level, once they collect all the gold, reevaluate by ten times.

Wednesday, August 14, 2013

I dont trust any government

I don’t trust any government, period. The debts are too burdensome for the system, and then it leads to all kinds of symptoms. In other words, if you can’t pay your debts, you may print money, or you default, or you increase taxation, or you take things away from the well-to-do people, the evil people that make so much money. Well, the Federal Reserve enables them to make so much money. That is a key difference. They didn’t abuse the system; they just took advantage of a situation of money printing so their wealth increased more than the wealth of the middle class and the lower classes.

In the Western world, they’ll go after these well-to-do people and people that own gold. In Asia, I’m not so sure this will happen because Asia is increasingly coming under the umbrella, our own umbrella of China. The Chinese government has actually encouraged people to accumulate gold, and themselves, they are accumulating gold.

Tuesday, August 13, 2013

Worst case scenario and gold confiscation

Let’s take the worst-case scenario. We have either a social unrest, a revolution, or war. Governments decide, “Oh, the price of gold is going up substantially, let’s take it away from people.” In other words, you expropriate it. I think it will, at that stage, not matter very much where you hold your gold, except it may matter where you hold your gold in terms of sovereign state.

My sense is that the Asian countries are less likely to take the gold away than Western countries.

Monday, August 12, 2013

One possible reason for price manipulation

One of the reasons I would be inclined to believe in some manipulation would be, let’s say you’re a central bank, like the Fed. You don’t have the gold that you declared and you know that you have to buy it back at some point. Then, you may wish to manipulate the price down until you can cover your short position in gold at a reasonable cost. There will still be losses, but you can cover them at a reasonable cost. That is really the only reason I could see why a central bank would want to depress the price of gold.

Friday, August 9, 2013

Marc Faber aware of Eric Sprott

I’m aware of some people, including Eric Sprott, that believe that there is manipulation in the system. Where I tend to agree with him is that maybe central banks don’t have all the gold they claim they have, because something must be funny.

The Germans have asked for the gold to be returned to Germany. Why would it take eight years to do that? There’s no reason. You can do it in three months.

Thursday, August 8, 2013

Dont believe the governments

Worldwide, you shouldn’t believe governments, period. I think you should believe market action. When markets go up, they give you a message, and when the markets go down, they give you a message.

The only problem nowadays is that the messages from markets have been distorted by very significant government intervention into the free market, so you can’t rely on the information provided by the market participants any longer.

Wednesday, August 7, 2013

Holding on to my gold

By the way, I would say maybe in the fall of 2011, when gold prices reached $1,921 an ounce in September 2011, I should have issued a sell recommendation and said, “Get out of gold and get into cash or the SNP.”

In general, I think that we are still in massive money printing and the worse the economy becomes, the more money printing there will be. I’m holding onto my gold. As I explained before, I bought some gold at $1,300 an ounce and I bought some more gold at $1,200 an ounce.

The Rejection of Personal Responsibility leads to the Submission to the Authority of the States

Much of public policy these days seems designed to eliminate personal responsibility. The widespread acceptance by intellectuals of the belief that government should play a larger role in economic and private affairs; [is] the triumph … of the philosophy of the welfare state.

Friedman opined that “today, governmental measures constitute the major impediments to economic growth in the United States … What we urgently need, for both economic stability and growth is a reduction of government intervention not an increase…"


Tuesday, August 6, 2013

Read between lines of China statistics

If you read between the lines of the hard-core statistics in China, in my view, they don’t match with the public statistics about GDP growth. The economy is growing at say, maximum 4 percent per annum, not 7.5 percent or 7.7 or 7.6 percent.

Monday, August 5, 2013

Fed statements are vague

When you read their[Fed] statements, they[the Fed] are completely confused and very vague. In other words, all is data-driven. If the stock market dropped ten, 20 percent, for sure there would be more QE programs.

On the other hand, if the economy is very strong, they may taper off somewhat. You get the picture. The worse the situation is in the US, whether regarding asset markets or the economy, the more QE there will be. The Fed doesn’t know anything else.

Friday, August 2, 2013

Think the fed is scratching their heads

Having printed this much money, and we are essentially in QE4 and QE unlimited, the results have been very dismal. I think the Fed is scratching their head at the present time and can’t believe that when their objective was actually to lower interest rates from July 25 of last year, the ten year Treasury note yield has gone up from roughly 1.4% to, a few days ago, 2.7%.

We have an almost doubling of the interest rate because of their QE programs. I think that really makes them scratch their heads and wonder, “What did we do wrong? What do we need to do? Do we taper, or do we have to increase asset purchases?”

Thursday, August 1, 2013

The Fed is clueless

I think that the Fed is completely clueless. It is composed by a group of academics. Most of them, or I would say 95 percent, have never worked in a regular job in their lives. They all went to universities and then they went to the Fed or other financial institutions. They have no clue what makes an economy move.