In an interview with ET Now, Marc Faber,
Publisher of the Gloom, Boom & Doom Report, shares his views on
global markets, different asset classes as well as QE. Excerpts:
ET Now: As you warned earlier in the year about formation of asset bubbles, we have seen some correction across the asset classes. Do you see more pain ahead?
ET Now: As you warned earlier in the year about formation of asset bubbles, we have seen some correction across the asset classes. Do you see more pain ahead?
Marc Faber:
We are probably at the beginning of a more significant asset class
deflation. If you look back, we had huge increases in asset prices,
whether it is real estate, equities, bonds, gold or commodities.
When you print money, prices do not go up evenly and they do not fall all at the same time. So, the money flowed between 1996 and March 2000 into high-tech NASDAQ stocks and also in India. Then this was deflated and post 2000, we had in the US the colossal credit bubble where the money flowed mostly into housing which was deflated after 2007.
After that, we had a huge flow of funds into emerging markets and emerging market bonds. I think that will also be deflated as in some cases we have already gone down quite a bit.
In case of India, the Indian ETF is now down 32% from the November 2010 high. It has performed miserably, relatively to the US. So the market will bottom out, but it is too early to buy anything at the present time.
ET Now: Gold prices have put their weakest quarter in as many as nine decades, losing more than 20%. We even saw the $1200 mark crack. How have you read into the decline of gold prices?
Marc Faber: We had a huge bull market in gold and silver between 1999 and 2011. In the case of gold (September 2011), the prices reached $1921 and since then, we have been in the correction period as we are down 37%.
Now, the question is -- does the decline in gold prices signal that despite of all the money printing the world will face a more significant deflationary shock, especially in asset prices? We are approaching a low in gold, but it is not yet confirmed.
ET Now: Are you still advising your clients to put money to work in gold?
Marc Faber: I have repeatedly stated that I will buy gold. I expected this correction and I would buy gold at $1300 an ounce and then at $1200 an ounce and then at $1100 an ounce. But I have a disciplined approach to my asset allocation, whereby I would not invest more than 20-25% in gold.
ET Now: The biggest worry for global money managers is what will happen to the central bank liquidity. There are concerns of the US Fed tapering of the quantitative easing, but Japan and China are likely to continue with their stimulus. Do you see any changes in easy money going forward?
Marc Faber: Central banks around the world will continue to pursue easy monetary policies and there will be very little tapering. But in the unlikely case, where the US economy were strong and showing strong growth, in half an year or year's time, then they will reduce the purchases of assets.
When you print money, prices do not go up evenly and they do not fall all at the same time. So, the money flowed between 1996 and March 2000 into high-tech NASDAQ stocks and also in India. Then this was deflated and post 2000, we had in the US the colossal credit bubble where the money flowed mostly into housing which was deflated after 2007.
After that, we had a huge flow of funds into emerging markets and emerging market bonds. I think that will also be deflated as in some cases we have already gone down quite a bit.
In case of India, the Indian ETF is now down 32% from the November 2010 high. It has performed miserably, relatively to the US. So the market will bottom out, but it is too early to buy anything at the present time.
ET Now: Gold prices have put their weakest quarter in as many as nine decades, losing more than 20%. We even saw the $1200 mark crack. How have you read into the decline of gold prices?
Marc Faber: We had a huge bull market in gold and silver between 1999 and 2011. In the case of gold (September 2011), the prices reached $1921 and since then, we have been in the correction period as we are down 37%.
Now, the question is -- does the decline in gold prices signal that despite of all the money printing the world will face a more significant deflationary shock, especially in asset prices? We are approaching a low in gold, but it is not yet confirmed.
ET Now: Are you still advising your clients to put money to work in gold?
Marc Faber: I have repeatedly stated that I will buy gold. I expected this correction and I would buy gold at $1300 an ounce and then at $1200 an ounce and then at $1100 an ounce. But I have a disciplined approach to my asset allocation, whereby I would not invest more than 20-25% in gold.
ET Now: The biggest worry for global money managers is what will happen to the central bank liquidity. There are concerns of the US Fed tapering of the quantitative easing, but Japan and China are likely to continue with their stimulus. Do you see any changes in easy money going forward?
Marc Faber: Central banks around the world will continue to pursue easy monetary policies and there will be very little tapering. But in the unlikely case, where the US economy were strong and showing strong growth, in half an year or year's time, then they will reduce the purchases of assets.
Contrarian Investor Dr.Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.
