Faber: Doom, Gloom or Boom? How About All Three.

How about all three. Faber released another provocative newsletter this month that has a little grist for investor of all stripes.

Boom. His short-term outlook is bullish because he believes money-printing will underpin the market even after the 60% increase in the S&P 500 from March 2009 lows. This puts him in the same camp with Rich Bernstein and Jim Grant. Interestingly, he says that a “very weak” economy is best for stocks because it will induce more money printing from central banks.

Gloom. However, he says this will only make matters worse over the longer-term as the U.S. government has no stomach for reigning in budget deficits expected to reach $2 trillion. It is merely underwriting the bankers’ mistakes. Down the line a point of debt revulsion will come.

Doom. In five to ten years, Faber sees major problems as a result. In the September Gloom, Boom & Doom report he writes:

The future will be a total disaster, with a collapse of our capitalistic system as we know it today, wars, massive government debt defaults and the impoverishment of large segments of Western society.

Let’s call this Financial Armageddon. While he certainly presents a dire worst-case scenario, I sympathise with this view because, as I have warned in the past, unsustainable debt bubbles like the one we are now witnessing usually end in depression, war and strife.

Below are three videos of Faber on Bloomberg Tuesday spinning his tale of waste and woe. Pretty entertaining and they run twenty minutes in total. Faber likes drug stocks. He thinks that bonds and cash will be the worst long-term investments because of inflation. Faber also would be overweight Asia as he believes emerging markets will grow faster than the West. He has good things to say about Goldman (GS). “They are really a smart group of people.”

See also Bullish Today, Marc Faber Is “Highly Confident” the Future Will Be Very Bleak and the attached video at Tech Ticker with Aaron Task. Faber gives another entertaining performance there as well.

(three videos embedded)

Comments

[58robbo]

i like his choice of words:

"i'm not an expert of healthcare reform, but i tell you each time the govt reforms something, it's usually for the worse"

"the financial sector gets money free of charge from the govt basically and the govt essentially underwrites their mistakes. so if you and i have a business and the govt lends us money free of charge we can also do something with it and make money"

"you would really have to be dumb, dumb, dumb not to make any money if the govt was handing you money free of charge! You can take big risks and if something goes wrong they'll give you even more money!"

these three paragraphs clearly define our flawed economic and monetary system! it's all a bad joke!

2009 Sep 23 07:14 AM

[John Galt]

I do fear that it all ends in war... Just like the last depression ended.

World War is out of the minds of most people as they've never had to live though it. It seems so improbable to people that it makes it more probable.

Politics is about emotions, and politicans never want to blame problems on voters... they'd much rather blame foreigners ( and unpopular domestic & minority groups).

People were shocked at all the "secret alliances" that nobody was aware of before WW1... All it takes is one nut case. One Ahmenajad, one Kim Jong, one Putin and then boom... Millions of people are trying to murder people they don't even know.

2009 Sep 23 09:23 AM

[chap08]

Thanks Edward. It's always interesting to hear Faber talking. Particularly striking that he sees the "Financial Armageddon" that you talk about as happening in 5 to 10 years. How do you react to that? Do you just dismiss him as a fruit cake? I think not, but I think he's wrong about the "end of capitalism". Perhaps it will be the end of the US as we know it, but capitalism is actually stronger than the USA. The end of other empires has shown that.

2009 Sep 23 09:53 AM

[Tony Petroski]

An entertaining interview. Faber was credited with calling the exact bottom in March. He reacts with the Swiss equivalent of "aw shucks." Later, when asked to make a new call, he says the S@P may go to 1250 and then back to 800, or it may go to 800 and then to 1250. That's great advice.

I sense joy in Faber's face when he talks of collapse and disaster.

"The future will be a total disaster, with a collapse of our capitalistic system as we know it today, wars, massive government debt defaults and the impoverishment of large segments of Western society."

The interviewer says (paraphrasing) "Yes, that will be in 5-10 years, but what about next year?"

Too funny.

"Mr. Faber: How can we profit next year so we'll have enough money to feather our bunkers before the collapse?" The sober Faber explains that a bunker won't do any good if there is nothing left when you come out. This is the stuff of prophets?

Faber's observes that wealthy individuals should move a substantial proportion of their wealth to the emerging countries. He loves Thailand as a destination (self-serving call that). His observations are worse than cranky--they're sophomoric. When the U.S. declines as a great power, we'll see how safe the Thais are under Chinese domination.

Faber: Buy health care and drug companies because the U.S. population is aging. My 9-year-old son figured that one out and he isn't even a prophet.

The prophet may be right. We may all be doomed. But if the prophet is right, he usually ends with "repent, the end is near," not "buy my next book, 'Armegeddon and How you can Profit from It.'"

2009 Sep 23 12:23 PM

[Edward Harrison]

Faber is a smart guy, but he is also an entertainer. the reason you see him on all of the business networks is that he is entertaining. So when he makes a call like "The future will be a total disaster, with a collapse of our capitalistic system as we know it today" or "I'm 100% sure that the U.S. will go into hyper-inflation" you know he is saying these things for effect.

www.creditwritedowns.c...

What he does is focus us on the extreme scenario in an entertaining way. I do take his comments very seriously, but he is definitely making them as extreme as possible because it garners him a bit of notoriety.

On Sep 23 09:53 AM chap08 wrote:

> Thanks Edward. It's always interesting to hear Faber talking. Particularly
> striking that he sees the "Financial Armageddon" that you talk about
> as happening in 5 to 10 years. How do you react to that? Do you just
> dismiss him as a fruit cake? I think not, but I think he's wrong
> about the "end of capitalism". Perhaps it will be the end of the
> US as we know it, but capitalism is actually stronger than the USA.
> The end of other empires has shown that.

2009 Sep 23 01:17 PM

[halamok]

Faber is earning his money as a "Crash Prophet" - he has to be negative,however he doesn't look like he would believe his most dire predictions himself and he even tends to smile while telling them.
The right time to listen to crash prophets is before a crash and people still have to decide themselves,when they take people seriously,who are negative on the US since 2-3 decades.

2009 Sep 23 01:45 PM

[Hot Richard]

War keeps the people in check. Amps up patriotism and keeps revolution at bay. It is also the stimulus package of choice for one major American party...actually make that both major American parties.

2009 Sep 23 02:56 PM

[Mad Hedge Fund Trader]

kjh The one absolute, take it to the bank, bet the ranch fact you can count on right now is that there is no value in the stock market. We are at a lofty 20 X earnings, and historically, when the market sported such a valuation, a 7% drop ensued in the following year. But what is history, but the ravings of an angry, frustrated old trader? Maybe having seen the best bargains in a century only six months ago, I’m spoiled. I have always been a tightwad. I must be the only guy around who flies his own private plane to garage sales for the sheer love of the deal. I just reviewed all of the stocks and sectors I liked at the beginning of the year, and a more picked over field you never saw. (Click here for my new year list at www.madhedgefundtrader... ) The list is long: FCX, FXI, BYDFF, BIDU, X, gold, silver, copper, crude, oil services, junk bonds (JNK), (HYG), emerging markets (EEM), BRIC’s, Korea (EWY), with shorts in long dated Treasuries (TBT), volatility (VIX), and the dollar (UDN), (ULE). Even tax exempt munis have been on a tear. Many of my core positions are up over 400%. The problem is that my more loyal, even fanatical followers have taken out paid subscriptions for up to two years, so I must keep dancing. Hence, the recent increase in book reviews, political pieces, or just outright frivolous stories. What you do here is deep research and list building, so when the window opens you can jump through with both feet, and without any reservations. I hate being out of the market. But I hate losing money even more.

2009 Sep 23 09:33 PM

[Gold Bug]

Source :
marcfaberchannel.blogs...

In an interview with CNBC TV18 Marc Faber said that he does not see any recovery in the US despite the fact that the US dollar may rally for a couple months ahead , but on the long term the situation looks grim for the US economy and dollar :
"Basically, we have had huge fiscal stimulus packages and we had quantitative easing in basically all countries around the world. So asset prices have recovered strongly after March 6 this year, with stocks rising, commodity prices rising and the dollar weakening again and each time the dollar weakens it is kind of a symptom of some inflation in the system and excess liquidity building up. What we have is large cash positions around the world and zero interest rates and also the policy by the Fed to keep the matter very low level for a very long time as was the case of 2001. With this in mind, money goes out of cash balances into something, either consumption or into some kind of assets like equities or commodities or bonds or art or real estate."

2009 Oct 02 12:29 PM