Lead-Lag Live

Marc Faber on Courage in Modern Challenges, Yen Carry Trade Myths, and Global Market Influences

• Michael A. Gayed, CFA

Share episode

What if courage was the key to preserving our freedom in the face of modern challenges? Join us for an enlightening discussion with Dr. Marc Faber, a financial expert whose career journey spans from Switzerland to the bustling markets of New York and Asia. Together, we explore the significance of bravery, drawing inspiration from Alexander Solzhenitsyn and examining how it applies to contemporary issues like COVID-19 regulations. Dr. Faber also sheds light on the yen carry trade, debunking its overemphasized impact on global markets.

This episode dives deep into the behavior of global investors, particularly the Chinese penchant for American tech stocks and cryptocurrencies. Drawing historical parallels to phenomena like the Nifty Fifty and the Nasdaq bubble, we discuss the pitfalls of concentrated investments. Through the lens of Thailand and Germany's political and economic climates, we uncover how these factors shape stock market performance and influence capital flows across continents.

We also tackle the power of media in shaping global politics, with a critical eye on the portrayal of China. Dr. Faber and I discuss the cultural contrasts in free speech norms between the East and the West, and the political shifts in Europe. As we examine the economic implications of recent oil price drops and government policies, we emphasize the hidden tax of inflation on lower and middle classes. Finally, we reflect on the complex relationship between wealth, financial independence, and happiness, providing a thoughtful conclusion to an episode rich with insights and actionable advice.

The content in this program is for informational purposes only. You should not construe any information or other material as investment, financial, tax, or other advice. The views expressed by the participants are solely their own. A participant may have taken or recommended any investment position discussed, but may close such position or alter its recommendation at any time without notice. Nothing contained in this program constitutes a solicitation, recommendation, endorsement, or offer to buy or sell any securities or other financial instruments in any jurisdiction. Please consult your own investment or financial advisor for advice related to all investment decisions.

 Sign up to The Lead-Lag Report on Substack and get 30% off the annual subscription today by visiting http://theleadlag.report/leadlaglive.


Foodies unite…with HowUdish!

It’s social media with a secret sauce: FOOD! The world’s first network for food enthusiasts. HowUdish connects foodies across the world!

Share kitchen tips and recipe hacks. Discover hidden gem food joints and street food. Find foodies like you, connect, chat and organize meet-ups!

HowUdish makes it simple to connect through food anywhere in the world.

So, how do YOU dish? Download HowUdish on the Apple App Store today: Support the show

Speaker 1:

Alexander Solzhenitsyn. He explained at the Harvard speech what surprised him the most in the Western world is the lack of courage, and courage is a virtue that people should adopt and also implement in their own lives. If someone has no courage, forget him. Freedom can only be maintained if people are prepared to fight for their freedom. Otherwise they'll all be enslaved by the kind of characters we've had during COVID that issued all sorts of regulations and laws to keep you at home and do nothing. They imprisoned entire populations. Regulations and laws to keep you at home and do nothing they imprisoned entire populations.

Speaker 2:

I'm excited for this conversation with Dr Mark Faber, who I saw many, many, many years ago over a lunch in New York City, and lots changed since then. Aside from my own weight. Dr Faber and I have both gotten a little bit older I don't know about a little bit wiser. If any of you want to engage during this roughly 40, 45-minute conversation, whether you're watching on LinkedIn, on X, on YouTube, I can see your posts. So what that means is that ask a question on X on YouTube, I can see your posts. So what that means is that ask a question, I'll bring it up.

Speaker 2:

We'll try to make this interactive. Please, folks, do me a favor, given that I do this as a sole effort on Lead Lag Live. Show some support, like repost and spread the word, given that this is not my day job, believe it or not. I just like doing these conversations with thought leaders, like Dr Favre. So, with all of that said, my name is Michael O'Gaia, publisher of the Lead Lag Report, and joining me for the rough 45-minute period here is Dr, Mark Faber, a man who normally needs no introduction, but I'm going to ask you, Dr Faber, to introduce yourself.

Speaker 2:

So who are you? What's your background? What have you done throughout?

Speaker 1:

your career? What are you doing? I haven't done much, but I was born in Switzerland in 1946, and I grew up in Geneva and Zurich and then I went to university in Zurich and then took a PhD in economics, which I did in Zurich and in London. And after my PhD I didn't know what to do. But I thought that the jobs that are paying the most are in the financial sector. So I joined a Wall Street firm in 1970 in New York White Wild and Company and then they sent me to Hong Kong to build up their Asian business in 1973. And since 73, I lived in Asia.

Speaker 1:

The White Wild was then taken over by Merrill Lynch and I don't think that Merrill Lynch wanted me to work for them and I didn't want to work for Merrill Lynch and I don't think that Merrill Lynch wanted me to work for them and I didn't want to work for Merrill Lynch. So I opened the offices for Drexel Burnham Lambert, the junk bond king, in Hong Kong and Singapore later, and ran the business until Drexel went out of business. And then I started my own business and I started to write, already in the 70s, a report, because I was not particularly happy with the eternal bullishness that prevails on Wall Street. And then, when I started my own business, I gave it a name the Gloom, boom and Doom report, and I still manage money and I still advise institutions on their investments. That's essentially what I do in life.

Speaker 2:

So I named in the setup for this stream, how Japan will bring gloom, boom and doom to financial markets. I want to get your thoughts on what happened momentarily in early August. I have been on this reverse carry trade theme since August of last year, so it took a year to play out, but you had a momentary juncture there where suddenly everyone freaked out about the yen reversal of the carry trade. You've seen a lot of this. First of all, maybe explain for the audience what the carry trade is and if you think that that dynamic is over.

Speaker 1:

Well, the carry trade in the traditional sense is that people borrow in yen and they invest in US securities, betting essentially that the yen goes down in value and that the dollar goes up or assets in America appreciate more.

Speaker 1:

That is the essence of the carry trade. But I'd like to point out that throughout the world there are people who invest in American securities, notably the magnificent seven stocks that do not engage in the carry trade at all. They have low currencies Singapore dollar or euro dollars or they have Chinese RMBs or Indian rupees and so forth and they see that some stocks in America keep on going up, so they pile into these stocks, but they don't necessarily short the yen. So, in my view, the yen carry trade is significantly or its importance is significantly overstated, significantly, or its importance is significantly overstated. The yen has been a very weak currency and, yes, there are large short positions in the yen, or they were. A lot has been now covered, but I think the yen will continue to appreciate against the US dollar because it became incredibly cheap, in other words, undervalued against the US dollar, as of, say, a month ago.

Speaker 2:

What about China? I've heard some people talk about the sort of China carry trade as well. Probably less.

Speaker 1:

But the fact is simply, I know lots of Chinese. They're big gamblers, big investors, I mean, because they have a lot of liquidity through their businesses. They look at their own market. They're already engaged in their own market, say, in Indonesia. They own large parcels of stocks in their own companies which they control, and so they diversify. They don't want to buy Singapore stocks because they say Singapore stocks don't move much.

Speaker 1:

A lot of investors in Asia don't want to buy into Hong Kong because of potential problems, mostly arising from the American State Department, which could essentially declare it as illegal to own any assets related to China. So what do they do? They go and pile in into American technology stocks which they can observe at night moving up and down. There's enough volatility in them. And they also pile into cryptocurrencies because for them gold is too slow. They like the action of Bitcoin, so Solana or Ethereum that move up and down by sometimes 5% in a day. Then they can buy options on these investment vehicles. So that is essentially the essence that the whole world has invested in the magnificent seven stocks, with the result that the American stock market capitalization. I've seen statistics that suggest that 70% of the global stock market's capitalization are American stocks. I think it's more like 50, 60%. Essentially, the whole world was or is involved in NVIDIA micron technology and in Facebook and Amazon and so forth.

Speaker 2:

That seems dangerous, right, because I mean if everybody's in the same trade and it's more than just in your own country. It seems like you have to set up for at some point, if, whenever, that reverses a bit of a global panic.

Speaker 1:

This is the big question that investors are faced with. I'll give you two examples. When the nifty-fifty in 1973 started to break down, the nifty-fifty were 50 stocks, approximately that during the bull market 1970 to 1980, sorry that went up dramatically whereas the whole market wasn't doing anything. And then when they fell in 73, 74, the bear market was approximately 50%. It dragged down everything. Every stock went down with the exception of gold shares. But I have to explain later on why gold shares performed so well during that time. And in year 2000, when the Nasdaq broke, the same happened. Most stocks went down. But when the Nikkei dropped after 1989, and in 89, after 1989, and in 1989, the Nikkei had a market value of 50% of global stock market capitalization. When the Nikkei dropped, other margins started to go up because the money flowed out of Japan into the Nasdaq in the US. So both can happen.

Speaker 1:

I tend to believe that the magnificent seven and the semiconductor stocks will proceed to go down by 70% During that time. The money will probably flow into assets that have done very badly. Let's say you take emerging markets in the last 10 years against the US they're very depressed. You take Europe versus the US they're very depressed. You take Europe versus the US, it's very depressed. You take gold shares, both against the S&P and against the price of gold Very depressed.

Speaker 1:

So my sense is that some sectors have already yes, they have already completed their bear market and they will not go down a lot. But I'm cautious with this view because traditionally, when the leading group in a stock market starts to go down and the market enters a bear phase, the likelihood is that 80% of assets go down at the same time. But I understand the argument of someone who says Mark the Magnificent Seven will go down, but other sectors in the investment universe will go up, including, say, gold and silver and bitcoins. I understand this view. I'm just saying in many cases when the leading group went down, the other stocks also went down, no matter how great the value was in these sectors that had already gone down.

Speaker 2:

Going back to that point about the fear of missing out FOMO, momentum trade in the MAC-7, do you have a sense of what amount of that momentum, of that persistence of trend, is because of just foreign flows as opposed to more US?

Speaker 1:

It's difficult to tell. But I'll give you an example. I recently wrote I mean on two or three occasions how bad the economy was in Thailand and that voices had come up even in the local press, in the Bangkok Post, that expressed the view that Thailand was a failed state. I find it actually very funny, because Thailand attracts a very large number of retirees. They come from America, they come from Australia, they come from Europe and they come also from Eastern Europe and Russia, and they all love Thailand. But officially Thailand is looked upon as a so-called failed state. Maybe the definition of a failed state is a state that is pleasant to live in because the government is not particularly effective at curtailing the freedom of people.

Speaker 1:

I wrote about Thailand, about the economy which isn't doing well and so forth. Then I wrote on previous occasions when even I couldn't see a catalyst that would drive the economy into a better position or into a growth phase. Usually the stock market was bottoming out. As a contrarian, because if I can't see anything optimistic then it must be very bad. So anyway, now the stock market has suddenly shot up by more than 10% within two weeks and some stocks have gone up 30%. But the point I want to make.

Speaker 1:

It's important for stocks in Asia or in Europe to perform well and then money will flow out of the US. But you understand in Europe and it's hard to believe, but the political conditions are even worse than in the US and we have leaders. They make actually Kamala Harris look intelligent. I'm sorry to say that it's a complete disaster, but we have leaders in Europe, especially in Germany. They are such a disaster. They have managed to maneuver a well-functioning, efficient economy like Germany. That was a Wirtschafts und an economic miracle. They have managed to push the economy down into sort of a silent depression. The economy is contracting. The status of living are going down. It's a disaster, but the stock market is relatively cheap.

Speaker 2:

Is it cheaper than China's markets? So everyone is talking about how China seems to be in some kind of deflationary depression of sorts. And I look at the China equity side and I say to myself, hey, you know, it looks like it's actually maybe sending a bottoming signal If you were to choose between European equities and China's equities, which would you choose.

Speaker 1:

I've been writing positively about Hong Kong and China for the last six, nine months because I lived in Hong Kong since 73. I moved to the north of Thailand, to Chiang Mai, in the year 2000,. But I still keep an office in Hong Kong and I go there frequently. And I've been known in Hong Kong as Dr Doom because I was very negative about Hong Kong properties for a long time and the economic outlook. Also because obviously China was developing and Hong Kong's importance, which was very significant relative to China in the 70s and 80s, was going to diminish. The GDP of Hong Kong, which used to be 30% of China, is now only less than 3%. But Hong Kong will be an important city in China, in the South China zone, in the so-called Greater Bay Area. There are 80 million people that live there. So if you're the principal city there, it's an important position to be in and a desirable position to be in. Now the property in Hong Kong are going down, but the property shares sell at an 80% discount to the net asset value of the properties that they own. Now the asset value will go down, of course, in my view not by 80%. So I'm on your side. I own Chinese stocks. I buy Chinese stocks and some have actually.

Speaker 1:

You see the Western media and Western analysts they're all very negative about China. Also, the public brainwashed by the media, and the media is very evil in the Western world. They influence people thinking they don't report facts. They report the lies that the government is publishing and the fact is simply, I've never seen in my life so much China bashing. If they want to bash something, they should bash the Chinese government, the Chinese people. What have they done wrong? Unbelievable.

Speaker 1:

And all these China bashers. You go to their homes. Most of their appliances are made in China, or the components that are in their appliances are made in china, or the components that are in their appliances are made in china. They have telephones like this most of the components come from china, most of the telephones are made in china. I mean this is just a ridiculous, ridiculous china bashing. Media influenced the public and the stocks. You have very good companies in china. The western media portrays them as being state owned and governed by the state, and so there are lots of private companies that are very well run, that are very successful. That's the point. They're very successful. That's why the Western politicians and the media hates them. They hate them because they've overtaken many companies in terms of technology.

Speaker 2:

It also seems a little bit pivot critical the idea that China suppresses free speech, and we are seeing more and more of those kind of concerns in the US. Look in Asia.

Speaker 1:

It wouldn't be advisable for me to speak very negatively about the government in Thailand, and I wouldn't do it in the first place because I think that the government in Thailand in many ways is actually better than in the US, quite frankly. But aside from that, if you're in the Philippines, it's not advisable that you drag down Bonbon Marcos publicly, you understand, in a blog or in the media. In Asia this is just not done. Now in the US the criticism is actually very strong, for in Asia it's hard to believe that people can write so negatively about the leader of the country. But in Asia it's a different culture. We have freedom of speech, but people don't use this freedom frequently publicly.

Speaker 2:

A question asked on the live stream. I'll show it on the screen. This goes back to your discussion around European leaders being awful. Is this a product of long-term nepotism? Do you think, when it comes to the ineptitude of those that are in power?

Speaker 1:

This is a very interesting question because you look at these characters who are in governments nowadays, including the people in I mean, she's no longer in New Zealand the prime minister and especially in America on your northern neighbor, mr Trudeau you have to scratch your head and say to yourself what did people think about when they voted for these characters? Unbelievable. The same in Germany, the Greens and the socialists and so on. One of the problems I've seen because I know some of the party leaders in Germany of the AFD the AFD is portrayed by the socialists and the communists as a right extremist party, when they are actually quite center politically seen. They're portrayed as being like a fascist organization supporting hitler type of government, which isn't true at all. The reason that this occurred this I'm swiss.

Speaker 1:

I would never have thought that Switzerland would suddenly lean so far left and I've been thinking about your question why is this happening? First of all, I think that America has an interest to actually destroy Europe as an independent assembly of states. I'm saying that because, if you look geopolitically at Europe, the union or the friendship between Russia and Europe would lead to an incredible power. You would have the resources in Russia, the technology in Western Europe, and this combination would be unbelievably conducive to strong economic growth in the long run and to being competitive in an environment of resources going up in price in the long run going up in price in the long run. So the US went in I mean, they didn't go in officially, but with all kinds of NGOs, and they financed movements that led to a swing to a shift to the left, politically seen.

Speaker 1:

Number two, and that I encountered. I went to a private school. The people there were essentially the sons of wealthy people in Zurich. I occasionally meet my friends in Zurich and I ask them you know, because I was in the committee for the initiative for neutrality of Switzerland I think Switzerland can make a contribution to world and world peace by staying neutral. But no, a lot of Swiss, they don't dare to speak out for neutrality. They don't like to attack the socialists. Why? Because the socialists will then go after them and harass them, and you know the media is very left in Switzerland. Then the media writes negative articles about these people who are on the right side politically, and the wealthy people then get a visit from the tax people and tax sody.

Speaker 1:

They can make your life very difficult. I'm telling you so, a lot of wealthy people. Instead of standing up and fighting for their freedom, they just lay low. They go into obscurity. Alexander Solzhenitsyn. He explained at the Harvard speech what surprised him the most in the Western world is the lack of courage, and courage is a virtue that people should adopt and also implement in their own lives. If someone has no courage, forget him. Freedom can only be maintained if people are prepared to fight for their freedom. Otherwise they'll all be enslaved by the kind of characters we've had during COVID that issued all sorts of regulations and laws to keep you at home and do nothing. They imprisoned entire populations.

Speaker 2:

I love when Mark is fired up. I love when Mark is fired up, I absolutely love it. So, mark, our mutual friend, mr Kevin Bambro, is watching live and he put this question saying Hi, mark, wondering if you ended up buying uranium stocks back in 2020, speaking of COVID after we chatted, and what you think about the future of nuclear power.

Speaker 1:

Yeah, I mean, I'm very optimistic about nuclear power, but, as you know, until recently the Greens, the only source of energy that is actually efficient and doesn't produce any negative side effects is nuclear power. But that's precisely what the Green communists didn't want. They asked France and Germany and all the European countries to close down the nuclear power plants. I'm positive and I bought at the time uranium stocks, but I sold them much too early. But I always do things early in the game and sometimes I sell much too early. I'm not a genius, I'm not the bot man.

Speaker 2:

Well, you're pretty close, Okay, but speaking, let's continue along the energy space, because every time it looks like there's some geopolitical event that's going to cause oil to run higher. It doesn't seem to run higher and actually, more recently, as we're chatting, Brent is falling relatively precipitously. I want to take that into a conversation around where we are in the economic cycle. Typically, as you know, when oil falls pretty aggressively, that's a precursor or a warning sign of recession. Is this time going to be somewhat different? There Is oil perhaps sensing something coming as far as slowdown, economic contraction.

Speaker 1:

Well, I think that people make a huge mistake by looking at GDP figures and then saying the economy is growing or contracting. I think GDP is fairly irrelevant in the whole context of ascertaining whether the economy is expanding or not. I'd say an expanding economy is an economy in which the standards of living of the majority of people improves. Now I cannot tell you exactly about the last six months or so, but if I look at, say, china and India 30 years ago and I look at China and India today, then I can say with good conscience that the standards of living of most people has improved, of most. I'm not saying that everybody was running up the ladder of wealth at the same speed. Some people moved ahead like in a horse race. Some horses are faster than others. That's the essence of capitalism.

Speaker 1:

Capitalism is based on inequality People who work more, they tend to earn more, and the lazy people who don't want to work, they're not participating in economic growth to the same extent. The difference of capitalism with socialism is in socialism you cut the high trees down and you make everybody equal, and by making everybody equal you take their freedom away. You understand? This is a big difference. In capitalism, people are free to choose and free to do things their own way. In socialism, no, they're not free to do their own things because most of the assets are owned by the government. That is the key difference private property or government property and I can assure you you can go anywhere in the world owned by the government. That is the key difference private property or government property and I can assure you you can go anywhere in the world.

Speaker 1:

Whatever the government touches they mess it up. That is one of the universal laws of economics Don't assign the government to do anything, because they're incompetent characters, most of the government bureaucrats. They never work a day in the private sector, let alone running an own business. The people that went to universities. The universities are run by communists, the socialists. That is the state of education nowadays. I mean, I have enough contacts with universities in the world. The rest of them are socialists. They hate the entrepreneur who has no education and becomes successful, because they think an uneducated person shouldn't be so rich.

Speaker 2:

Maybe the only competent government official was Nancy Pelosi, because apparently she's a phenomenal trader and those that are on social media are well aware of those memes. But I want to go back to the recession question because I think this is sort of it is interesting.

Speaker 1:

I love it when you're fired up.

Speaker 1:

I love it when you're fired up, it's OK, I divert it. In my view, if you look, you understand in a money printing environment, everything gets distorted and you can hide things. You can say you have a higher salary and then you can understate the rate of inflation. In essence, if you take real economic growth and real wages, then the majority of people is in recession already because wages have gone up since 2018, yes, but I had discussions with people. In my view, prices are today about 30% higher than in 2018, 2019, pre-covid say between 20%, 25%, 30%. But I have friends they say no, they're up 50%. And I rely very heavily on a man called John Williams. He publishes shadow stat statistics. The shadow stat statistics, in my view, may overstate inflation a little bit, but they overstate the cost of living increases much less than the government understates the cost of living increases. And so if you take the statistics published by Williams and you adjust the economy, the nominal economy, by his inflation figures, we're all in recession already. Figures, we're all in recession already, but for the rich people and the people that are interviewed on CNBC and Bloomberg and God knows what, and for Wall Street, there's no recession because their asset prices have gone up and they feel wealthier and for Mark Faber.

Speaker 1:

As an investor, I love money print because it boosts the net asset values At the cost. Who pays the cost? The lower middle class, the middle class and the poor people. They pay the tax. They pay for the inflation, and inflation is a tax, but it touches different sectors of society differently. So if you ask me why is the oil price weak, I'll tell you why. The global economy is today lower than it was in 2018 in terms of real measurement. I have many statistics that show that Today, the automobile stocks are all down. Why are they all down? It has to do with the demand. People don't have the money to buy goods anymore. Dollar General said it. Other retailers say the same that people are strapped. They have to cut down on life necessities.

Speaker 2:

So what is the answer to that? I mean, the Bitcoin maxis would say the answer to that is Bitcoin. The gold bugs would say the answer to that is gold. Is there an answer to any of that?

Speaker 1:

The answer to that is Bitcoin the gold bugs will see the answer to that as gold. Is there an answer to any of that? You know I also own gold and so forth. I'm not looking at the world as a private investor and I don't think how do I participate in the best way to exploit a very unfortunate situation that arises from money printing? I'm an economist, I'm a social observer and I'm an historian. As such, I have to condemn money printing in the strongest possible terms, because it's one of the worst disasters that can come upon a society. It's an injustice that is incredible and it leads to hardship for the majority of people and it benefits a few profiteers.

Speaker 1:

I have entire books on the subject. I mean, I'm not singling you out, but it gets me that people think well, how do we address this problem of inflation and money printing? Oh, we buy bitcoins or gold. Yes, I agree with that view, but at the same time, people should think in the larger sense what does it do to a society, and shouldn't we stop the measures, the policies that lead to inflation? Inflation, consumer price inflation is a symptom of government overspending and of money printing. You take away the overspending. In other words, you close the deficit and you close and you stop printing money, then you have no inflation. The problem will be solved, but with it the excessive profits of profiteers will go. You want to belong to the profiteers, you're welcome. I don't want to belong to a group of people that profiteers from the harm of other people. You understand the socialists will always attack the capitalists as the exploiters of the people.

Speaker 1:

Now let's look at the history of capitalism, say from the time of approximately Adam Smith at the end of the 18th century to today. What did the 19th century exploit? People went to America because they wanted to find work and the working conditions in America were better than in Europe. That's why the Europeans all traveled to America and immigrated to America. And then, of course, the socialists write about the Robert Barons. The Robert Barons, yeah, they made a profit.

Speaker 1:

What's wrong with making a profit? If you assume the responsibility to build a railroad from A to B, if you build a canal from A to B, of course you should get the profit. But the railroad then benefits the whole population because people can travel from A to B easily and the transportation costs fell. And the result was that in 1900, the price level in America, despite the population, going up from 4 million in 1800 to 80 million in 1900, the price level was the same because we didn't have economists in America and because we didn't have a Fed. That is the reason. The worst for the economic growth is to employ a lot of economists. That I tell you, and I'm saying this as an economist, I mean as much an academic as a businessman.

Speaker 2:

I want to get your thoughts on treasuries as we start to wrap up Speaking about government debt and the deficits. It's been a hard three years. For the duration side of it. It seems like maybe some of those dynamics are changing as we go potentially from duration risk to credit risk. How do you think about long duration treasuries, at least from a trading perspective? You know buying holds a whole different question.

Speaker 1:

This is actually a very good question which touches many different assets. I'd like to summarize it as follows With my negative view about the economy, you have essentially a tailwind for treasuries to go up, in other words for interest rates to go down. That I accept and I own treasuries. I have to say that I always have a bond portfolio, but of course my bond portfolio varies in terms of qualities of bonds and it varies in terms of maturity. So I have bonds that mature maybe next year. I have bonds that may mature in seven years and so forth, and I have an average maturity of such and such. I wouldn't know it by heart because I'm not spending a lot of money on search. I wouldn't know it by heart because I'm not spending a lot of money on my personal affairs specifically, but I own bonds and I've taken some duration in the US with the view that the economy is actually weaker than what the Biden administration is lying to the public. It's much weaker. I also think the Fed will cut rates, but you understand the Fed has a problem here.

Speaker 1:

The inflationary pressures are still with us Now. On the good side, we may argue that the weak demand will kind of reduce the demand for finished goods and that, as a result of that, prices of commodities and finished goods will go down. In China we have a sort of a deflation at the present time. Also, here in Thailand, we don't have much inflation at the present time. Inflationary pressures are still with us in the asset markets. I mean you look at house prices in America. Home prices they're at a record high, essentially Not everywhere, but in general. You're surprised to see home prices. They're at a record high, essentially Not everywhere, but in general. You're surprised to see home prices this high, especially when you compare it to commercial properties, which have dropped in some cases by 70%. This is now an example where easy money hasn't helped Property prices. Commercial property prices are down very significantly. Will it spread to residential? Who knows? I suppose it will spread to residential, but maybe to a lesser extent.

Speaker 1:

In any event, the headwind for bonds to rally is that when in 1969 and 1973, 1969 and 1973, the rate of inflation was about, as it was, say, in 2022, 2023. At that time interest rates on the 10-year treasuries were much higher than now, much higher. Now the 10-year treasuries are 3.7%. You really need a period of sort of deflation to justify this low interest rate. So my view would be the Fed is in a very difficult position because they print money, inflation takes off again and the treasury bonds the 30 years you can follow the TLTDF will tumble. That's why I hold treasuries, but I'm a reluctant holder, and also I think that once the world sees the Fed printing money again which they will have to do, they will have to do then they will sell the dollar.

Speaker 1:

Now you will argue well, the other currencies are even worse. Yes, I agree with you that maybe even worse, except selected ones like the Singapore dollar and the yen and so on. But in general, the dollar is maybe still one of the soundest currencies. But I can give you some currencies that are much better than the dollar, namely gold, silver, platinum. Now you will come and say well, what about bitcoins and cryptos? I don't want to give a speech about the disadvantages and advantages of currencies, but I'd just like to tell you, if governments had the power, these governments are democratically elected, they were elected by people, but then they lock in their people.

Speaker 1:

If they have that kind of power, what do you think they can do to the Internet? They can muddy, close the Internet for a whole region in India. How do you want to use your credit card? How do you want to use your bitcoins? Without internet, I can use my gold coins in my pocket, going out when there is no light and no electricity and nothing. The same in wartime. Cigarettes become money. You should store cigarettes in your home. This is like small coins.

Speaker 2:

Well, don't smoke up your currency. If that's the case, well.

Speaker 1:

I have to keep the supply tight. There you go.

Speaker 2:

Exactly Duck power for those who want to track more of your thoughts, more of your work. Where would you point them to? And maybe give a little pitch on the Gloom, boom and Doom report?

Speaker 1:

I'm not in the advertising business. I have two reports which I write every month. I do it myself, and I do it out of interest, and I do it because it stimulates my thinking and I think it's better in life to do something than to do nothing. So these are the reports, but they challenge widely accepted views and the highlight opportunities that ordinary research would maybe not highlight. So it's difficult to say the report is good or not so good. Some people like it and some people don't like it.

Speaker 2:

That's the world and I have contributed, I think, probably 20 pieces over the last 12 years to you, so I appreciate you also giving me an opportunity for that. Emery, please check out the Bloom, Bloom and Doom report. If Mark will not advertise, I will advertise. I appreciate those that watch this live stream. I have another two podcasts coming up live back to back, so stay tuned for that. Dr Faber, always a pleasure chatting with you.

Speaker 1:

Well, thank you very much and thank you for the viewers, and I hope and wish that they have a successful year. I think in the money printing environment, wealth is overstated as an important factor in people's lives, but I admit that to go through life with money is probably simpler than to go through life without money and with heavy debts.

Speaker 2:

Money buys you comfort, it does not necessarily buy you happiness.

Speaker 1:

I think that's a good way to it can contribute to your freedom so you don't depend, like 70% of Americans, on living paycheck to paycheck.

Speaker 2:

Yeah, I think that's a fair point. Cheers everybody.

People on this episode

Head Shot

Michael A. Gayed, CFA

Host