Did The Smart Money Just SELL The Stock Market? (Uncut) 02-07-2025

 Did The Smart Money Just SELL The Stock Market? | Marc Faber

But the typical American standard of living has been going down because his salary is going up less than his cost of living. Yeah, very good point. This is the fact and this is a fact that Wall Street doesn’t tell to the public because they want to induce the public to buy stocks from which they benefit.

Wall Street and the group around Wall Street, the lawyers, the accountants, the private equity managers and so forth, they all, and Trump himself, they all benefit from asset inflation, from prices going up for assets. You’re watching Capital Cause and my name is Danny. And today’s guest is the publisher of the Gloom, Boom and Doom report, Mark Faber.

Mark, thank you so much for coming on, my friend. It’s my pleasure. Thank you very much.

And welcome to this beautiful day. Yeah, it’s really nice out here too as well. But let’s go ahead and talk about finance, economy, markets, etc.

Let’s dive right in here, Mark. What is most topical for you? What is the top story that you’re most focused on right now? Well, there are many stories that I focus upon. Basically, my view is that Wall Street doesn’t want to, and the public doesn’t understand really what inflation means and what it is.

And in my view, there are two major categories of inflation or the symptoms of inflation. Inflation is an increase in the quantity of money and the fiscal deficits and so forth. But the principal symptoms are either you have very high consumer price inflation.

In other words, the price in your supermarket goes up or the price of services go up. Like if you want to take a train or you pay for a taxi, the prices of these things go up a lot. Or insurance premiums is a typical consumer price inflation symptoms.

Or we have other categories like asset inflation. When stocks go up, properties go up, and commodities go up, or house prices go up, and so forth. So these two major categories we have to treat differently.

And this is one of the viciousness of inflation. That in the system, when you print money, the money doesn’t flow evenly to everybody. It flows unevenly to the banking sector first, and from the banking and insurance sector, it flows on into other sectors of the economy.

It’s a cancel-out effect. Yes, but what then happens is that occasionally you print money, and the money doesn’t boost the asset prices that you would like to boost. In other words, the money could go into, say, coffee or cocoa, like in the last two years, or precious metals, or it went in the past into stocks.

But as we print money, we don’t know for sure whether Nvidia and Tesla will go up, because the money could flow into other sectors of the market. It’s like I always say, four years ago, who would have foreseen that commercial property prices would collapse as much as they did? You know, this is an unusual scenario that in a money-printing environment, suddenly commercial properties in America are down, in some cases by 70%. So these are very important things to focus upon.

And my view is that the asset markets in general are peaking out in the United States, and other asset markets, especially in Europe and in emerging economies, or in America, some sectors are depressed relative to the commodity. Oil stocks are cheap, or the miners, mining stocks are low. So some sectors are bottoming out, and some sectors are peaking out.

And as investors, we need to focus on what will go up, and what is not recognized, what is neglected, what nobody wants. That is what we’re looking for. But if asset prices have already topped, doesn’t that mean that… Not all.

Some are bottoming out, but some are peaking out. Right, right. So the broad market is what you’re referring to, correct? I’m referring to the magnificent seven stocks, the fund stocks, semiconductors, all these AI investment trades.

These stocks are peaking out. I wrote the report that Trump topped. The report was written in December.

I see. Won’t these assets deflating, these assets that you just referred to, won’t they also create a downstream effect on other assets as well? If you recall, in previous crashes, everything comes down all at once, correct? Or is it different this time around? This is correct, what you’re saying. Usually, that was the case in 1973, and in 2000, and in 1987, when they crashed, everything goes down.

But there is one exception to this rule. In 1989, the Japanese stock market was more than 50% of world stock market capitalization. It then went down precisely for 25 years until 2003.

But during that period of time, a lot of markets went up strongly. And when Japan went down in the 90s, the money flowed out of Japan into emerging economies, notably Latin America, and into the NASDAQ. NASDAQ stocks had a fantastic performance 1990 to 2000.

The best 10 years ever. And why was that a unique case? What was the reason for that? What you just mentioned before, that usually in a bear market, everything goes down. I’m just explaining that in the case of Japan, Japan, which was more than 50% of the stock market capitalization in the world, in other words, the largest stock market in the world, went down and others went up.

Yes, but what was the reason for that? Why didn’t it repeat history like the other crashes? What was so different about it? Quite frankly, I cannot answer this question precisely. I don’t know. I see.

Because the mood was maybe so convinced that Japan was a unique case of overvaluation. But a reason must have been that interest rates continued to decline between basically 1990 and year 2000. And there was plenty of liquidity because Greenspan was the Fed chairman and he made sure there was enough liquidity.

I see. To enrich his bodies. Do you see capital flowing into the U.S. markets, though, given the fact that there’s so many other foreign markets that are weak as well? Wouldn’t foreign capital want to come into the United States as kind of a safety play, more so into the Dow as opposed to the Nasdaq? Look, the whole world is gambling on Nvidia and the cryptos and the Tesla stock and so forth.

A bubble is always attracting capital from everywhere. Every bubble we had, you know, even in the tulip mania in Holland in the 17th century, sorry, in the 18th century, it attracted capital from all over Europe. Because the people today are well informed through social media and the Internet.

I know as much as you do about Nvidia and its stock price right now. I happen to have Bloomberg Traveler. But other people, they have other services like Yahoo Finance and interactive brokers and so on.

So they know the codes and they trade these stocks at the commodities or Bitcoins 24 hours a day. Yeah. Well, what do you make of this recent price action in gold? There’s a lot of talk about the LBMA being emptying out.

They’re taking four to eight weeks to deliver on their gold. Do you have any insights on that? What do you make of that situation? I mean, I never was, you know, a big conspiracy theorist. But some of my friends who are very well informed, they have argued for the last 20 years that London doesn’t have the gold it claims to have, you know, and that there is a shortage as well as for silver and most likely for platinum as well.

And we know that in the last 20, 30 years, the financial markets have grown like this exponentially. The global economy has grown like this. So the financial markets are much bigger than the global economy nowadays.

We can measure that by measuring the market capitalization as a percent of GDP. So when I started to work in 1970, the US stock market capitalization as a percentage of GDP was 25%. Now it’s close to 200%.

When it was 25%, when the stock market went down or up, it had no impact on the economy. Right. It had a little impact, but not a huge impact.

Now, in my view, if the markets go down, they’ll have a huge impact on the economy. Huge. But that, in my view, will motivate the Trump team, who are all rich people, not all, but most, to support the stock market.

They will print money, but then the currency will go. So we will have a lot of volatility. And as I said, my view is you’re not going to make money out of assets markets.

I mean, not the meaningful money. But I think gold and silver and platinum and those other commodities, the food commodities have started to wake up. I think we’ll keep that purchasing power.

I see. I’d like to take a moment to point my audience towards our partners over at ITM Trading for a second. Schedule your free, no-commitment-necessary strategy call with ITM and figure out what works best for you when it comes to your gold and silver allocation in portfolio.

It’s totally free. There’s no commitment necessary. You have nothing to lose.

Check out the link down below or call the number on the screen below as well. All right, Mark, speaking of Trump… Can I also indicate my telephone number? Oh, go ahead. If you want to, go ahead.

Absolutely. Well, sure enough. I like it.

You might have some people watching. He’s still alive. I like a peaceful life.

Yeah, yeah. That’s how it is over in Chiang Mai, right? Well, I mean, it’s the second largest city in Thailand and there’s quite a lot going on, but it’s not a dynamic city like Hong Kong, Singapore, Moscow, New York, London, Paris, Frankfurt, and so forth. Yeah, I’ve heard good things about Chiang Mai, so I might check it out one day.

Yeah, it’s a very nice city. It has a good nightlife and it’s very laid back and it’s inexpensive. I see.

All good stuff. Well, you mentioned Trump. I want to get your reading on Trump so far.

He’s been in office for a couple of weeks now, a little over a couple of weeks. What is your view on his tariff strategy? Let’s start off with that. He did get some concessions from Mexico and Canada, although some people say that those agreements were already in place before.

What do you make of him using tariffs as a negotiation tactic moving forward? Well, I have to give you the background. I would have voted for Mr. Trump in 2016 and I would have voted for him now because both the candidates in the opposition, Ms. Clinton and now Ms. Kamala Harris, in my opinion, are horrible people. Horrible.

So anything better than these people is, let’s say, an improvement. However, the problem with Mr. Trump is he’s an arrogant, no knowledge person. He takes decisions without having thinking through the process of the consequences of his decisions very carefully.

He’s very impulsive and he changes his mind. He’s an interventionist. Sadly, sadly, he thinks he knows everything better than anyone.

So the tariffs, by and large, are a horrible idea. Horrible idea. The tariff is a tax and it’s an unfair tax.

The economists in the 19th century already discovered that it’s an unfair tax. So they removed the tariffs in England, which were the Navigation Act and the Corn Laws and thousands of import duties on everything. I wrote a series about that.

That’s why I’m interested and I studied on the character called Heinz Haller. He supplied the academic, economic academic background to the value-added tax in Germany, which was introduced by the finance minister, Erhard. The book is not in a good condition because I kept it in a cellar and my house was flooded.

Wow. But this is the Bible about taxation. And I want to tell you, in taxation, and this was observed by several economists also in Sweden, you have to be very, very careful how to handle it.

Because if you impose, say, a sales tax on someone, he may not be the one who pays for it. And the tariff, the tax will be on the lower classes in America. That, I guarantee you, everything will become more expensive as a result of tariffs.

Now, he may not introduce them because soon he will notice that America may need China more than China needs America. Yeah, didn’t China retaliate? They may, they may not. Maybe the tariffs do not interest them very much because what Mr. Trump doesn’t know or forgets, at least half of exports from China to America are actually American companies that make goods in China.

So, I mean, you know, if General Motors produces auto parts or imports auto parts and there are tariffs on these auto parts, then of course the car in America will become more expensive. Do you want that? I don’t think we want that at all. Well, Mr. Trump, he doesn’t care.

He doesn’t care. So he has spoken about removing the income tax, however, which would be a huge benefit to the average person. Given your knowledge of taxes… No, actually, the income tax is… The income tax alone, if we tax everybody at 15 percent of income, it’s a very fair tax.

The socialists will come and say, well, it’s unfair that the poor guy pays the same tax rate as the rich guy. But this is an idea of the crazy socialists who want to level off everything. In capitalism, if everybody pays 15 percent, it’s wonderful.

But what do you make of the argument that an income tax is involuntary? You have no choice but to pay it. But a consumption tax, whether it be a sales tax or a price increase through tariffs, you have choice, right? You can choose whether or not to buy the product. Yes, especially if you have two children and your family eats.

You have a great choice not to buy any food at all. Yes, you can feed the whole family, like me, on beer. It’s a choice, yes.

And, you know, necessities of life, like pharmaceutical products. Yeah, you have a choice. Either you die or you have a colossal headache or you take a pill.

Yeah, well, clearly the government… You can also move out of the U.S. But now so many people are moving out of countries that they impose migration taxes. In other words, if you as an American leave America, you come and live in Thailand, you pay tax, massive. So based off of your knowledge… Don’t ever tell me that governments give a choice to people.

They want to enslave people, not give them choices. All the policies that they’ve implemented is to restrict the freedom of people. And most people are not interested in freedom.

They’re interested in a free lunch. And that’s why our systems have become corrupt. And the freedom of movement of people and economic growth has deteriorated.

Don’t tell me the U.S. is growing rapidly. Because if the debt grows by, say, I don’t know, $10 trillion in eight years under Biden, and the economy is growing only, say, by $3 trillion, where is the growth? Especially when you take into account inflation. Yes, of course.

But the government lies about inflation. I’m telling you, don’t ever believe a single word of what the government is telling you. They will lie to everybody about everything.

Yeah, clearly the government spending is overblown. There’s this initiative with Doge of wanting to cut all of these different forms of waste. We’ll see how well they do.

But in your view, in your expert view, your knowledge of taxes and so forth, what would you recommend to the United States as the best mechanism of collecting revenue? Would it be a 15% income tax straight up for everyone? What do you see as the best route? In my view, the best is a flat tax, 15%. But it’s only helpful if you say 15% tax and no deficits. The government is not allowed to have any deficits.

There are countries that have this in the Constitution. In Switzerland, our deficits are limited. Right.

I want to shift over to audience questions from my sub stack. This question is from Grisha. He wants to know, given that the world population is going to hit a peak of about 9 billion people in the next decade and start a permanent decline, given that our global economic structure is based on debt and expansion, does that mean that our economic structure is no longer fit for purpose? Well, it depends what you mean by economic structure.

As you know, we had until the 1980s in a large number of countries of the world, in the majority of the population of the world, systems of socialism and communism and planning economies. Then China began to open up under the open door policy of Deng Xiaoping in 1978. And then the Berlin Wall fell in 89.

And Vietnam also began to open up and adopt market economy principles, as well as India, finally, in the mid 1990s. And what has happened since then? All the standards of living of countries that had socialism and communism and now have a market economy and capitalism, they have improved. The standards of living of everybody in China and India has gone up.

And what have happened to the standards of living of countries like the Western European countries in America that gradually had this creeping cancer of socialism into their free market economies? The standards of living of the typical people, not the people who are in Newport Beach and in Palm Beach and so forth, in the rich areas, rich ghettos, but the typical American standard of living has been going down because his salary is going up less than his cost of living. Yeah, very good point. This is the fact.

And this is a fact that Wall Street doesn’t tell to the public because they want to induce the public to buy stocks from which they benefit. Wall Street and the group around Wall Street, the lawyers, the accountants, the private equity managers and so forth, they all, and Trump himself, they all benefit from asset inflation, from prices going up for assets. Yeah, and you pointed this out earlier on.

I believe you said the collective market cap of the US market is, what, 200% of GDP now? Almost 200%. Versus 25%, which is where it was several decades ago. Yes, in the 70s.

All right, next question is from David Cooper. His question is, there are many questions regarding the big Asian banks, but the main one is about what effect the tariffs will have. If they trade more and more outside of the US dollar, that would be good for them, right? I hope so.

I mean, the large banks in Asia are still the Japanese banks, and then we have large banks in Singapore and Hong Kong. In general, I have a positive view of these banks, but bear in mind that in Singapore the banks have gone up a lot in price already in the last 18 months. I mean, I’m mentioning this because everybody in the world was so negative about the emerging markets and about China and so forth, and yet the banks in Singapore have performed very well, and even the banks in Malaysia have performed very well because they were very cheap before.

So I like to buy things that are cheap and then wait until it becomes fashionable. So yes, I sort of like banks in Asia. I think the Thai banks are reasonably priced.

I see. All right. Well, before we sign off, I want to get your thoughts on what you can forecast ahead, given what we’ve seen so far from the Trump administration.

Again, it’s been about two to three weeks. Given what we know so far, what do you see laying ahead for the next year or so with Trump at the helm? Well, I want to say that forecasting is very inaccurate. I don’t know any forecaster who had a consistent, positive forecasting record.

But it’s clear to me that selected U.S. assets are very highly priced, and the expectations for these companies are very high. And when expectations are very high and the stock price is very pricey, there is plenty of disappointments that can creep up. And so I would avoid the magnificent seven stocks and the semi-conductors and anything that is popular.

And I would look at sectors and industries that are not popular and depressed and have a value character. Low-priced book, low-priced sales, and so forth. That is what I would do.

And that you find in emerging economies. Last year, one of the best performing markets in the world, the best performing country ETF was Argentina. Two years ago, nobody wanted to look at it.

2023, one of the best performing markets was Turkey. Nobody wanted to look at it beforehand. So these are the things I look at.

I think Latin American markets are reasonably cheap and some Asian markets are inexpensive. They’re not as cheap as they were in 2003 and 2009 during the crisis. But they are relatively cheap.

I understood. Anything else you want to talk about that we didn’t get to before we wrap up? No. It’s best in life to shut up once in a while.

Well, we’re ahead, right? All right, Mark. Thank you so much for coming on. Where can people find you if they want to hear and see more? We have a website, gloomboomdoom.com. Okay, fantastic.

We’ll have the link to that down below. I don’t know whether they should go on the site or not, but that is their choice. Yeah, I mean, curiosity killed the cat, right? Yes.

All right. Thank you so much for coming on. Thank you very much for having me.

And all the best to your viewers and listeners. Yep. Thank you so much.

Much financial success. Thank you. Definitely.

Well, if you guys enjoyed the show, be sure to give us a like and comment. Go, Mark, go in the comment section. If you disagreed with anything, however, do let me know.

I do read the comments. And finally, subscribe to the channel so you don’t miss an episode and check out our partners at ITM Trading. If you want to get specialized strategy sessions as it relates to your gold and silver portfolio, again, it’s free.

You have nothing to lose and there’s no commitment necessary. So with all that said, thank you guys for watching and I’ll catch you in the next episode. Bye, y’all.