Transcription
Good day everybody. This is just Steve Yang here with Natural Resource Stocks where we mine for stories that matter. And joining me today is Dr. Mark Faber, editor of the Gloom, Boom, and Doom Report. Mark, it's always a pleasure to have you and to get your perspective. Thanks for being here.
Thank you very much for having me, and good day to you listeners.
Mark, you're in Thailand, so I really appreciate the time you're making here, but I want to get your perspective. Uh, where do you see the biggest cracks right now globally? Is it liquidity, stagflation, something else? And what breaks first?
Well, I believe, and most people will disagree with me, but I believe that liquidity has tightened for the simple reason that so many asset prices have declined. I mean, if you look at, uh, say, real estate, people have less liquidity because prices went down. And at the same time, interest rates, uh, since 2020, have been increasing. So people who borrowed money against their homes at variable rates, uh, they are being squeezed. And then you have the Generation Z, they are being squeezed because they are big players or speculators in the crypto markets, and most cryptocurrencies have been hit very hard. I mean, down 50% or more. So I think that there is some liquidity there that has, uh, occurred. And more recently, if you look at stock prices, okay, the magnificent seven and the semiconductor stocks have sort of held up, uh, but also among them, there has been some damage, and many other stocks are down significantly. The stocks that have recently performed are value stocks, uh, oil shares, and, uh, the mining companies until just recently. But recently, they also got hit and so forth. And then there, we have the Middle Eastern war. Uh, the sovereign funds of Middle Eastern countries, say, let's look at the Emirates. The Emirates have less cash flow. There's no question about this because the oil exports are down, and one of their main components of income is Dubai, and Dubai has gone into hibernation at the present time.
So, a lot's happening. Uh, do you see stagflation being an issue right now, and, uh, where does that lead us with the liquidity issue that we're having?
Well, I don't believe that we are in a stagflationary environment. We have been for years in a recessionary environment where the typical household's standard of living is going down. In other words, in nominal terms, the government should show GDP growth rate, but GDP is a bad measurement of standards of living. And, uh, I think that if we really measure how much people have at the end of the month, we can see that actually, it is, uh, diminishing because roughly 70% of US households, they live month by month, paycheck by paycheck, they have no reserves. So nobody can tell me that the, the prosperity is to be found among the typical household. Yes, people who have assets and are involved in the financial field, like myself, we benefit from rising asset prices, uh, and, uh, we become wealthier. But people that don't have these assets, they become poorer. Yeah, the richer get richer and the poor get poorer. Uh, and you mentioned a lot of people have. I love when you smoke a cigarette, Mark. Uh, Mark, I want to get to the cigarette part. Like, go ahead and smoke.
Well, I'm at home. You know, I'm home. I'm not disturbing anyone.
No, [laughter] I wish I could smoke there with you. Uh, but, uh, you know, markets and geopolitics often feed off each other. Uh, do you think the financial instability is triggering the geopolitical tension right now, or is the geo, you know, is it the geopolitical events that's creating the financial stress?
This is a very good question, and I have no precise answer, but I think, uh, if I look at this whole stupidity of war in Iran, uh, I think to some extent, not maybe to in every respect, but to some, at least Netanyahu wanted to distract the attention from the failure and the human rights abuses in the Gaza Strip. And Trump, he was sort of forced into it by, uh, the Epstein files that must have contained, uh, a whole book on Trump's relationship to Mr. Epstein and the time he spent with him, and that he wanted to kind of hide from the public's attention. But to conduct the war for that is really a stupidity that is beyond any measures. And, but, but I mean, I would have voted for Mr. Trump any time and still would vote for him because the alternatives are so bad. But he's an, he's an imbecile. He's an idiot. He's plainly stupid. And, uh, that is a, in a case of war, of course, disastrous.
So Mark, you're telling me that we have an imbecile for a president, and that's the best option? [laughter]
Yes. I'm, I'm sorry to say. I mean, every American must scratch his head and say to himself, what the hell is happening to our democracy if we can't put up someone who is a more, a more suitable person and more diplomatic than Mr. Trump is, and less of a liar. I mean, politicians, they are, they go through the school of liars, and so they become expert at lying about everything. But Trump does it so blatantly and contradicts him [laughter] within the same speech so often that [clears throat] you scratch [laughter] your head.
Like, is anybody else seeing this? [laughter] You heard that too, right?
I don't know, but I see it.
So, with, with all this stuff that's going on in Iran right now, you know, where does the capital usually go? And, and is that happening right now?
Where the what? The capital? Where's the money going?
Well, that touches on the liquidity issues that you just, uh, brought up. In an environment where liquidity shrinks, the liquidity in the past, I'm saying, not always, but usually has gone into cash, and it's gone into bonds. But the problem is that we're entering this period of illiquidity without that much, uh, bond prices being low. In other words, the bonds, say, the 10-year yields now slightly over 4%. If I look at Mr. Trump, if I look at the US deficit, the the budget deficit, the fiscal deficit, and I look at the trajectory of debts in the US, which cannot do anything else but going up because they need money to, for social security and for all kinds of benefits, and for the army. And increasingly, the government needs money to pay the interest on the existing debt. And if interest rates are already low now, and all this happens at the same time, it's difficult to see how interest rates will go down. Now, I have written in my reports that I own bonds. I always own some bonds, but the maturity changes. I mean, I can own bonds, we call them notes or bills that are 3 months or 6 months or one year, but I can also own bonds that are 30 years. Now, the reason I own 30-year bonds, I think the Fed, if Walsh gets appointed, under Trump's pressure, in theory, they could slash interest rates to zero. Okay. Now, the B market, well, they can do it. Uh, they can control short-term rates, but, uh, the long-term rates, they don't control. And since, uh, since September 2024, the Fed has reduced interest rates, they cut the Fed fund rate repeatedly, and what happened to the bond market? It didn't rally, but bonds went down. In other words, interest rates on the long end went [clears throat] up. So, this tells me the Fed, to a large extent, has lost its power. But they can still cut short-term rates. And in theory, in theory, I'm not saying they're going to do it, but in theory, the government could, uh, reduce or stop altogether the issuance of long-term bonds of 5, 10, and 20, 30-year bonds and issue all short-term. [laughter] You understand?
Yeah.
So if they issue everything short-term, we'll have an interest rates on the debt that are much lower than at the present time. But since a lot of the debt is owned by foreigners, specifically Middle Eastern institutions and Chinese and Japanese and so forth, when the interest on the debt that they can buy is very low, they may choose not to do it, and then the dollar collapses. So I was talking yesterday to someone who is, uh, has also been in the business for years, and we kind of agreed that there's really no possibility of a favorable outcome. [laughter] Sorry to say, in each instance, they're going to have to print money just to pay the the interest on the existing debts and so forth. And in my view, this will lead to inflation.
Okay?
But you understand, since the beginning of the year, the long bond in America, there's a TLT ETF. Everybody looks at the TLT ETF to determine the strength and the weakness of the bond market. The TLT is down 1.6%. The NASDAQ is down like 9%, and many stocks are down 20% in the first three months of the year. So my view is I'd rather have bonds. I lose some money, but this is my view. After 40 years of asset price inflation, I call this asset price inflation. I think that asset prices will go down for everything, including gold and silver and stocks and bonds and everything, down collectibles.
But some things will go to zero. All Trump-related companies will go to zero.
You are about that.
What didn't you say Trump-related companies? Can you expand on that?
He has many companies where he's involved in. Based on the past experience, they all will be zeros. But anyway, let's talk about the ones that will go down less. I think gold and silver and precious metals and platinum, they also go down. But if the Trump companies all go to zero, and you and I own gold, and it goes down 20%, then relatively speaking, we are doing well. [clears throat]
I agree with that. But, uh, help me understand why the Trump companies go to the zero.
Because whatever he touches, he [laughter] up. This is my view. Whatever Trump touches, he up. I think the last time you and
I'm not saying the others are better. I'm not saying the other politicians are better.
But it would be very difficult to be much worse than he is as a businessman.
Yeah, I think last time.
I give him credit. I give him credit. He got elected twice [laughter] against all odds. But it's not a sign of great wisdom of the American public that people around the world should notice.
It's a healthy sign.
So based off what you're saying though, he only won because of the lack of alternative options. [laughter]
Yeah.
Uh, what?
I mean, last night and I.
Yeah. Yeah. So you and I, we, uh, actually kind of want to talk to you about the deflationary, inflationary part. Uh, you, we joked, I was laughing because you're smoking. I wanted to ask you this. I mean, last time we joked that, you know, smokes and whiskey were the your essentials, the things that you need. But more broadly, you expected at the time, 2026, to be deflationary on what we don't need and inflationary on what we do need.
Uh, has that played out accordingly after Q1? I mean, has anything shifted? I mean, it seems like that's the long-term view, but how imminent is this?
Uh, sorry, I didn't get, uh, the question where.
Like, like deflationary for things we don't need and inflationary for things what we do need. Is that how you see things?
Yes, I think that is a good point. I mean, I was just reading today about the price increase of chocolate [laughter], and I mean, I don't eat chocolate, but, uh, many people, they like chocolate, and it's a present that is being handed out at Christmas and for Santa Claus and for Easter bunnies and so on. And that price has more than doubled in five years because partly because the price of cocoa has gone up. That was two years ago. And then cocoa came down, but then the price of coffee went up. And the companies that make these things, they use the price increases to increase the product prices. But when the price of the commodity comes down, they don't reduce the price anymore. But the price can go down when the demand shrinks. And if we look at rich people from around the world everywhere invested in commercial properties, and what has happened to pro commercial properties? Many, many have gone down by 80% in price over since 2018%. And the reason is that life has changed. You know, a lot of people, they stay home. They don't go to restaurants anymore. They order the food from fast food stores and eat at home. And, uh, they don't go shopping to department stores. They may go occasionally to have a look around and, uh, to have a drink in the bar or whatever. But in general, most people order goods from the internet. In other words, Amazon and so forth. And that doesn't need expensive, uh, locations in the best places of cities in the world where the traffic is heavy. That can have the warehouse anywhere.
Yeah. I, I mean, in terms of what we need, I want to look at energy real quick. Let's talk oil. Uh, oil right now is 108, uh, just north of 108 as we speak. Uh, it's gone down a little bit today, a bit, but, um, still pretty high. Uh, how much of the current tightening is cyclical, and how much comes from the geopolitics and the energy disruptions that's going on in Iran?
Let's say, uh, of course, people will say oil is expensive, but it depends how you measure it. If you measure it in gold, then oil is not terribly expensive. Say we start with an energy price of $10 in the early 1970s. It had been lower than that before. But say it was artificially low, artificially kept low by the international oil companies until 1973, and then we had the increase by OPEC. If we start at $10, and now the price is over $100, up 10 times in, uh, almost 50 years. It's up less than gold. It's up less than silver. It's up less than your insurance premiums, that I guarantee you. [laughter] It's up less than the stupidity of politicians. M. So I, I think actually oil has em has just embarked on another upward leg in prices, and, uh, we could be going up for, I mean, I wouldn't be surprised to see the current oil price being the next normal that we're around here, and then we fluctuate up and down depending on demand and supply in the world and so forth. But if I look at the per capita consumption of oil, and I look at it at the US, and I look at it at China 20 years ago, and at China today, and at India now, and India is 1.3 billion people. Mr. Trump, he doesn't know that, but I, maybe he watches your show, and then he can learn something. You know, I'm happy to [laughter] teach him something about the world, how the world looks like in terms of geography and in terms of population. [laughter] But anyway, you know, the structural demand for energy will go up. And it is true that some alternate forms of energy are gaining market share. But I'm sorry to say, to make a blade of a windmill, you also need energy. And to transport the bloody, uh, wing of a windmill, you need a truck. That is a huge thing, you know. [laughter] I mean, people have a kind of the impression that you can get rid of oil and diesel and gasoline. This is simply not the case. It won't happen. And then people talk up, I have an energy-saving car, an electric vehicle. Okay. The electricity also has to be generated from somewhere. Yeah.
So with the energy prices going up, with, uh, the liquidity issue that we're facing, and where do you see things going with Iran? Let's say, uh, what's [snorts] how does this play out, and what are investors maybe not prepared for that you think may be a little bit obvious, or, you know, what you think is likely going to happen?
Well, I mean, I'm sorry to say, I don't think this conflict will be over in like three weeks. I think it can last forever because the Israelis, uh, want the solution, and [clears throat] their solution is actually to get rid of an Iran that could be hostile to them. You understand? That means the complete destruction of the country or the domination of the country. I mean, Netanyahu is not exactly my model [laughter] of a, a desirable leader. I think he's a, he's sort of a mad Zionist who has a very, very evil ideas about the world and about human rights and so forth. But of course, my Jewish friends disagree with me, and I understand to some extent their views. But, uh, a preventive war is like, as Bismarck said, the German chancellor at the end of the 19th century, he said, a preventive war is like committing suicide because you're afraid to die. [laughter] You understand? So I think this war is a complete disaster. And about the last that I want to make sure everybody understands, the last thing anyone would want is an Iran that is dominated and ruled by the duo Netanyahu-Trump. Do you think the Russians would like it? Do you think the Chinese would like it? Do you think the Arabs would like it? Nobody would like it. That is clear. And that's why I don't think there will be peace anytime soon. How is Trump going to tell the Israelis, stop bombing Iran?
Yeah. Well, Mark Faber, tell you. Yeah. For sure, already today, Iran has strong support from other countries. Maybe not yet manpower, but the Bash in both, uh, Pakistan and Afghanistan, they're of course, uh, in largely in favor of Persia, of the Iranians, and they will support them with manpower if they have to. And these are experienced fighters. A, a land force in Iran is going to find very strong resistance, I assure you, like in Vietnam.
Well, it seems like here we're here for the long haul. Dr. Mark Faber, Dr. Mark Faber, thank you so much for your time. Uh, Mark, Dr. Mark Faber is the editor of the Gloom, Boom, and Doom Report. Uh, check that out. Uh, Mark, thank you for being here. I enjoy it. Uh, I love your energy. And, uh, everyone else, stay smart, stay curious, stay disciplined, and be careful out there.
Thanks, guys.
Thank you. Bye-bye.