Marc Faber is best-known in investing circles as one of the leading authorities when it comes to gold. Faber has proven a keen observer of trends in the financial markets, and he is one of the most outspoken voices providing insight into the gold market. He is joined in that effort by a few other luminaries, such as Jim Rogers, James Rickards, and Peter Schiff.
In light of the recent quarter-point interest rate hike by the Federal Reserve, Faber shared his views of the central bank and how investing in gold especially relates to monetary policy.
Gloom, Boom, Doom
While he has a long career in the finance industry behind him in addition to a Ph.D in Economics from the University of Zürich (Switzerland), the Swiss-born Faber is best known for his self-edited and self-published “Gloom, Boom & Doom Report.” The name of the report really speaks for itself: fittingly, Faber shares his long-term bearish views of the U.S. economy. For this reason, he has been characterized by some as a “permabear.”
Faber’s track record as a market analyst is filled with accurate contrarian predictions. He correctly called the stock market crash in 1987, and was remarkably prescient in foretelling much of what happened between the first decade of this century and about 2012.
Of course, he has been incorrect in certain instances since then. For instance, according to Bloomberg:
“Faber’s predictions haven’t always hit their mark. Since he called long-term U.S. bonds “a suicidal investment” four years ago, the 30-year Treasury has returned 8.7 percent per year, according to Bank of America Merrill Lynch data. Last year, he touted gold and predicted U.S. stocks would plunge; since then gold has plummeted and stocks have gained.”
Nonetheless, his main case that he is and remains bearish on the U.S. economy has several convincing themes.
Faber vs. Yellen
One of the recurring themes of Marc Faber’s outlook is his disdain for the incompetence (and corruption) of central banks. He once famously declared that, “If I could short central banks, I would; since I can’t, I buy gold.” Faber has held fast to this view, especially as central monetary authorities around the world have become increasingly dependent upon stimulus measures in the wake of the Great Recession.
In particular, the dovish stance of the current Federal Reserve Chair, Janet Yellen, has been cause for Ms. Yellen to be the target of more than on invective from Mr. Faber’s. Like many proponents of gold, Faber is cynical about the long-term sustainability of centrally planned economic policies from central banks. He has often said that the money supply, rather than being at the whim of central bankers, should be grown at a consistent annual rate. (This view was also once expressed by the famous economist Milton Friedman.)
In direct contradiction to Yellen’s characterization of the U.S. economy as stable or recovering, Faber has declared that we are actually already falling into a recession (in real terms, not the Fed’s chosen measurements).
One of the key themes of Faber’s investment strategy is that central banking has distorted prices, so it’s increasingly difficult to find real value in all but the most far-flung markets (i.e. Vietnamese equities or Russian real estate). Due to his rather gloomy view of where the economy is headed, Faber has recently suggested that he thinks precious metals and 10-year Treasurys are a good relative value at the moment, and perhaps will serve as a hedge against a stock market sell-off.
Most telling was this hypothetical he shared:
“[If] you said, ‘Marc, here is $1 million, but you have to put everything in either gold or in the Dow Jones,’ then I would say I’d take gold.”
The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.