Thursday, March 17, 2011

Marc Faber : Buy Gold The Dollar will eventually go to value Zero

Marc Faber : Ben Bernanke knows only how to print Money

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..."

Marc Faber : you are better off in equities than in bonds.In terms of returns

Marc Faber : I think that there will be some decoupling, and whenever you look at the markets,different sectors perform differently, but generally speaking, in the same direction. So if someone were to take a very bearish view about emerging stock markets, I do not think he should go into European stocks or U.S. stocks. I take a more balanced view. I think we are in a money-printing environment. If something happens in China, they will print even more than the U.S. prints. If something in happens in Europe, they will also print money. They are going to print money everywhere, and with interest rates, essentially on short-term deposits, being zero, or below zero, inflation-adjusted, in other words, if inflation rates everywhere in the world are higher than the interest rates on short-term deposits, I
think, for the investor, the question is really, “How do I invest my money for the long-term?” I think that you cannot make a very bullish case for stocks, but I think you can make a more bullish, or more positive, case for stocks than say, for U.S. government bonds,because the specifics in the U.S. will stay very high, and the quality of the banks will diminish and the interest payments as a percent of tax revenues will go up, and so forth.So whether you believe in, let’s say, an economic recovery and world growth, or if you believe in disaster, in either case you are probably better off in equities than in bonds.In terms of returns, I agree with you, I do not think that the returns will be fantastic, but if you print money it is very difficult to say what the returns will be, because it is not stocks that adjust on the downside, but it is the currency that adjusts on the downside. So in theory, it is possible that the Dow could double if you print money, or it could even go up10 times, depending on how much money you print, and with Mr. Bernanke at the Fed, I think it is quite likely that a lot of money will be printed "
Marc Faber in a recent interview with Radio Host MacAlavany


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