Marc Faber Interview on Bloomberg: "Bureaucrats in Brussels make US government look like an organization of geniuses"

Marc Faber was on Bloomberg TV on the 10th of May — Via Mish:

Transcript from Bloomberg

Faber on whether he still thinks that profit margins will shrink and record profits seen will be no more for U.S. corporations:

"Yes, if you look at the statements by corporations, it is very clear. Earlier on, you had a commentator who said the exports to Europe from the U.S. are irrelevant. I agree with that. What is relevant are the businesses of American corporations in Europe and the earnings they derive from these businesses. That is definitely slowing down. The revenue growth is slowing down and, in my view, you will have more and more corporations that report earnings that are actually good but they do not exceed expectations…The bottom line is I think the market will have difficulty moving up strongly on less we have a massive QE3 and if it moves here and makes the high above 1422, the second half of the year could witness a crash."

"A crash, like in 1987…because the market would become technically very weak. I would expect the market making a new high. If it happens, it would be a new high with very few stocks pushing up and the majority of stocks have already rolled over. The earnings outlook is not particularly good because most economies in the world are slowing down. People focus on Greece but Greece is completely irrelevant. What is relevant are two countries -- China and India -- 2.5 billion people combined. They are a huge market for goods and these economies are slowing down massively at the present time."

On whether more Fed stimulus will put a floor on the S&P 500 this year:

"Yes, I think we had a rally that began March 2009 at 666 on the S&P. We made an orthodox pop a year ago on May 2, 2011 at 1370. Then we made a new high on April 2 of this year. The new high was not confirmed by the majority of shares and many shares are already down 20% or so and every day, there are shares that are breaking down or they no longer go on good news which is a bad sign. I think maybe we have seen the high from the year unless you get a huge QE3. That may not be forthcoming."

On whether the Fed will issue QE3:

"I think that QE3 will come, but it depends on asset markets. If the S&P dropped here another 100-150 points, I think that QE3 will occur. But if the S&P bounces back and we are above 1400, I think the Fed will essentially be waiting to see how the economy develops. The economy in the U.S. consists of different economies, some of it is very strong. I was in southern California and there the economy is doing fine. In other places, it is not doing fine. It is not universally bad. Compared to other countries, it is actually doing relatively well."

On whether Greece will exit the euro:

"There is a very good chance they will exit the euro and it would have been desirable if the euro countries had kicked out Greece three years ago. It would have saved a lot of agony. As a result of the bailout, the problem has become bigger and bigger and bigger."

On whether policymakers can manage the exit properly:

"I think it would be much better for Greece and the entire euro area if Greece were kicked out. Spain kicked out. Italy out and even France should be out. At the end you just have Germany with the euro. The other countries can have their own currencies and still trade and use the euro as an international currency."

"The bureaucrats in Brussels and the media are brainwashing everybody that if Greece exited the euro, it would be a disaster. My view is the best would be to dissolve the whole euro zone and that the countries would go back to their own currencies and still use the euro as an international currency the way you travel through Latin America and with a dollar you can pay anywhere you with. In my view, that would be the best. These countries that have financial difficulties, you will have to write off their debts and make it difficult for them to access the capital market in the future. Just to keep bailing them out will increase the problem. It will not solve the problem."

On how economic catastrophe can be avoided if the euro is dissolved:

"Explain to me why there would be an economic catastrophe. Many countries have pegged currencies have given up the peg to another currency and it was not a catastrophe. The public has been brainwashed that the breakup of the euro would be a complete disaster when in fact, it may be the solution."

On whether there will be a race to the bottom among various countries to devalue their own currencies if the euro is dissolved:

"I do not have a high opinion of the U.S. government, but the bureaucrats in Brussels make the government in the U.S. look like an organization consisting of geniuses. The bureaucrats in Brussels are completely useless functionaries and they want to maintain their power. They always talk about austerity being bad but if you look at the government expenditures of the EU, in 2000, it was 44% of GDP. Since then, it has grown by 76% under the influence of the Keynesian clowns and now it is 49% of GDP. That is the problem of Europe -- too much government spending and lack of fiscal discipline."

On whether it's a mistake to short the euro:

"I want to make this very clear -- the investment markets may move in different directions than the economic reality because if you print money. That's why in the Bloomberg poll, Mr. Bernanke is viewed so favorably because fund managers and analysts and strategists, they are only interested in having stocks up so their earnings increase and their bonus pool increases. But in reality, the economy can go downhill and stocks can go up just because of money printing and in Europe, the ECB has proven now that they are very good money printers."

On where to invest in Europe:

"Actually, usually when socialists come in or there is a crisis such as we have in Greece, it occurs usually near market lows. If someone really wanted to take speculative positions, he should look at quality non- financial stocks in countries like Spain, Italy, France, and Greece. I think rebound is coming. The market on a short-term basis is oversold. But if you look at the market action -- first of all, we made a low on the S&P last October at 1074. We went to 1422. The market is down from 1422 to less than 1360. The whole world is screaming we're in a bear market. This is a minor correction. I think it may become a more serious correction as the technical picture of the market has deteriorated very badly and as the S&P made a new high this year on April 2nd, all the European markets are lower than they were a year ago."

Two Gems Found in a Pile of Garbage — Felix Zulauf and Marc Faber Interviews on KWN

Before I start, I wanted to apologise because this post starts by a big rant, and that I got really emotional after listening for these interviews the whole afternoon, playing catch up.

King World News — KWN as they call it — is a well known lair for crazy lunatics forecasting gold 5 digits, silver $300 or $500 and talking about hyperinflation.

Listening to these interviews make me lose a lot of hair as the likes of John Embry or Eric Sprott are stunningly ignorant of the monetary system and the inner working of financial markets. Generally speaking, any of the people interviewed come with never lower than +100% on any forecast, but it's better if the forecast is about quintupling or more.

Unfortunately, even people I highly regarding have came up to become very disappointing, such as James Dines — Mr. "You've Heard it By Me First", Mr. "I'm the original gold bug". Not only was he happy to discuss about Hyperinflation in the US, but he also did say that at this time, he was the first one to forecast it, and that they heard it for the first time just now — link to full interview as MP3.

So how refreshing was it when I heard Felix Zulauf — on the 16th of July — on this 20 min long interview — link to full interview as MP3 — discuss his opinion the following point — dismissing most of the ridiculously biases questions that Eric King asks him:

• Gold, gold stocks and mining shares.
• Deflation (and not inflation) is what we're going to see — answering King's question about "the ocean of money that is printed" and the "Weimar republic like inflation that will happen in the US".
• The consensus of economic acceleration after this soft patch is all wrong. The whole economy will be in recession by the 4th quarter.
• Was expecting the market to tumble to 1,100 by end of summer (wow! that's exactly were we are at the moment).
• The bond market to make a new major move, to new lows, in the 2% for the 10Y (wow! exactly what happened!) although he doesn't mean that someone should go and invest in long term bonds for the long term.
• The US dollar could look strong for a while [...] The USD will look good during the next 6 months or so — I'm expecting this to happen, it's time he get this one right as well.
• Quote: We are not there yet. The situation of highly inflationary policy in an environment of extremely deflationary pressure by too much debt in the system will continue to keep the CPI at a benign level and interest rates at the very low range historically speaking. It could last for year. It's only later that inflation could happen. — And then Eric King talks about the 1970 and massive inflation again... Deafen by his greed for gold, unable to see or hear the reality around him.

I will definitely follow Felix Zulauf from now on. What a great mind. I'm not sure he'll get invited on this show though.

Next is Marc Faber — link to full interview as MP3 file — who I very much respect, and is one of my heroes, even though he get the inflation-deflation debate from the wrong angle — only equal to himself, it's a very interesting interview and makes  a strong case about investing in gold bullion instead of gold shares. Something many of the crazy lunatics interviewed on KWN do not understand and keep on forecasting a doubling or tripling. I won't discuss into as much details this interview, but I recommend listening to it anyway.

Marc Faber Interviews on CNBC and BloombergTV

Marc Faber, aka Dr Doom, is making lots of interesting comments.

On the 2nd of August:
He is "bearish about everything". He remains an inflationist, so still prefers precious metals and equities. "I would prepare for the worst". "You don't won't to be in cash and US treasury bonds."

In the US, they should fire half of the government, including the President.

Correction is due in the gold market.

On the 5th of August:
Markes are extremely oversold, and a rebound will happen today or tomorrow. But the technical damage is too much. 

He's aiming at 1050 - 1100 on the S&P and would be using rebounds as a selling opportunity.

5th of August on Bloomberg:
We're down 10%. The whole world is mad. Investors don't understand that markets are volatile [...].
I think we have seen the highs for the year.[...] We can have a snap back rally. [...] We'll go down to 1050-1100 but I can already smell QE3. [...] We'll see if Mr Bernanke is a true money printer or just an amateur

David Rosenberg turns Bullish ?!

In April 2010, just before the biggest decline in the biggest bear market rally since the Great Depression, Jeremy Grantham, a very well respected portfolio manager, wrote in his quarterly letter that — in summary — no matter what, markets will keep on rising, and he had reverted his bearish stance to post this over bullish report, and showing that he is capitulating with the trend. I spotted this at that time as a great contrarian opportunity — and it turned out to be one.

Just a few days ago, a long term bear — probably the longest term bear ever, excluding Robert Prechter — turned his head upside down to become a bull. Here's another Bull, disguised in a Bear costume, pretending that there are fundamental and technical reasons for his bullish standpoint.

To be honest, I believe that he had to do this as his firm needs to make money, and that having a bear as a chief strategist is not very profitable indeed. But then one would have to question his integrity, and I would certainly not be that person.

The deflationalist has also given up on the US dollar, and joins the 99% person of the crowd who believes that this poorly managed, highly despised currency will collapse soon.

CNBC — If the bull market will end when the last grizzled bear comes out of his den and comes to the table, then hold onto your portfolio, because it may well be dinnertime.

David Rosenberg, the curmudgeonly senior strategist and economist at Gluskin Sheff in Toronto, told clients Wednesday in his daily newsletter that he’s finally given up his long-held position that the market is heading for a thud, if not an all-out crash.

Even as the major averages have risen 90 percent off their March 2009 lows, Rosenberg hasn’t been convinced, arguing that the economy is still too weak and investor sentiment way too giddy to justify such a relentless rally.

No more.

“This is not about throwing in the towel,” he writes, “it is an acknowledgement of what the market internals are flashing at the current time from a purely tactical and technical standpoint.”

For more than two years now Rosenberg has been advising clients not to trust the rally, defending bonds against “inflationistas” and warning that deflation remains the far greater danger. 

But he now marvels—somewhat incredulously, to be sure—at how investors are dispelling concerns over downward GDP revisions, soaring commodity prices, supply disruptions after the Japan disaster and looming European debt default risks.

“The (US dollar) is on a one-way ticket south and so far has been orderly—will that be sustained is anyone’s guess,” he writes. “For now it is being viewed as fodder for the global liquidity and risk-on trades.”
[...]
But mostly, he sees the market trending toward an “important technical signpost” which he says is a “Holy Grail” that entails “new highs led by higher volume.”
[...]
These moments when major market bears give it up are often the signs of a peak in sentiment, but anyone so far who has tried to step in front of this rally has gotten crushed.

“Market internals are too strong to ignore right now—NYSE advancers beat decliners by a 3-to-1 ratio (Tuesday); the Dow transports soared 1.9%; and the small caps beat their major benchmarks,” Rosenberg says. “My overall macro concerns have not gone away, but these market facts on the ground are tough to ignore.”

I would side with Marc Faber on this one:

The markets may be giddy about stocks hitting new highs, but contrarian investor Marc Faber is having nothing of this. He is concerned that stocks will fall sharply in May and that the recent breakout in stocks will prove to be trap for the bulls. The markets are due for a correction and the technicals point to a weak market. In particular, Faber points to the decline in new 52 week highs as evidence of an unhealthy internal market.

Thanks to my friend SS who reported this.

Marc Faber believes we won't see new highs on the S&P 500

Marc Faber was interviewed on Wall Street Pit, here's a quote of the most important part of this interview:

"We peaked out on the S&P on February 18th at 1344 and usually in April we have seasonal strength but I think it’s likely that the S&P will not be able to make a new high and then we will have a more significant setback in May, June. I think the Euro, contrary to expectations has rallied. I think what we could see in the next few months a rebound of the U.S. Dollar, weakness in asset markets, correction in commodities, and maybe a rebound in U.S. bonds. We live in very volatile times; a correction could be 10%, 20%. I would on any weakness accumulate gold.”

Basically, this means: get ready for a big dollar rally, leading to a fall of every other asset class but treasuries.

Marc Faber Goes Uber Bullish on Japan and Calls a "Lifetime Buying Opportunity" — I respectfully disagree

Marc Faber made a short appearance on TechTicker today:

legendary investor Marc Faber, the author of the Gloom Boom & Doom report, who gave them a big headline: Faber called the sell-off in global markets a "lifetime buying opportunity" in Japan.

Faber, while reiterating a positive stance on Japanese equities, also told Macke and Nesto that U.S. markets could drop as much as 20% to 30% before becoming attractive on a valuation basis.

Well, Marc Faber has already mentioned he is  very bullish on Japanese and so has Mish, with whom I have respectfully been in disagreement.

There are several reasons for that.

The first is that the earthquake, tsunami and nuclear reactors disasters which have propelled the current sell-off in Japan are just — and it sad and probably outrageous to say it this way — rationalisation for a falling markets that was quite overdue for a very big correction. I have been warning about over-bullishness for quite some, and the Nikkei and DSI chart below — published by ElliottWave on the 3rd of March prior to the disasters — shows that the the level of bullishness was extreme and that a sell off was in the cards irrelevant of the earthquake:

Then, on the short term basis, I expect the dollar to rally and the equity markets all around the world to correct. I do not think that the Japanese market will be able to avoid the correction, given the 100% correlation we have seen across all asset classes since the bottom in March 2009.

Finally, the Yen being so high, there's a fair chance to make losses due to FX risk on the positions, or else that exports in Japan fall.

And I haven't even mentioned the longer term risk of Japan defaulting — which will probably happen a lot sooner than anyone expect — and the current hikes in sales taxes etc. that they have in the deck.

Marc Faber on Obama, Bernanke and Governments in General [Updated]

Marc Faber was interviewed on Bloomberg TV on the 25th of Jan. As usual, he doesn't try to be politically correct, and tells very plainly what he thinks about Obama, Bernanke, and the corruption of any centralized government with lots of humor. Very refreshing.

This 11 min interview is a must watch and is available on YouTube.

[Update:] Another interview, on CNBC this time (embedded below, YouTube link) , during the forum in Russia, where Marc Faber gives his economic and markets outlook: an artificial recovery driven by ultra-expansionary monetary and fiscal stimulus that will lead to further issues down the road. This interview is making some buzz because of the statement Marc Faber gives twice in the course of a few minutes: "Bernanke is liar". 

Marc Faber also explains why rising food prices will lead to a lot of unrest in emerging economies and the poorest countries, and he is very concerned that this will happen in Pakistan. 

Overbullishness — Marc Faber weights in

Could this be said in any better way?

But what disturbs me now is that in late August, sentiment was very negative worldwide and people said that Dow would drop to 1000 and so on. Suddenly now, the consensus is that you have to be in equities, you have to be in gold, you have to be in assets, because central banks around the world will print money. That’s correct, they will print money.

But sentiment has become so universally bullish that about all assets, especially emerging economies — in US dollar terms — are up. This year, the Indian market is already up 19%, Malaysia 28%, and the Philippines, Indonesia and Thailand each over 40%.

We already have big moves and I see all brokers upgrading the earnings estimates and so forth. So, I become a little bit apprehensive about this universal bullishness. I would rather think that after a strong month of September, when everybody was expecting September to be a horrible month, October and November may be bad months.

In the past, October has frequently been a disastrous month, like we had the October 1987 crash, we had the late September-early October 1929 crisis. In 1976 and 1978, we had very bad months in October and November. So, who knows, out of this present bullishness, we could have some kind of a sharp correction developing.

in Economic Times, quoted from this unofficial blog.

Marc Faber one-hour presentation at the Mises Circle in Manhattan

Presentation by Marc Faber, titled Mirror, Mirror on the Wall, When is the Next AIG to Fall?

Great one as usual, and worth your time.

Mish and Marc Faber interviewed together on TechTicker

Not much to add, except that Marc is still inflationist and the Mish is among the handful people deflationist (and so I am).

Is China going to crash?

Equity markets might be finally and hopefully toping, and China is leading this toping mecanism. Plus, China is finally reducing the amount of credit it's making available to the public and corporations (read: deflation has started), I have started to document myself

I have been documenting a lot about China, and from my point of view, China is going to have a major major slow down, or, even more likely a crash. It also constitute a great contrarian play.

On top of that, there's a fantastic 30 min interview of Marc Faber on Asia Confidential (available on YouTube). He discusses many things during the interview, and as usual, I very much enjoy listening to his ideas and points. He also believes China might have a crash.

"Is China going to crash?" is not the right question. One should ask: "When will China crash?"

Black Monday

Just a quick post about the Black Monday 1987, because Monday is going to be the 19th of October 2009, so it's the 22nd anniversary of the crash.

In finance, Black Monday refers to Monday, October 19, 1987, when stock markets around the world crashed, shedding a huge value in a very short time. The crash began in Hong Kong, spread west through international time zones to Europe, hitting the United States after other markets had already declined by a significant margin. The Dow Jones Industrial Average (DJIA) dropped by 508 points to 1738.74 (22.61%).

By the end of October, stock markets in Hong Kong had fallen 45.8%, Australia 41.8%, Spain 31%, the United Kingdom 26.4%, the United States 22.68%, and Canada 22.5%. New Zealand's market was hit especially hard, falling about 60% from its 1987 peak, and taking several years to recover. (Wikipedia)

Where Wikipedia gets it wrong:

A degree of mystery is associated with the 1987 crash, and it has been labeled as a black swan event. Important assumptions concerning human rationality, the efficient market hypothesis, and economic equilibrium were brought into question by the event. Debate as to the cause of the crash still continues many years after the event, with no firm conclusions reached.

It was actually not a black swan event at all, since Marc Faber successfully and accurately predicted it several months before it actually occurred.

Now I am wondering if it is possible that we assist to the same kind of event since we have reached such an extreme level of overvaluation and so much complacency in the markets...

When contrarians become contrarian indicators

It looks like all the contrarians have turned bullish on stocks, for various reasons. But when contrarians draw the same conclusions as mainstream, they are not contrarians anymore, they become merely contrarian indicators for true contrarians. And there aren't so many of this latter kind left (Robert Prechter and Jim Rogers being the mainstream contrarians not to have fallen into the trap so far).

- Marc Faber, my hero, is forecasting Armageddon but still suggesting to buy stocks (though for his defense, his forecast is for the next 5 to 10 years, not short term).

- Bill Fleckenstein (who I highly respect) is extremely bullish on Gold and also thinks super-inflation is around and hence he doesn't want to fight Bernanke's printing presses.

- Jim Grant (highly notorious, but I don't like he's positions) has turned from a perma-bear to a bull after a 60% rally in the markets

As Bill Bonner put it in a recent post, "even before the rally began, Prechter foretold its story" :

“Regardless of extent, it should generate feelings of optimism. At its peak, the President’s popularity will be higher, the government will be taking credit for successfully bailing out the economy, the fed will appear to have saved the banking system and investors will be convinced that the bear market is behind us.”

It's just a matter of waiting and holding now...

Marc Faber identifies the rotten apples in the system

Sometimes, I like to go back in time, and listen to what was said now with the benefit of hindsight. For this exercise, Marc Faber is a fantastic use case.

On an interview, on the 7th of April 2009, at around 7min20 (YouTube link), he mentioned the market rebound, then a small 5 to 10% decline, followed by another rally upleg.

As an anecdote, this quote is fantastic:
[...] Tim Geithner wants to identify the bad and rotten apples in the system. Well, he should buy a mirror and stand in front the mirror himself with Mr Ben Bernanke and Mr Larry Summers. There you have the rotten apples.

Geithner, Bernanke and Summers are the rotten apples, says Marc Faber

Marc Faber during this interview on Bloomberg TV was asked how he would see the end game for the zombie banks and he replied very straightforwardly, as usual: "Tim Geithner who wants to identify the bad and the rotten apples in the system. Well, he should buy a mirror and stand in front of the mirror himself with Mr Ben Bernanke and Mr Larry Summers. There you have the rotten apples." (set the cursor to 7 min 10s).

Marc Faber is growing hashish in Thailand

This is a great interview of Marc Faber on Bloomberg (available on YouTube) where he talks about various subjects. The two points that stuck me are the following:

• He sees war and terrorism as the way out of the current crisis as irresponsible gouvernment are not willing to take drastic measures and let the market clear out...
• He is growing hasish in this farmlands in Thailand. Check the video at about 5min25.

"We have some farmlands in New Zealand, and obviously there, we don't grow hasish. But in the north of Thailand, I have some lands and we grow some good stuff.
- Good stuff?
- Yes good stuff. It makes you very happy."

Good work Marc!