Transcription
I'm convinced that NATO will break down. The price of oil compared to say the gold price or the price of silver is extremely low. What has happened is a tragedy is very bad for the social system for societies. This wealth inequality with a few people owning everything and the majority owning nothing. Every country that was communist and became capitalist has grown and flourished because the the worst thing anyone can experience is socialism. That is the worst. I started to work now 55 years ago and I'm still waiting for the breakdown.
Hello everyone, my name is Paul Biotink and welcome back to Reinvent Money, a show about money and power. Today I'm delighted to welcome on the show for the first time Dr. Mark Faber, also known as Dr. Doom. He was born in 1946 in Switzerland and with his home base in Thailand. He got his PhD at 24 years old and has been trading across the globe for decades. He's known for advising his clients to get out of the stock market before the big crash in 1987. Also, he warned about the housing bubble in the US in 2005 and 2006 prior to the great financial crisis. He's a publisher of the gloom, boom, and doom reports. And today, I will tap his vast amount of knowledge to understand where the opportunities lie in this uncertain and rapidly changing world. Dr. Faber, an absolute pleasure to have you on. I've been following you for 15 years now. So, um, thanks so much for saying yes to my invitation.
Thank you for inviting me for this uh interview and uh I thank the viewers to have the patience to listen to my views.
No, I'm I'm pretty sure the viewers will be delighted to hear your your take on things. Let's start with um what went on over the weekend with Trump kidnapping or at least um his people um kidnapping uh Maduro. uh h what's your take on that and and most importantly what will be the impact on on certain markets like oil gold the dollar?
Well, I mean I don't like the idea of world power like America or China or India going into smaller countries and kidnapping. Yeah, the the president, you understand that idea is not necessarily my idea of harmonious political and social system in the world. However, in the case of Maduro, I have to say that he he wasn't a particularly desirable character from my social economic point of view. And therefore in a way I sort of like the action to just take him out and uh say that a regime change should happen. So that would be my view and the impact on markets. I think we don't know yet what the reaction will be uh from countries that are closer to Venezuela like China and Russia and even Thailand that we don't know exactly what the reaction will be but I my suspicion is that there will be a reaction and what the financial markets have been doing is that precious metals have rebounded very strongly. Now is it because of Venezuela or other factors? But uh it shows an unpleasant side of the Americans and the complete uh unpredictability of Mr. Trump is unpredictable. You know, whatever comes to his mind, he may implement and uh not think very carefully about the consequences.
So that would be my view.
Yeah. Because I I noticed that like you said like gold went up today. Um oil went up also a little bit. uh a lot of market pundits were expecting it to go down because because of of the US getting involved in Venezuela will lead to more supply of oil which could potentially of course harm Russia. Um what do you expect of the oil price going forward of the next next year for 2026?
Well, my view is uh more positive than the general public because at the moment bearish sentiment about oil is very high and the price has performed poorly. So the price of oil compared to say the gold price or the price of silver is extremely low. And when I look at the stock charts of oil stocks, uh my sense is that oil stocks are about to break out on the upside. So if you have an allocation to equities in the world say you put some people put 50% of the money in equities and some 25% like I do or some 100% I of that money that is designed for equity investments I would use some of that money for the purchase purchase of oil and natural gas stocks.
Yeah, seems like a smart move. And what do you think will be Trump's next move when it comes to meddling in other countries? You think Greenland is next or Cuba or Colombia?
What's his next move? You mean which woman will he marry next time?
Something like that. Who knows? No. But uh I think that uh he he will be reluctant to say invade some countries where a reaction by less friendly countries could be significant. But he like all Americans, they're interventionists. They think they have the right to intervene into the political affairs of other countries. And uh you know candidates are obviously Cuba and Colombia and possibly Brazil and Greenland. I mean I don't know but uh I would not be surprised of more interventions especially because this intervention has so far been actually rather successful for the US. They didn't lose any heavy material and uh nobody got killed on the American side. I mean as an operation of you know efficiency I have to say they've done a good job very good job.
And if they decide to
Not that I like it not that I support it but one has to say it was well executed surprisingly well executed for Americans.
Yeah. No. Yeah. It it seems like it um of course it's it's too early to say what what the ramifications will be in in the long run. But um what I wonder let's say Trump decides to go after Green next. What would be what should be Europe's answer to that? Should should Denmark leave NATO or what would be the outcome of that move?
Yes, that that is also a question I'm asking myself. What would the Europeans do? Because basically Greenland belongs to Denmark whether we agree with it or not but this is the fact and if America would just take it over I suppose that this will would be a huge problem for NATO because Denmark as far as I know is a member of NATO.
It is. Yeah. So, and America as well, you understand? So, two NATO members would be essentially fighting with each other. How do you solve that? I have no idea. No. And the same applies to Turkey because Turkey is siding with Venezuela and Turkey is also NATO member. So, NATO looks quite fragile to me based on all of this. Um, but yeah, I'm convinced that NATO will break down. I don't think that NATO members will go along with uh the aggression of Mr. Trump.
And how would uh because you're you have a global view. You're based uh in Thailand, but also you're often in Switzerland. You've been trading the markets for decades. uh it's quite difficult I guess for any investor with everything that's going on and with the with the rapid change of things to to be properly positioned. How how would you advise an ordinary investor would just like a retail investor with only let's say 10 20,000 to invest um what would your general advice be in in these types of circumstances?
Well, uh, you know, this is a difficult question because 10, 20,000 or 30,000 or whatever is less than a million is not much money anymore. It used to be a lot of money when I grew up in the 50s. My father was who was a successful surgeon, orthopedic surgeon, sports medicine, he used to say, "Oh, this is a millionaire." A million Swiss Franks or dollars at the time was a lot of money. In the 1970s, there were one or two billionaires in the world. And now we have thousands. If someone comes with a billion, he's a poor. He he's rich, but he's a poor billionaire. Because the rich billionaires have 20, 30, 50, 100 billion and soon a trillion. This is, you know, people say the price of gold and silver and platinum went up. Yes. relative to worthless paper money which is constantly depreciating. So I could say the price of gold is stable but paper currencies are going down in the in their purchasing power. In other words, the value of paper money is diminishing compared to gold which is steady. So the individual in my opinion and this is a personal opinion other people will disagree but I think that people should be diversified. They should own some stocks and some real estate and some cash and bonds and some uh precious metals and uh the the the waiting is about 25% each. Now as a result of the appreciation of precious metals, the precious metals portion has increased and the bond allocation has diminished because bonds have not been performing well over the last uh 5 years since 2020. But the bond market hasn't been a disaster because you get the interest on the bonds and so forth. So it's it's been okay in general. My concern is that all asset prices are in the sky. They're very very high. The real estate you're Dutch I presume.
Yes.
As you know in Amsterdam price of real estate is very high. I went the first time to Amsterdam in the 1970s because I covered Dutch institutions uh as a broker. I I was working for the American brokerage company and then I used to go and run around Amsterdam to visit all these institutions. I used to rent a bicycle to move around because you know the traffic was bad and did the move and all. Anyway, uh at that time you could buy a beautiful house on the gra for maybe 300,000 or so. The euro didn't exist at the time, but the equivalent of around 300,000. It was dirt cheap. And that I always say when I was young salaries of people were relatively high compared to asset prices. Now asset prices are in the sky and salaries are relatively low. The result is that the affordability has diminished. Young people today who go and work, they cannot buy a house in Amsterdam. Not possible.
No. So young people are especially victims of inflationary policies.
Are screwed.
Sorry, what's that?
They are screwed.
Yeah. Yeah. That's that's
In good English. They're
Yeah.
No, I totally agree. And that's that they are the the the main victims of these inflationary policies which led to higher asset prices uh of which mostly the wealthier class has benefited over all these years.
Yes, you see it exactly the way it is. You know I mean you can see I mean I have some economic knowledge. I read all the classical economies and so forth and I'm interested in social history and in the political history and military history and so forth and uh I mean as social observer and historian and economist I uh object to the monetary and fiscal policies of governments because they have created an environment where the 1% including myself have become immensely wealthy due to the appreciation of their assets because we had assets. But the half the population doesn't have any assets. they have nothing and so they have become relatively poorer. So the wealth inequality has increased dramatically and I as a asset holder of course I'm sleeping better when my asset value goes up than when it tumbles. But as an economist, as a historian, as a social observer, what has happened is a tragedy is very bad for the social system, for societies, this wealth inequality with a few people owning everything and the majority owning nothing.
No, it could also it could also backfire, of course. like at some point the population could revolt because they believe
Yeah, of course of course this going to happen or has happened already.
Yeah. And this despite the fact that uh some asset prices are expensive compared to wages, you still would advise young people to uh make a move, buy some property, buy some land, buy some shares. Better than than staying in fiat money. You see, it's not uh it's not easy to foresee how the current monetary system will survive and how will it end. Uh what we have today, this money printing will one day have to come to an end. Largely because as you know and as your viewers would know the debt market, the credit market uh what governments owe is going up substantially and then the interest payments on the debts are going up substantially and exceed in many cases other expenditures. So as the money is used, the tax that comes into the government's coffers are used to pay the interest on the debt. Less money is available for other expenditures and that in the current environment will go up. It's been going up now substantially. In the US, the interest payments is more than a trillion dollars a year already, more than a trillion. And that is a big big expenditure. And when interest rates move up or stop moving down that interest expenditures will increase regardless and lead to a problem sooner or later. Now uh governments throughout history have usually solved this problem by printing money but that just postpones the solution of the problem. It doesn't uh sort of solve the problem and the problem then o occurs again but in a larger context. So I'm very bearish and in that environment probably for anyone to own cash and bonds is is not desirable. uh and properties is a proposition I would uh I would support provided you buy the properties that are not particularly expensive. You understand?
In Amsterdam you buy on a good location property, it will be very expensive. The same for Frankfurt and Munich and Zurich and Geneva and London, Paris, Madrid, Barcelona. You go an hour into the countryside or 2 hours, you can buy a property that is very reasonable and you have a house and a garden and a few chicken and dogs and so forth. But but you understand property in some areas in Europe certainly 3 4 years ago were very cheap. They're not as cheap today as they were at that time. But some properties are still reasonable. uh you go to say Croatia, Macedonia and so forth, Greek, Greece. In these places you can find in Bulgaria you can buy properties at reasonable prices. The same happens in Asia. Some properties here in Asia are expensive but others are reasonable.
Yeah. And you're based in Chiang Mai in Thailand. This is Thailand an interesting uh market when it comes to property and and also the stock market. Is it undervalued compared to like let's say some of the western markets in in Europe?
It's a very interesting market for Thai women because they marry the foreigner and the foreigner will buy the property. He cannot buy in his name. He will buy it in the name of the little tie girl that he met who is in love with the older man like me. And then once the property is all built and uh acquired and paid for, the little girl with no education at all, she will kick out the educated professor from Europe who believed that the young girl would love him forever. She will kick him out and bring in her old husband or the family.
Are you sharing a personal story?
Whether it's a good proposition depends on the circumstances.
Yeah. Yeah.
And and the stock market
I'm married already 50 years. So don't you know you have to sell it to me?
And and the stock market there is that interesting.
Yes. This is a good question. I I think among all stocks in the world, I think uh Brazilian stocks are relatively attractive. And if you look at sorry if you look at the performance of emerging markets by and large they performed like European markets much better than the US market over the last 12 months. You know, in Europe, we have markets, they went up 35%. And in Brazil, we're up like 50%. Partly because the Brazilian realale appreciated. We also have to look at the currency movements. Now, in Asia, some markets have done well. A year ago, we recommended um Hong Kong property stocks. Some of them have done fantastically well, but nowadays there's one group of stocks that I think is reasonably priced and these are Thai banks.
Interesting. I have a fairly large portfolio of Thai banks and uh my Thai stock portfolio which I've had now for like uh some time has done okay because of the high dividends Thai companies pay. I'm a a value investor so I pay attention to dividends and book value. and uh you know devaluation measures like PE and so forth.
Yeah. Old school.
The old school is dying out.
And and recently you warned about a system breakdown that could happen. Um are you expecting that for for for this year and how would it look like for any based in US or Europe or
And I hope it doesn't happen right away because a system breakdown can take very unpleasant form. You know the governments they can expropriate your prop you and your properties and they can expropriate say you hold gold or silver and so forth that they can do they've done it before.
Yeah. So that will be one element of a system breakdown. Yes. And I mean what surprises me the most in my life the one thing when I studied I studied economics that I never thought is possible is to have negative interest rates. It happened. And the other thing is uh when I started to work I thought the system would break down sooner. So I'm still waiting for the breakdown after 40 years. I mean I started to work now 55 years ago and I'm still waiting for the breakdown.
Yeah. Uh well, we saw we saw a few a few moments where it was very close, let's say, the great financial crisis or in Europe with the Euro crisis, which was also very close to uh the end of the euro. Um and I I guess people living in in Greece and Cyprus did experience a system breakdown where they couldn't access the bank accounts and um but yeah, it's not one like a one big event. There there smaller events in certain countries, in certain certain moments. It's it's a it's more of a fluid thing than just one big crack, I guess.
Yes. And surprisingly each time uh there were some big moments like the Japanese breakdown after 1989. But uh the surprising thing is that the central banks printed money and washed the problem away. And each time they did that when you observe uh some people did benefit from each crisis because they became immensely rich. you know, Black Rockck because they acquired properties during the crisis in 2009 2010, uh they did very well or they bought stocks and so forth. So I think that if I look back at the last 50 years, I started to work in 1970. It's remarkable how rich the rich people have become. That is remarkable. And equally remarkable is how little professional people did benefit. Say a typical doctor, a typical engineer, a typical worker, he earns more than 55 years ago, but not that much more in real inflation adjusted terms. You understand?
Yeah. His salary has gone up, but the cost of living has gone up more. So in real terms actually his salary has gone down.
Yes, it's very it's very uh uh yeah awful when when I when I also conclude that so what what could we do or how can we change that in order for the system to become more equitable equable and for for for people professionals just like you mentioned for them to to to get more out of the system than they currently get?
Yeah. Well, it's very difficult because the taxes are high. You understand? Someone in Europe who is a professional say he earns half a million or a million a year, he pays 50% tax. How can he save money with that with the taxes he pays? So I'm just saying as a social observer for me it's very depressing to see how the wealth accumulated to very few people and it's interesting that these very few people are not rightwing people. They they support the socialists because they know that the socialists will give them subsidies and they know the socialists can be bribed. They can be corrupted. That that is the main quality of the socialist. You can bribe them.
Yeah. So smaller government uh would also mean fewer opportunities to bribe and would eventually also lead to lower taxes and for more people to to have more at the end of the month and and and make it worth. But that governments don't want because the governments want to expand. And as the governments grow faster than the economy, the economy cannot grow much. Cannot. It's not possible.
Yeah, that's problem. Yeah. So maybe a final word of advice from from you for our viewers, Mr. Faber.
Don't listen to me.
No, that's uh that's the worst. As I said, I think I mean in my profession, I write a newsletter. I'm basically supposed to forecast the future. And yes, uh there were cases which I saw coming and so forth. and uh they enabled people to make money and there were other cases where I was wrong. So you know if I look at everything but it's difficult to say I was more right than more wrong because maybe I was once right where it mattered a lot and many times wrong where it didn't matter but but each reader or viewer he he he has a different interpretation of what I'm saying but basically I would be cautious with anyone one who predicts the future because we don't know and this is a theme I strongly believe after working for a long time if I think how will the world look like in 5 years time I tell you I have no idea I saw the rise of China and I wrote the book uh tomorrow's called Asia age of discovery that was 25 years ago go. And as you know, China has grown dramatically as has India. Every country that was communist and became capitalist has grown and flourished because the the worst thing anyone can experience is socialism. That is the worst. But the young people in Europe, they all want socialism because they never experienced the disaster socialism brings about. But anyway, we don't know how the world will look like in 5 years time. My impression is that asset values will disappoint because everybody thinks stocks will go up and properties will go up and this and the gold will go up. I take a different view. I think uh lot of assets will diminish in price. But you understand you and I and 10 other of our friends we each have a 100 and then asset prices go up. So the one of us maybe his asset value goes from 100 to 200 but the others they only go up to say 110. So the people with with assets that go from 100 to 110 they have become relatively poor compared to the one who has assets that went from 100 to 200. Do you understand?
Yeah. This is what has happened in the last 50 years of asset inflation. The 1% has become richer, much richer and the typical worker, the typical household has become relatively poorer has nothing. Now in a period during which asset prices go down, we all have a hundred. One of us of the 10, his assets will go down 90%. And maybe five of us will lose 90%. And you and I, because we're so smart, we will only lose 20%. So our assets go down from 100 to 80 and everybody else goes down to 50 and some go down to 20. Us that go down from 100 to 80 are becoming relatively richer compared to every one everyone else. And that is something people should think about. People always think what will go up the most that I want to buy. But you and I we should think what will go down the least. This is a different thinking. Not what goes up but what goes down and what goes down the least.
Yeah. That is what we should invest in in my view. You understand? Is a defensive strategy. I have enough money. The only worry I have is to lose it all. So I think how do I keep most of it? Not how do I only lose 20%.
Yeah. Interesting.
90.
Yeah. Well, if you allow me one final follow-up question then so it means that you expect a sort of deflationary environment then maybe like the 30s in the last last.
This is a this is a very good question because first of all it's very difficult to define inflation. I could say uh when stocks go up, when property prices go up, when stamps go up, when my book collection goes up, this is a symptom of inflation. But investors, they call it a bull market. When the price of cheese and butter and milk and beef and pork and wheat and corn go up, they call it inflation. But it's the same is a price increase due to monetary policies. And so in some cases we must distinguish are the price increases uh favorable for you and me or are they unfavorable for the middle class family. When the prices of good uh and insurance policies go up, it's unfavorable. But for you and me as stockholder, if we own insurance companies, stocks and the premiums go up, it's favorable because the profits go up. So, you know, they it's very complex to say that inflation is bad or good. for some people is very bad and for some people it's good. I know for whom usually financial uh prices and inflation are favorable. I know these people but I don't want to talk about it.
No, but it's okay. Yeah. But it's so then but if I understand correctly with all the money printing going on, inflation is sort of bound to happen. and also asset price inflation as well as consumer price inflation.
I suppose so. But I give you an example because this is something that preoccupies my mind. You know over the last say 50 years people bought properties and the property market is divided into commercial properties and into residential. In America, they are commercial properties. They went down 80% in value. 80 in value. Typically, they went down something like 50% in value in Chicago, in San Francisco, Los Angeles, and so forth. And that that is an example how and this was observed by Copernicus already. How when you print money the money can flow into this sector into that sector or into another sector and so the price increase are not evenly like this. No, here and then there and on so forth. And that creates an environment that is challenging for asset holders. I'm not that smart to know which asset price will go up the most. So, I diversify.
Right. Yeah, that's always a good advice. Well, thanks so much, Mark. Uh people can can read more at the gloomboomdoom.com. that that's that's the name of your uh of your report. Um I'll put it in the show notes. Uh I really appreciate the time you made today for me and uh
Uh let's see yeah let's do it again in the future. Take take care and um and hope to uh uh read many more interesting uh analysis from your from your hand.
Thank you. Okay. Byebye.
Bye-bye.