Marc Faber: Countries Unwise to Let Antagonistic U.S. Hold Their Gold / Commodities / Gold and Silver 2018
Mike Gleason: It is my privilege now to be joined by a man who needs little introduction,Marc Faber, editor of The Gloom, Boom andDoom Report. Dr. Faber has been a long-time guest on financial showsthroughout the world, and is a well-known Austrian economist and investmentadvisor, and it's a tremendous honor to have him on with us today.
Dr. Faber, thanks so muchfor joining us again, and, how are you?
Marc Faber: Well, it's my pleasureto be on your show. Thank you.
Mike Gleason: Let's start out here with the equities Marc. Now the U.S. stock markets peakedin late January and made their lows for the 
year in early February. Stocks havebeen trading in a range since but are currently pushing back towards those lowsas volatility has certainly picked up. If you had to guess about which way themarkets are likely to break from here, what would it be, and do you think we'veseen the top for 2018 or can speculators keep pushing the markets higher for abit longer?
Marc Faber: That's a good questionand I think everybody's interested in the answers and everybody has a differentview, but I have maintained that the January 26th high for the S&P up 2,872was like a mirror image of the low on March 6th, 2009 when the S&P was at666. At that time, everybody was bearish and leading strategy and I don't wantto name who, but they were predicting for the S&P to fall to 400. And whathappened is that, because sentiment was so negative, and the market was sooversold, themarket turned around andactually on very poor earnings, started to go up. And now, we have, in January,a high, when everybody felt that the market would go higher and what thenhappened is that on good earnings, stocks didn't move up, but started to godown.
So, I think we are in asituation where it is likely, it's not yet a hundred percent sure, in order toget a clearer picture, if a major bear market has started, we would have tomake a low below the February low, but that hasn't happened yet. But looking atthe market and the market action and the momentum and the number of stock thatare actually making new lows, I'd say there is a fair probability that themarket will disappoint point very badly.
Mike Gleason: Dr. Faber, it seems to us that the fate of precious metals markets is tiedpretty closely to stock prices, at least in the near term. We lack either fearor greed to drive any trend change. Here in the U.S. there's very little demandfor safe-haven assets. If you look at sentiment in the metals markets, you'llfind that the greed factor is also missing. Now that could all change if goldand silver can catch investors' attention by significantly outperforming stocksfor a while longer or if we get the long overdue correction stocks.
Now Marc, you wroterecently about two items you feel would signal a major top in the equitymarkets. The first had to do with the public going all-in, coupled with an excessiveamount of speculation. The second would be the revelation of a major fraud.Those items will be familiar to anyone who had taken a good look at the 2008financial crisis. Are you expecting history to repeat itself here?
Marc Faber: Well, I think there is alot of disinformation, and usually when stocks go down, some fraud comes to thesurface. And I expect it to happen, and I mean in a major way. Whether thefraud is related to some corporation, which I think is quite likely, or whetherit's related to the fraud that is going on in the pension fund system, wherepension funds are grossly underfunded, and, in the future, will either have toincrease contributions or reduce distributions. I think these are items thatcould happen. Secondly, the public may start to lose faith in the systembecause of the political situation. I think the political situation in the U.S.is very bad, and If you read about what has been happening at the FBI, the CIAin Washington, you have to scratch your head whether that is all possible in asystem that is supposedly functioning.
It's like Watergate, butactually magnified. So, I think there is a possibility that investing publicloses interest in financial assets. You talked about precious metals. I thinkthere has been, just recently, a huge short position in the dollar. In otherwords, speculators, 15 months ago, they were heavily long in the dollar, andnow they are very heavily short dollar. I think the dollar may rebound and as aresult, precious metals may not move up right away. I think, eventually,they'll move up, but for the next, say, one or two months, I don't see howprecious metals would rally significantly.
Mike Gleason: Getting back to politics here for just a moment, it does appear that we may beon the verge of a global trade war. What are your thoughts on the tariffs beingimposed by the Trump administration on China, and how do you envision thatplaying out?
Marc Faber: My view is that,actually, the Trump administration, for which, I would have voted for Mr.Trump, but he proves every day that he's a completely clueless individual. Hesays one thing and then does something totally different. He changes his viewall the time. And I think, quite frankly, there is a trade war which maybewon't happen, but if there is one, the U.S. will be the big loser, becauseconsumer prices in the U.S. will go up and that is not desirable at the presenttime, as the Fed is already tightening, and interest rates have been rising, sowhat it will mean is, if there is a trade war, initially the dollar willactually rally. But this is precisely what the U.S. shouldn't have, a verystrong dollar.
Mike Gleason: Turkey is the latest nation to announce that they will repatriate their gold,joining a number of other countries who have declared they will do the same.What does this say about the confidence in the system, and then what do youthink these countries are positioning themselves for? Basically, why are theydoing this?
Marc Faber: Well, I think thequestion should be: why did they actually hold gold in the U.S.? I personallythink that, to hold your assets that are like a safe-haven, in another countryis a risk by itself… so I understand all these countries. And secondly, I thinkfor the first time in Bretton Woods, we have less confidence or less faith inthe U.S. dollar as a reserve currency. I think the U.S. policymakers,especially the Neo-cons, had the talent to antagonize Mr. Putin and also Mr. Xiin China.
By doing that, they haveactually managed to get them closer into an economic and political alliance.And the goal of these two countries, Russian and China, is probably togradually move away from a dollar system. I'll tell you, I personally, I'm nota U.S. citizen, I'm just an international observer of economic, financial, andpolitical trends. I cannot imagine a foreign policy that would be worse for theU.S. itself than what the Neo-cons have engineered. I just can't imagine.
Mike Gleason: Yeah, that's a very fair point, there. Speaking of oil and the petrol dollar,oil prices have been moving up steadily for a while now. Do you envision abroader commodity rally taking place here, and then maybe could that benefitprecious metals in the long run?
Marc Faber: Well, a lot ofindustrial commodities have been rallying because of commodities-relatedcircumstances, like aluminum rallies because of the trade embargo againstRussia, and so forth. But if I look at industrial commodities, I rather havethe feeling that they will come down. Why? I think the increase in interestrates in the U.S. on the 10-year treasury note from 1.38 percent in the summerof 2016 to the current level of over three percent, in other words, we morethan doubled in the yield in the bond market. And for the two-year treasury, wehave been going up between 10 and 20 times depending how you measure it.
I think these interestrate increases will slow down the U.S. economy, and probably bring about arecession.
Mike Gleason: We talk a lot about the appetite for gold in other parts of the world. Do youever see the tide changing when it comes to the importance of gold ownership?We know Asians are buying it relentlessly and so are many folks in Europe. Onthe whole that mindset definitely hasn't made it here to the U.S. yet, but doyou sense that may be coming, and if and when it does, do you foresee anyproblems with being able to get the physical metal once the masses do finallydecide to pour into it as the ultimate safe-haven?
Marc Faber: That's a good question.We had a total neglect of gold and other commodities in 1999, and then goldrose from $255 to a peak in September 2011 of $1,921. At that time, there was a lot of speculation in gold and inother precious metals and other commodities. And since then we've been at abear market until December, 2016, when gold approached $1,000.
Since then, as you know,we've been up something like 30 percent, and it is true, there is somespeculative interest in gold, but nothing compared to crypto-currency. Peoplethat look for an alternative to paper assets like bonds and equities, they'reall gambling on cryptos. I don't think that cryptos are safe. Now they may moveup and they may move down but I, as an investor for the ultimate crisis, Iprefer to be in physical precious metals, gold, silver, platinum.
I think, eventually,these precious metals will come back into the investment portfolios of majorinstitutions and individuals. The major institutions of the world, they holdpractically no gold. They have more money in Apple, they have more money inAmazon, than, say, in gold. And I think that will change over time, but I don'tknow whether it will be tomorrow or in three years’ time, but my view would bethat if you really look at the financial situation, the unfunded liabilities,the government deficit, the inflated asset prices, the conclusion is centralbanks will have to continue to print money, otherwise the system collapses.That, in my opinion, will boost precious metals prices.
Mike Gleason: As we begin to close, here, Dr. Faber, one of the things we value most aboutyour perspective is that you don't live in the U.S. More than most people,you're tuned into what's happening elsewhere, particularly in Asia and Europe.As for Americans, they can't seem to get their eyes off the political theaterin Washington, and to be fair, there's never been a show quite like the one wehave today, but is there anything of note that Americans are overlooking, andwhat stories are you going to be watching most closely as we move throughoutthe year?
Marc Faber: Well, I don't want tocriticize the U.S., because in other countries it is not much better. But theone thing I want to say is the following: Americans have been growing up andthey've been brainwashed that America is a superpower and they have beeneducated in the belief of the American exceptionalism. And I just want to say thatlots of countries in this world have a different perspective of the world. Inparticular, if you look at China, it has four times the population of America.Its industrial production is larger than in the U.S., their land mass is largerthan the U.S., and they're growing at a much faster pace. They have, in myopinion, no territorial ambitions, but they don't want to be controlled by theU.S. that has, in Asia, countless military and naval bases.
They (China) look at theworld from their perspective, and the U.S. would do well to consider otherleaders' perspectives, including Xi Jinping and Mr. Kim Jong-un, and Mr. Putin,of course. But if you only look at the world from your perspective, undoubtedlysome trouble will arise. And what most Americans don't see, they have kind of atunnel vision where the tunnel starts in America and looks at the whole world,whereas other countries, they have another view of the world than the U.S.
And I think it's veryimportant, both economically and politically to consider the point of view ofother countries that, by the way, have become very powerful.
Mike Gleason: Yeah, very well put. We'll leave it there, and Dr. Faber, thanks so much foryour time and for staying up late with us today in your home in Thailand. Itwas a joy to speak to you again. Before we let you go, please tell people howthey can subscribe to The Gloom, Boom and Doom Report so they can follow yourgreat commentaries on a regular basis.
Marc Faber: Thank you very much. Ihave a website called www.GloomBoomDoom.com. There, they can choose either a printed version of The Gloom, Boom and Doom Report or thewebsite report, or both.
Mike Gleason: Excellent stuff. Once again, it's been a real privilege to speak to you, Dr.Faber, and I hope we can do it again in not too distant future. Thank so muchfor joining us.
Marc Faber: It was a pleasuretalking to you and to your listeners. Thank you.
Mike Gleason: Well, that will do it for this week. Thanks again to Dr. Marc Faber, editor andpublisher of The Gloom, Boom and DoomReport, again the website is GloomBoomDoom.com be sure to check that out.
By Mike Gleason
Mike Gleason is President of Money Metals Exchange, the national precious metals company named 2015 "Dealer of the Year" in the United States by an independent global ratings group. A graduate of the University of Florida, Gleason is a seasoned business leader, investor, political strategist, and grassroots activist. Gleason has frequently appeared on national television networks such as CNN, FoxNews, and CNBC, and his writings have appeared in hundreds of publications such as the Wall Street Journal, Detroit News, Washington Times, and National Review.
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