Wednesday, May 18, 2016

Asset Deflation : Everything has gone up in price substantially

Marc Faber’s interview with Anuj Singhal on CNBC-TV18. Watch Video Interview  at:

Q: It is national television so we cannot say exactly what you said about what is the best use of that money, but do you get a sense that this could be unravelling sooner than later and we might be close to a bit of a problem point for global markets? 

Marc Faber : Let us put it this way. Inflation shows up in many different things. You can have inflation in wages and you can have inflation in commodity prices, you can have inflation in consumer price, in wholesale prices and you can have inflation in asset prices where assets move up sharply. So, if you go back to 1980-1981, 1981 treasury bonds in the US were yielding over 15 percent. They are now down on the 10 years to 1.75 percent – they were at 1.43 percent. In Europe, we have numerous government bonds that sell at a negative yield. In other words, when you buy a 10 years German bund or so, you are guaranteed to lose a little bit of money, not much but a little bit. And actually, 30 percent of sovereign bonds in the world, they trade at the negative yield. So, we had this colossal asset inflation, which you are also familiar with in India, in terms of real estate prices in Mumbai. Although the Indian stock market peaked out last March, in other words, a bit more than a year ago, at over 30,000, we came down to less than 23,000 in January. And now, it has rebounded to slightly more than 25,000. Stocks, since 2003 have done very well in India. So, everything has gone up in price substantially and as you indicated, my sense is actually that we could have a period of asset deflation where asset prices just do not perform particularly well. We have some evidence. The art market in London and New York has weakened considerably. Not every artist, but most artists’ luxury properties whether it is in the Hamptons or in New York City or in San Francisco, the very high end is no longer moving up and in many cases, it is actually down. Same for May Fair in London. So the high end is not performing particularly well. And stocks, over the last 12-24 months, if you take a global index have not performed well.

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Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.Dr. Doom also trades currencies and commodity futures like Gold and Oil.

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