Dr. Marc Faber discusses he thoughts on equities, government debt, commodities and precious metals January 12, 2010. (Video interview follows excerpts and commentary)
Faber on Stock Markets:
“I think that this complacency and unanimous belief that we’ll still go higher now may lead, actually, right now to a more meaningful correction. And then later on in the year maybe a rally, but maybe not to new highs. And that overall we could close the year lower than we are today.”
“So I have some signs that show some weakness is emerging in the market. Number two, years ending in “0″ are not favorable for stocks, for whatever reason, years ending in “0″. Number three, years where you have mid-term elections are not particularly good for equities and after the huge gains we had last year you can’t expect another huge gain this year. Now, can the market go up 15%? Possible. But, can it go down 20%, 30%, also possible. So, the risk reward is no longer particularly good.”
It seems that everywhere I look and listen, be it mainstream news or my neighbor next door, the economy has recovered and the stock market is the proof. Yet no one talks about the disaster looming in residential real estate, commercial real estate, consumer credit, international sovereign defaults, the Chinese bubble, or the US Dollar. One event, even a minor one like bad retail sales numbers for example, is all it will take and everything can turn on a dime.
Faber on government debt:
I’m concerned about the US government deficit bubble, in other words, I’m concerned about the government debt rising very dramatically over the next five years and also unfunded liabilities going up very substantially and that eventually in five to ten years time the interest payments on the government debt will go up very substantially as interest rates then go up, so that is my main concern.
This should be a concern for every American. As our government continues to borrow more money from foreign governments, commits more money to spending on programs like universal health care, medicaid, medicare and social security, the interest payments on the loans being taken out will eventually destroy any ability we have to pay back the loan.
If the government was an individual borrowing money from credit card companies, they would have been cut off from additional credit long ago or already defaulted on their payments.But unlike an individual, the government can print money to cover the payments on that debt.
We currently have over $100 Trillion in debt, including unfunded liabilities. Does anyone in the US government, maybe Mr. Geithner, or President Obama, or Mr. Bernanke, find this at all excessive? How are we to generate the revenue to pay this money back when tax revenues in the US are dropping?
In the 2007-2008 GAO audit report, the government had tax revenues of $2.5 Trillion. Of that $2.5 Trillion, 18% or $454 Billion (if you include Social Security) was paid just to service the interest payments on the debt!
Look at it this way: The US basically owes $100+ Trillion in debt over the next 40 or so years. The US government brings in about $2.5 Trillion a year. Even if they increase the peoples’ taxes, the government will still be hard pressed to pay all this money back. It’s kind of like an individual making $50,000 a year taking out a loan for $2,000,000 or so. How easy would that be to pay back and how long would it take, even with salary increases? Exactly.
Marc Faber’s concerns are well founded, because in order for the government to pay all of this off, they will have to print even more money. This is the only way, save a full-out default, to pay off our debt. And this is why foreign creditors like China, Japan, Russia, et. al. will eventually stop buying our debt — they know that regardless of the interest rates they have on their bonds, the value of the dollar will continue to decline and they will be paid back in toilet paper. They will, in essence, cut us off like a credit card would do to you if you had too much debt.
Doc Faber on Gold:
I think we can test around $1050, maybe even $950. But longer term, as long as I look at Mr. Obama, Mr. Bernanke, Tim Geithner and Larry Summers, I will keep my gold, that I guarantee you.
Mac Slavo Views:
Read by 34 people Date: January 18th, 2010 Website:www.SHTFplan.com
Copyright Information: Copyright SHTFplan and Mac Slavo. This content may be freely reproduced in full or in part in digital form with full attribution to the author and a link to www.shtfplan.com. Please contact us for permission to reproduce this content in other media formats.
The content on this site is provided as general information only. The ideas expressed on this site are solely the opinions of the author(s) and do not necessarily represent the opinions of sponsors or firms affiliated with the author(s). The author may or may not have a financial interest in any company or advertiser referenced. Any action taken as a result of information, analysis, or advertisement on this site is ultimately the responsibility of the reader.