Friday, March 12, 2010

Marc Faber: interview

Marc Faber was recently interviewed by the Financial Times for their video series, "View From the Markets". Here's a quick overview of some of the topics and themes covered in this 4 part discussion:
  • Marc warns of a partial US debt default, in which the government denies payment to foreign bond holders due to the overwhelming burden of future interest payments on the debt. Usually, governments faced with this situation will "monetize" the debt and print money to inflate away the real debt burden.
  • Irrational monetary policies and artificially low interest rates have fueled recent asset bubbles and laid the foundation of the global financial crisis. We continue to see these artificially low rates globally, which leads to misallocation of capital, as in the case of China currently.
  • Faber does not agree with targeted "excess profit" taxes on industries such as banks or oil companies. Instead, he points out that simply having high real interest rates would encourage savings and discourage speculation and the formation of bubbles.
  • Stocks (particularly US shares) may continue to go up in terms of local currencies, but are unlikely to make new highs in terms of gold over the longer term. Marc is far more optimistic about the outlook for Asian shares and emerging markets. He feels that returns from emerging markets will outpace those of Western developed markets over the coming years.
Tune into the full video interview linked above for more. Enjoy your weekend, and thanks for reading!