Wednesday, March 2, 2011

Marc Faber : In a money-printing environment, it is very difficult to know what is actually cheap and what is expensive.

Marc Faber : "....In a money-printing environment, it is very difficult to know what is actually cheap and what is expensive. Is the price of wheat high, or is it low? Inflation-adjusted,it is extremely low. In nominal terms, it is relatively high. I believe that, in March 2009when the S&P was at 666, the market was actually much cheaper than is generally perceived, because of the money-printing, and I do not anticipate that we will see 666 on the S&P again, in nominal terms.In other words, they are going to print so much money that the S&P could be at, perhaps,2000, but in real terms, it could be down below the lows of March 6, 2009. Maybe in gold terms, we could one day reach a ratio of Dow Jones to gold of 1-to-1, as we were in1980. In other words, the Dow could be perhaps at 10,000 or 12,000, and gold could beat the same level.That is why I am advising people to accumulate gold. Can gold have a correction? Yes,there has been a little bit too much euphoria about gold, and we may have a correction,but I do not think we are in a bubble in the price of gold. In fact, I could make a case that gold, at this level of $1400 an ounce, is cheaper than in 1999, when I look at the unfunded liability growth of the U.S., at the credit growth of the U.S., and at the
household growth, and at the money printing, and at all the wealth creation that happens in China and Russia.Just consider, when I started to work in the 1970s, it was said there were two billionaires in the world. One was Rockefeller, and the other one was Mr. Ludwig. Then in 1980there were, I think, six or eight billionaires. Now you have thousands of billionaires.The paper money has become of lower value, and in that environment, it is conceivable that actually stocks do not go down a lot, in nominal terms, but they go down inflation-adjusted, and not inflation-adjusted by what the government is publishing, but in inflation-adjusted terms, as John Williams points out. He says inflation is running at 8% per annum. I have it slightly lower, depending also on the household, whether you have children, or no children, and where you live, but I would say between 5-10% in America is probably a realistic figure, and between 8-12% in countries like India, China, VietNam..."

This was an extract of the long interview that Dr. Marc Faber did with McAlvany on 23 February 2011 , below is the full interview :

Marc Faber thinks retails stocks are vulnerable right now

"Faber thinks retails stocks are vulnerable right now as rising food and oil prices reduce consumer spending. Wal-Mart is the classic example of difficult conditions for retails stocks, after the retailer reported another decrease in same store sales. If you want a real proxy for how the economy is doing, follow Wal-Mart’s stock price which has been flat for the past 2 years. Faber even advises people to short the Retail Index (RTH) with a tight stop-loss."


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