Marc Faber On Bubbles, Markets & Inflation (Uncut) 02-14-2025

Marc Faber On Bubbles, Markets & Inflation

We are in history in an unprecedented asset bubble. I think the U.S. is in a terminal phase of a bull market. I call this the Trump top.

A central bank that prints money is a criminal. That is the word, criminal. Welcome to Speak Up on the Wealthion Network.

I am your host, Anthony Scaramucci, and joining us now, longtime legend in the investment business, somebody that’s been to our conferences a few times, Mark, so thank you for that. It’s the legendary Mark Faber. He publishes a well-known letter.

It’s the Gloom, Boom, and Doom Report, which, of course, I am a subscriber to. He is a contrarian, and he’s somebody that we should all listen to for so many different reasons. The main one is you’re right a lot.

You’re right a lot, Mr. Faber. Mark, tell us first how you got into finance, why this has been a dedication of yours for almost 50 years. How many years, Mark? More than 50 years.

More than 50 years. But actually, what happened is when I was studying, I was ski racing, so I was earning some money from the ski races, and I participated in several World Cup races. But by the time I finished my studies with a PhD at the London School of Economics, I sort of had some money, just some $20,000.

And I thought, okay, I put it all in some stocks, and if I win, I travel around the world, and if I lose, I go to work. So I bought Penn Central and Lytton, and both went down. They have gone down by 90%.

They went down another 90%. And Penn Central went bust. Then it was restructured, but Lytton was performing very well.

But anyway, I started to work, and it was very simple. I didn’t know what to do, and I went for different job interviews. And I took the job that paid the most.

That was an American investment bank. Well, I love that part of your story. But you’re seeing the world, to me, it’s almost like you have a realism about you.

So some of us are Fed-centric. I would say that my investment career has basically been Fed-centric. Fed’s lowering rates.

I don’t fight the Fed. I get along the markets. But I think you see the world a little bit more from an old-school neoclassical economic theory.

So tell us where we are right now, sir. Well, some people think that we are about to end World War III. And the situation in the Middle East is very tense.

I mean, the world looks at the U.S. differently than Americans look at America. And you said you are Fed-centric. I am a person who already as a child, I was maybe eight years old, went to Yugoslavia.

And I wasn’t an economist at the time. But even as a child, I could see the incredible poverty compared to the Western world in the 1950s. Because the Western world, especially Switzerland, had become already reasonably prosperous.

Whereby, I have to say, my father was a famous surgeon in Zurich. And he had all these world champions, the cyclists and the footballers, the gymnastic people and so forth, as clients. And he always said he wanted to say that someone was very rich, one of his friends.

He said, he is a millionaire. Who gives nowadays about millionaires? The money has depreciated incredibly. But this is not what I wanted to talk about.

But then as a student, I was ski racing. And we frequently went to ski races in Eastern Europe. And I saw the poverty there.

And then I went to Hong Kong and I met my wife. And then we went to Russia in 1980. And I could see they had markets where people would line up to buy rotten tomatoes and apples and carrots and so forth.

And I went to China. The whole country was in incredible poverty. And everywhere in Eastern Europe, people were depressed.

And what I want to really emphasize here, the young people today who won’t vote for the socialists and the rich people who vote for the socialists are a disaster because they haven’t seen the oppression that occurs on the socialism and capitalism. This is the essential ideology of freedom and of prosperity. That I want to say.

This I’ve seen with my own eyes and therefore I can judge it. You go to China today, you go to India today, Vietnam, Russia, Eastern Europe. Everywhere, the standards of living have been lifted by the capitalistic system and the market economy.

That has to be told to the young students who always vote socialists. And to the academics at universities who are mostly socialists because they’re jealous of uneducated people being successful in business. Well, I obviously agree with everything you said.

We could probably end our show right there because I think it’s so declarative. But I guess the problem with our society is that we live together. And so we have capitalists and we have socialists and there’s always a struggle.

And we have monetarists and we have Keynesians. And so there’s always a struggle. And you mentioned about the depreciation that’s going on.

For myself, I grew up in a blue-collar family. So the inflation is a very regressive tax mark for people that don’t have assets. And so what I’m worried about is there’s a big strain now in the Western nations, particularly the United States, where the blue-collar people feel left out.

They feel like they’ve worked hard. You give them the money, the money’s worth 10% less in a year and they can’t catch up. And it’s almost like you’re stealing their time and their labor from them.

And so I guess my question is, where do you think we are in the society in terms of… I don’t know. I mean, you know, when people get unhappy, you get a lot of political upheaval. You know, I always tell my capitalist friends, take care of the people that are in the lower and middle income so you don’t end up with too much socialism, frankly.

Look, your observations I fully agree with. But the cause of inflation, as you know, is government fiscal policies. In other words, you create deficits.

And you have an accomplice in the form of your central bank that you followed for the last 40, 50 years. And they are printing money. And I mean, I have so many books and read so many literature about the subject.

A central bank that prints money is a criminal. That is the word, criminal, because they impoverish by purpose the lower income recipients and the middle class. And they enrich the asset holders who were born already with money.

Or who were favored by the government through policies and so forth. I mean, I have this book and I recommend it to all of you. This is The Economics of Inflation by Bresciano Turoni, okay? Anyway, that describes the social impact of inflation.

It also describes how stocks and gold performs during inflation. It also describes the concentration of wealth. This is what has happened.

Money printing favors people like me. I have assets that favors people like you. You have also assets and destroys what you call blue-collar family.

And another book that I highly recommend. Of course, the academics will never talk about this. Because it’s not in their interest.

They want interventions. The government says this, that, that. And the government, as we know now, and it’s being documented, is stealing from people all the time.

But this book describes socialist capitalism and democracy. And the capitalistic system is not perfect. It has also some disadvantages.

But it’s still the fairest system. Thanks so much for watching our discussion here on Wealthion. If you would like help with your wealth efforts, please head over to wealthion.com for free portfolio review.

Well, but in that book, you’re referencing Joseph Schumpeter’s book. He talked about creative destruction in that book. We don’t allow that to happen.

You know, during the financial crisis, the government stepped in and prevented the destruction, right? We encourage the support of useless enterprises, among others, with tariffs. He’s allowing people to take risks. But where do you think we are now? Are we in the gloom, the boom, or the doom? We are, in history, in an unprecedented asset bubble.

Because the fiscal deficits combined with money printing have been very favorable since 1981 for bonds, for stocks, for commodities, for real estate. Now, recently, and this I have to mention, here we have an example that money printing doesn’t always help. In the last five years, commercial properties have tanked, although money printing has continued at a very high rate.

So if people say, oh, I just buy stocks because of money printing, it will depend what kind of stocks you buy. You know, there’s some markets like the US. I think the US is in a terminal phase of a bull market.

I call this the Trump top. And from here on, and here we have to adjust the value of stocks for the rate of inflation. You talked about inflation around 10%.

I agree with you. I think for most households in the US, it’s been 5% and 10%. But the Fed, the 10-year bond yield is at 4.5%. So interest rates are strongly negative.

This kind of favors for assets to go up, but not all assets. And number two, against gold and the hard currencies, probably these assets will go down. I think the dollar is significantly overvalued.

Yeah, well, I mean, that happened last year. Obviously, gold was probably the best performing asset last year. You know, it’s outperforming all these operating companies.

Well, coffee was one of the best performing in Argentina. Because the media, the media is a catastrophe in the Western world. They’re biased and they support the government, social policy.

But the best performing ETF last year, country ETF, was Argentina. Because the president dismantled the government and cut expenditures. And so the rate of inflation went down from something like 20% per month to now 4%.

And the stock market went ballistic. Yeah, well, I mean, that’s what Elon Musk is obviously trying to implement something like that in the US. But my question is related to assets like gold.

What are your thoughts there over the next couple of years? And what about Bitcoin? Do you have an opinion on Bitcoin? It is the favorite. Cryptocurrencies are the favorite of young people. They’re less interested in gold.

But I prefer physical precious metals. Now, I have to say, and we don’t have the time to talk about, because it would take about an hour to explain, the advantages of cryptocurrencies, disadvantages of precious metals, and the advantages of precious metals. That’s also to do with the transferability.

But as a store of value, in my opinion, gold, silver, platinum are the more desirable assets. But you like Bitcoin or you don’t like Bitcoin? Bitcoins. You like it or you don’t like it? Well, I traded Bitcoins from time to time, but I’m not, say, someone who would store my money in Bitcoins.

Okay. All right. No, that makes sense.

It’s a generational philosophical issue. Let’s talk about, before I go to the outside questions, let’s talk about the US-China relationship. What do you feel there in terms of the current tension? And is there an opportunity to heal that relationship or will it worsen? In my opinion, the US would greatly benefit from having a very friendly relationship with China and expand the trade.

I mean, the fact is simply, the man on the street in the Western world has been brainwashed and believes that the evil Chinese, they have low salaries and they undercut the salaries of Western workers and this and that. This is all nonsense. The salaries in China are, of course, far higher than in Bangladesh or India or Vietnam.

But the advantage of China is that you have a group of people who are highly educated. Do the tune, say, America produces this many engineers every year or physicians or mathematicians and China produces 10 times more. And you look at international service, these are not service made by Chinese, but by international groups.

The best universities in science, technology, mathematics, physics, and so forth, out of the 10 best in the world, normally six are in China. Six. Of course, Harvard is the best university overall, but this has to be given to Harvard.

What are the reasons? I mean, if someone tells me that Harvard is the best university, I have to laugh out loud, because I know how many of these Harvard people have bankrupted companies. Right, right. Now, listen, believe me, I went to Harvard.

There are people in my neighborhood that are putting in sheetrock that are as smart as some of the people I met at Harvard. All right, let’s go to the outside questions. Let’s take some questions.

What has been the most surprising or unexpected global shift you’ve witnessed? This is Vera from United Kingdom. Yes, I want to say that that is something. There are many things that have surprised me a lot in my life, but one of them is when I went to school in my final years, interest rates in 69, that’s the year I kind of wrote my thesis, under 10 years, treasury bonds were around 6%, because inflation had accelerated during the Vietnam War and the social programs of Johnson.

Now, in the 70s, these interest rates, and I mean, I was a friend, Sue, of Sidney Homer. He wrote the Bible about interest rates, the history of interest rates, and through him, I met Henry Kaufman, and we became friends and we still correspond nowadays. And interest rates went to over 15% on the 10 years treasury.

The high was 15.84, and deposit rates were around 20%. That surprised me. But at that time, bonds were considered certificates of confiscation.

And I would never, although I had studied about the character called Silvio Gesell, who in the 1910s, 1920s, had written about negative interest rates, but I personally, I would never have thought that interest rates could become negative. Number two, when I went to China the first time, and I saw this incredible country and the poverty and the choices in departments, you could buy a blue suit or a green suit, and that was it. There were no choices.

You wanted a taxi at the hotel desk, you wanted a taxi, and they ordered the Lanzarote. And that, in essentially 40 years, the country has come this far with the modern infrastructure. It’s incredible.

I have to say, this is, I mean, for me, a mind-boggling event. And the third thing, it shows how stupid I am. I never would have thought that with a mobile phone, you can send a picture to you.

I was not born in this environment. I was born in the environment and started to work in 1973. The most popular stocks at that time, as you remember, were the Nifty Fifty in America.

Among them, Polaroid, Dr. Land, and Kodak. And both of them essentially disappeared. So the technology progresses, but not all companies benefit to the same extent.

Xerox was also one of the most popular stocks, digital equipment and so forth. Sears, JCPenney were also among the Nifty Fifty. So there are lots of things that have surprised me.

Yeah, I know. Listen, I’m old enough to remember the Nifty Fifty. And the world, look at the top 50 stocks today compared to 50 years ago.

And that’ll be the same 50 years from now. Okay, let’s go to the next question. If the Fed had to choose between letting inflation run hot… This is a good question, actually.

If the Fed had to choose between letting inflation run hot, Mark, or crashing the stock market with rate hikes, which path do you think they’ll take? This is Frank from Texas. Frank, you’re my man. I think there’s no hope that the Fed would crash the stock market voluntarily.

Especially not under the current administration. You look at who is in the administration. They’re all billionaires or rich people.

They all own stocks. Do you think Elon Musk wants to crash the stock market? No way. Every society in history, that I guarantee you, every society has chosen the easier way of, as Anthony said, tax is an inflation.

It arises inflation because the government doesn’t collect it in official taxes. Because it would be painful for a politician to go to the people and say, okay, we have to increase taxation. No, people wouldn’t vote for him.

Or it would be painful for someone to go to the people and say, look, we have to tighten our belt. We’re going to cut all the pensions of the policemen and the veterans, the firefighters and so forth. Nobody will get elected.

They have a revolution. So the easiest way is just to print money. And I think this printing of money will lift assets.

But as I explained, we had money printing and commercial properties went down. Because the problem is money printing, and I want to spell this out, is affordability. You know, like in housing, according to Goldman Sachs indices, housing affordability is at the lowest in history.

The young people don’t earn enough money. When I started to work on Wall Street in 1970, I mean, I could rent a flat easily with my salary, and my salary wasn’t particularly high. In Zurich, I paid in the center of the city.

Yeah, okay. My family moved through. I had some connection to the owners of the properties.

But I paid about 15% of my salary as a starting salary for an apartment in the center of the city. And a nice apartment. Nowadays, you pay 70 or 100% of your salary as a tradie when you start in an investment bank or so.

Let’s go to the next question. It’s a great question. Thank you, Moore.

Which sectors do you think will be the biggest winners and losers in the next decade? This is Lucas from California. Lucas, I wish I knew. I mean, I think what is happening in the markets is very interesting.

Because as you know, the US stock market has outperformed Europe and emerging economies for the last 10 years. In some cases, actually more than 10 years. In some cases, maybe five years.

And these markets have gone down to some extent, or also in absolute terms. So you look at Chinese stocks, they’re at the bottom, and America is up in the sky. So my view is that some… Let me rephrase it.

In Japan, in 1989, the Japanese market was 50% of the world’s stock market capitalization. At the time, I thought that Japan would go down and that it would drag down other markets as well. But no, I was wrong.

The Japanese market went down and the NASDAQ went ballistic. So my view is the US could go down and markets like China, Hong Kong, the Asian markets, Southeast Asia, Indonesia, Thailand, Vietnam, and so on, could go up. And especially, I believe that Latin American markets are inexpensive.

So those are in a world war. So Latin America is out of sight of the world war theater. The war theater will probably be Middle East, Central Asia.

Because I doubt, I have some well-informed friends, they think an attack by the US-Israel on Iran is imminent. If that happens, and they want to create the greater Israel scheme, I think that it will not be welcomed by Russia and China, because China depends on Middle East and oil. So whatever happens, who knows? Plus, say, if Israel takes the Gaza Strip… I mean, China could argue, well, if they take the Gaza Strip with American help, why shouldn’t we take Taiwan? Why shouldn’t we take Cambodia? Why shouldn’t they take Laos? And why not Thailand? Yeah, I think that’s really where the hypocrisy is, right? I mean, I live here on Long Island.

Imagine somebody told me I had to move off of Long Island. I don’t know. People have to see things from each other’s point of view.

All right, let’s take another question. Mark, what’s the best piece of advice you’ve received in your career? This is Charles from Canada. Yeah, that’s a wonderful question.

Well, I think a good piece of advice was, you know, that in the long run… I mean, I know I’m a friend of Eddie Ardeni, and his track record is actually quite good, because he says, statistically, the market goes up because of money printing, and because the money printing, of course, helps corporate profits and so forth. And this is true. I mean, for a long time, I was a very good friend with Jim Janos and the short sellers of this world.

And I really lost a lot of money on the short side. But then someone, a military expert, he was a colonel in the Swiss Army. He said, Mark, often in life, if you’re convinced of something, you do the opposite of your conviction as a military strategist.

And so I closed all my shorts in 2003 and went along the markets in Asia. And that was very rewarding, because India at the time was very cheap. Hong Kong was cheap and so forth.

So I’ve become less convinced that what you and I think is correct, you understand? Everybody thinks he’s correct in the market, and we have to kind of be very careful not to be overly confident in our views. And the second advice, I mean, Ray Dalio and I, we met already in the 70s when he was not a well-known manager in Australia, because he knew something about Kondratiev cycles, and I also knew something about Kondratiev cycles. And diversification lets you sleep in peace.

And I can tell you here in Thailand, I mix among, let’s say, upper class Thais and so forth, but mostly among poor people, because I go out at night at three, four in the morning when New York closes, I go to bars to play pool. They told me at an old age, you need to learn something new. So I go and play pool.

And there are always lots of girls. A curse for people is to have heavy borrowings. And heavy borrowings, you know, it’s not 10% per annum.

It’s 10, 20% a month. And people are in an incredible mess and hardship because they can’t pay. The debts just explode.

And so a good advice has been, you know, my parents and grandparents to be financially conservative. And that I remained all my life. I never borrowed any money, never.

I prefer not to be that rich. I can’t spend everything because my diet is very simple. It’s cigarettes and beer.

I love you. And you’re going to live to be 300 years old on cigarettes. Maybe the best advice you’ve given here on the Wealthion Network, Mark, is to smoke cigarettes and drink beer, which is the secret to longevity, perhaps, right? Am I wrong? I think the success to live long is to have a fulfilling life and to be with people who motivate you or give you incentive to do things and not be around boring people that never traveled anywhere and just are scared to stand up.

Because not everybody can talk and not everybody can express his views. But a lot of wealthy people, they’re scared to take a stance and say, this is wrong. Society should change and so forth.

Well, I totally agree with you. So I just want to say thank you so much for coming on the Wealthion Network and speak up. Hopefully, I can get you back.

And I appreciate your recommendations on the books and also on living the good life. Before I let you go, there’s that bus behind you. Is that you when you were in the Olympics? You have that bus.

Is that you? Who is that? You mean this one? Yeah. This one is Ho Chi Minh. Oh, it’s Ho Chi Minh.

Oh, OK. Yes, because I have this collection of Mao Zedong. I mean, communist memorabilia.

You can see them. And I have this book collection. Essentially, you can see everywhere there are statues and badges and plates of Mao and so forth.

Lots of posters. You’re collecting that as a reminder to stay away from communism? You see, when I arrived in Hong Kong, Mao was still alive. And my idea was nobody is interested to collect Mao and other communist leaders memorabilia.

And I thought when they die, the system will change. They will no longer produce these buttons of Mao Zedong. And the Russians will no longer produce the propaganda of communism and so forth.

So I bought initially posters. And then I bought 300,000 buttons that you pin on your shirt with Mao. And they were at that time worthless.

You bought them by the bucket, by the kilo or whatever. And now they are catalogs, like stamped catalogs, because each one has a different value. And I mean, I will never sell them in my life.

Maybe one day someone will take it away. Or they send me to Egypt in the sun. Well, I’m very grateful to you for being on, sir.

And I look forward to having you back. Thank you so much. Well, Anthony, thank you very much.

It’s nice to see you. And you look very well. You look younger than before when you were actively engaged in hedge fund management.

Maybe I got out of politics, Mark. Maybe that’s what happened. Yes, yes.

When you’re done with politics, you go back a few years, you know. Yes, yes. I remember your remarks about the quality of politicians.

All right, well, you be well, sir. Great to see you. OK, thank you very much.

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