Marc Faber on Bloomberg Radio’s ‘Taking Stock’ Program

Marc Faber was interviewed on Bloomberg radio’s ‘Taking stock’ program on 30/8/11. He spoke about international investment markets, regulations, society and much more. It’s well worth a listen if you have 20 minutes to spare. As usual we’ve included a summary for our readers who may not have the time.

 

 

Summary:

 

  • The decision of whether or not Germany will back euro bonds will be a political one. Without such backing, there won’t be any euro bonds and there won’t be further bailouts.
  • It would have been better to let Greece fail two years ago. Each time the end solution is postponed, it becomes more costly.
  • The Euro will probably survive. However, the question is who stays in it; will it end up as a euro for the strong countries or for the weak ones?
  • The removal of Glass-Steagall and the bailout of LTCM gave the green light to financial institutions to lever up. So, basically most financial institutions became poorly run, hugely leveraged hedge funds.
  • This mixture of politics and business has perverted the nature of reward and loss. In the current system, the corrupt grafter is rewarded and the honest guys like Ron Paul are regarded as oddballs to be marginalized!
  • An atmosphere of enormous greed has crept into the financial markets. The fiduciary duty of safeguarding client’s assets is not a top priority at modern-day financial institutions.
  • It’s important to be diversified: 25-35% in equities (especially in EM), 25% in gold, some cash & bonds and maybe 25% in real estate.
  • Interestingly, gold has been rallying at the same time as government bonds. Likewise, they’ve moved lower together also. This seems paradoxical because the Treasury bond is supposed be a ‘deflation asset’ and gold is supposed to be an ‘inflation asset’.
  • Bernanke did the right thing by not announcing QE3. However, the growth in M1 suggests that silent monetization is going on. We’ll probably see some more measures announced at the September FOMC meeting unless economic statistics pick up.
  • In Asia there is more individual and business freedom. The Asian crisis meant that debt levels were purged unlike the Western world.
  • Tensions between India and China are growing. There is increasing unrest in Pakistan. These geopolitical tensions mean that one should be careful about investing in Asia right now.
  • Most financial market firms are just trading against each other and not creating GDP growth. Employment on Wall Street will contract by maybe 30% over the coming years.

See here for our collection of rare historical economic data.

Posted Sep 4, 2011
by | Categories: Other