Thursday, September 27, 2007

Faber: bubble in commodities, but buy gold

Marc Faber in ABC News, Tuesday:

Very simply, it will end in a catastrophe. We never had, in the history of capitalism, a global, synchronised, boom. If you travel around the world, everywhere you go, there are booming conditions.

Now if you look at the last 200 years of financial history, you had investment booms and mania in relatively small sectors in the economy: in the US in canals and railroad in the 19th century, some regional real estate markets. And then in the 1920s you had the stockmarket boom, and in the late 80s you have a silver, gold and energy share boom, and in the year 2000 we had a boom in tech stocks and in Japan in the 80s in Japanese shares. And each time these bubbles burst, they had an impact but the impact was largely sectorial or regional and not affecting the whole world.

Now, we have a bubble everywhere. We have a bubble in real estate prices, we have a bubble in stock, we have a bubble in art prices, we have a bubble in commodities.bigger the bubble, the bigger the bang will be. If someone argues we're in a global synchronised boom, I agree entirely. The consequence will be that the next boss will be a global synchronised boss.

By the way, I like that mistranscription, it conveys his Europeanness.

The southern Germans are comfortable with the themes of pain and loss, as you'll know if you've looked at the Meglinger painting on Dr Faber's GloomBoomDoom site. D.H. Lawrence wrote of the sensual agony in the little roadside shrines in interwar Bavaria. This is not simple morbidity - unlike modern crime/action films - but a sign that you can rise above suffering, instead of avoiding it.

A Viennese taxi driver explained to us the difference between Austrians and northern Germans: "They say, it's bad, but it's not hopeless; we say, it's hopeless, but it's not so bad."

Back to our muttons. Here he is again, quoted from various sources via Resourcexinvestor:

"Investors have to look for assets which cannot multiply as fast as the pace at which the Fed prints money."

... He advised buying gold
to defend against monetary inflation... he recommends holding physical gold bullion investments in gold-friendly countries such as Hong Kong, India and Switzerland. He counsels against holding gold in the US for fear that it might be nationalized by the government.


Wolfie said...

Some highly amusing anecdotes for the financial pessimist.

Well, what can we do now but laugh about it?


Hi Wolfie: it's not so much pessimism as muted outrage. I think the situation could still be rescued.

We need to stop our governments stealing money through inflation to pay today's bills and beggar tomorrow's children; greatly reduce the size of government; cut wasteful practices of all kinds; and accept that we will be less rich than we were - materially.

Having grown up in the 60s/70s, when we had less stuff, I know that you don't really need that much of it. But increasing social inequality, broken families, unemployment, and the despair implicit in much modern entertainment (which is almost a 24/7 propaganda machine) are a recipe for great unhappiness.

Wolfie said...

Yes indeed. Being of the same generation as yourself I understand that only too well. However I am not as optimistic as you can it can be stopped by democratic means, you even touched on why that is in your comment. How could the media be so coordinated with the economic, social and political changes which we have witnessed? (that's a rhetorical question) If these various components of society are indeed independent then there could not be such coordination. Complicity through shared interest maybe.


The snowball falls down one side of the ridge or the other, and then gathers material as it falls. I don't believe in comspiracy theories so much as the human tendency to "go with the flow"; but if the flow tends to disaster, we do have to conspire to stop it.