Marc Faber: Financial Turmoil Ahead, Gold is My Largest Single Holding

Marc discusses today’s economic theories and how they are already fairly modern, with the world now having 15 trillion dollars in negative-yielding bonds. Until recently interest rates had never before been negative in nominal terms. Modern Monetary Theory would allow governments to print money and deliver it directly to the citizens as a form of direct quantitative easing. However, that would lead to dependency on government and people would lose their freedoms as more government always results in less freedom.

Markets have changed a lot since the 1970s. Back then the U.S. stock markets as a percentage of GDP was only 20 to 30 percent. Today markets are 150 percent of GDP and they have a rather large effect on overall economic activity.

Gold is again rising but how high it will go, Marc, does not know but to him, it seems inexpensive when compared to negatively yielding bonds. Gold should stay above 1400 and investors should hold it as insurance in varying amounts depending on their confidence in the financial system.

New technologies can disrupt older systems and change the economic landscape. He feels that the internet and electric vehicles could potentially change the way people and cities work.

Marc discusses different types of investment strategies. Today there is value in commodities, emerging markets, and in Europe. As an investor, it doesn’t really matter what you buy so much as when you buy it. He recommends the book “Manias, Panics and Crashes” by Kindleberger which is a simple read. It’s important to have broad exposure to writings on markets and to listen to many viewpoints.

Time Stamp References:
0:40 – Modern Monetary Theory
4:10 – Markets in the 1970s.
8:10 – Gold is breaking out.
11:20 – New disruptive technologies.
16:00 – Why city centers may be disrupted.
18:00 – How to find undervalued assets.
21:00 – Favorite authors and books.

Talking Points From This Week’s Episode
• Modern Monetary Theories
• How markets have changed since the 1970s.
• Golds overall direction and confidence in the system.
• Technology and its ability to disrupt existing systems.
• Investment strategies and his favorite authors.

Dr. Marc Faber was born in Zurich, Switzerland. He went to school in Geneva and Zurich and finished high school with the Matura. He studied Economics at the University of Zurich and, at the age of 24, obtained a PhD in Economics magna cum laude.

Between 1970 and 1978, Dr. Faber worked for White Weld & Company Limited in New York, Zurich, and Hong Kong. Since 1973, he has lived in Hong Kong. From 1978 to February 1990, he was the Managing Director of Drexel Burnham Lambert (HK) Ltd.

In June 1990, he set up his own business, publishing a widely read monthly investment newsletter “The Gloom Boom & Doom” report which highlights unusual investment opportunities. He is also the author of several books including “Tomorrow’s Gold” and “Asia’s Age of Discovery”.

Dr. Faber is also a regular contributor to several leading financial publications around the world. A regular speaker at various investment seminars, he is well known for his contrarian investment approach.

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