Marc Faber – Gloom, Boom and Doom

by | Apr 7, 2014

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Born 1946 in Geneva. Currently working in Chiangmai, Thailand, and Hong Kong

Big Picture Thinker

Somehow the word contrarian doesn’t sum Mr Faber up properly. Crazy, courageous, combative and controversial, certainly. The 68 year old achieved global fame in 1987 by warning of the impending stock market crisis that was to wipe 35% off the value of the global stock markets and cause lasting damage to east Asia in particular. A crisis which, with hindsight, could have been spotted by anyone with his gaze focused securely on the US dollar. What told, however, was that so few others had the same macro focus as Faber.

The Outsider’s Voice

A short spell in New York and Zurich during the early 1970s led swiftly to a move out to Hong Kong, where he became managing director at the ill-fated Drexel Burnham Lambert  between 1978 and 1990, when the group collapsed. Undaunted, he established a consultancy, Marc Faber Limited, which he still runs.

Faber’s early predictive successes would have counted for little if he had not also correctly anticipated the enormous growth of international commodity prices in the 1990s; the weakness of the US dollar in the early 2000s; its recovery in 2008; and the bottoming of the US stock market in March 2009. Right now, he’s still insisting that 2014 could be “worse than 2008”, unless we get a 30%-40% fall in US stock prices first. Which is sobering.

Bubble Rap

Faber’s coruscating dismissals of many emerging markets, particularly “nowhere-to-hide bubbles” in Indonesia, the Philippines and Thailand, have recently given heart to developed-market fans even though he believes that it’s the US that is exporting the pressure. He has also delighted the gold bugs by insisting that the yellow metal has been oversold. “I think that trouble in Asia and geopolitical unrest in Asia, along with problems in the rest of the world, may actually lead to higher gold demand rather than lower gold demand.”

China Muscles Up

Ever the tactical thinker, Faber told Sprott Global in March 2014 that we should expect more expansionism from China. “The Chinese economy is highly vulnerable to interruptions in the supply of metals and oil….. 47% of global metals consumption is nowadays coming from China (up from 4% in 1990 and 10% in the year 2000)… Over time, the Chinese would want to control the East and South China Sea.” And that the possibility of a yuan devaluation cannot be ruled out.”

India, he believes, is currently oversold and is one of the few Asian markets well placed for a revival. China’s economic growth will subside to around 4% a year, he said in January 2014. And the US dollar is about to start pulling back against the euro, after a spell of weakness which he has described as ‘surprising’.

The US

The taper? The planned withdrawal from quantitative easing is “data dependent”, he says, because there is still room for the Fed to call the whole thing off if the US stock market should take a major dive this year. A pro-Republican and small government advocate, he dislikes Barack Obama’s spending plans but still endorsed Obama in 2012 against the Republican contender Mitt Romney, who he felt was unelectable.

Thorn in the Side

Like the other Doctor Doom, Nouriel Roubini, Faber relishes his ability to stir it up through his internet blog, http://drmarcfaber.blogspot.co.uk  – not to be confused with any number of imitators. And through his Gloom Boom & Doom Report, for which he writes monthly columns. (http://new.gloomboomdoom.com ).

 

“The Federal Reserve, today, artificially manipulates asset prices up. It’s a huge mistake, but that is what they do.”

 

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