March Faber, Charles OrtelÂ and guests appear on CNBC May 15, 2009 to discuss the potential collapse of capitalism, defensive wealth protection strategies, commodities and the economic outlook. (Interview follows excerpts and comments)
Government has become so big that it is a very powerful force. As you’ve seen in the case of Chrysler and GM they can muscle themselves into the business world and then get support to stay in power. All I am arguing is that I think the final low in markets and the final crisis will occur when the system will be cleaned out. And, since the government doesn’t want to clean out because they are protecting their own pensions, it will be essentially a total collapse of the system. Like the way communism collapsed, eventually capitalism will collapse.
Before you dismiss Dr. Faber’s comments as crazy, consider Alexander De Tocquiville’s thoughts, “The American Republic will endure until the day Congress discovers that it can bribe the public with the public’s money.” It seems to me that congres has, in fact, discovered that they can bribe us with our own money.
My while investment style going forward is on the premise that we will have inflation in the next 10 years and probably inflation rates that are much higher than anyone expect. So, you want to buy assets and you want to buy cheap assets now. For instance, I was just in Vancouver, in Vancouver you get to know a lot of people in the mining industry. There are lots of mining companies now that are unbelievably inexpensive that could easily go up 5 times in the next few years simply because there has been a shake out.
You have to be selective. I think it’s going to be a stock picker’s market.
With the risk of inflation, commodities such as mining companies, agriculture companies and energy companies may be an excellent defensive play to protect, and even grow, wealth during this crisis. As Dr. Faber pointed out, however, inflation may not arrive any time soon, therefore a time horizon of years, as opposed to months, is importan to consider.
Watch Marc Faber on CNBC (Part 1 of 2):
Watch Marc Faber on CNBC (PartÂ 2 of 2):