I Am Telling Myself, Maybe After All, Trump Is A Better Choice: Marc Faber 

Markets are volatile and there is a lot of leverage in the system. Hedge funds borrow money to buy gold, silver, equities, bonds, and currencies. Over the last 2 years, gold dropped almost 30 percent. So we have this volatility. People say markets are not volatile, but that’s not true. There’s a lot of volatility. And I think that the positioning in gold was heavily long. You have to see some of the hedge funds. They know what the positions of other hedge funds are. So when they know a hedge fund is heavily long gold on the margin, they may squeeze that position out by selling gold. And then the hedge fund which has large positions may have to dump gold and the price goes down. And then they can cover.

I think it would be good for the world if we have a U.S. President who is not a neocon and is not guided by people like the Bush family, but someone who is prepared to see the world the way it is. The world is not as it was a 100 years ago where western powers were able to colonise the world and impose their will. Today, we have countries like India and China and even Russia that have become very powerful. So we have to negotiate with these countries keeping in mind their perspective, not just our perspective of the world. And this is something Hillary Clinton just can’t do. She was Secretary of State so we know what her record is. She supported the invasion of Iraq. She supported and launched the invasion of Libya and she supported also the nation-building in Egypt and the war in Syria – all major disasters. And so I am telling myself, maybe after all, Trump is a better choice.

If Hillary Clinton is elected, I very much doubt that she will increase interest rate. If Trump is elected, the likelihood of her increasing interest rate is very high.

My view is that the U.S economy has been slowing down over the last 12 months and corporate profits have been coming down, and so it’s not a good time to increase interest rate. On the other hand, the Fed lowered the rate to almost zero in December 2008. So in December 2016, in eight years, at zero interest rates, the economy must be stinking if you can’t increase interest rates during eight years of an expansion so something is wrong. So my view is that they should have already increased it in 2011 and they should increase it now.

I was not a fan, for several years now, of U.S. equities. But I always said that emerging markets over the last 12 months have become relatively attractive. And so this year, we had the Philippines, Thailand, Indonesia, Vietnam all up in the order of 15-25 percent. So I think we have to look at the world...there’s plenty of money floating around. One day it goes into commodities and then another day it goes into equities and then it goes into some currencies and then it goes into bonds and so forth. So we can’t be overly diplomatic. And second, I really believe the Fed and other central banks have no other option but to print money. The whole system collapses if they stop printing money. And so they will continue to print money. Over the last 18 years, the balance sheets of major central banks have gone up 16 times. I think they can go up by another 20 times or maybe 30 times or 100 times. If you can print money, you really can print money. The impact on the economy is of course not very good, but you can do it.

At present, the Indian economy is growing strongly. Maybe not as strongly as the government is publishing, but it is growing more than most countries in the world. The Indian economy, within the emerging market complex, is probably relatively attractive in terms of macro-economic developments. The problem occurs when we look at valuations, because good companies in general are not inexpensive. They are selling at 30-50 times earnings. So I think in India if you really want to make money you have to go to second line shares and focus on sectors. In the last few years, as you know, the world has gone into an indexing madness. They just put money into an index. I believe the next 10 years will allow active managers to make a lot of money because they can move from one sector to another. Now some will outperform and some will underperform, but at least you have an opportunity.

Well I suppose that everywhere in Asia, one of the themes will be infrastructure. Infrastructure has a lot of potential in India for port facilities, roads, bridges, tunnels, and then you need infrastructure for tourism and domestic airline passengers. So you need to build hotels, airports etc. So that is a sector in my view that is very attractive. Another attractive sector is real estate – secondary locations like weekend homes and so forth.

As I said, in India there are some expensive stocks and the same applies to Thailand and the Philippines. You don’t need to be a rocket scientist to see that consumption is going up. That has led consumer-related stocks to go up very substantially. And in the process they have, in some cases, become rather expensive.

The crisis in 2007-08 occurred because we had excessive credit growth and because banks in Europe and of course in the U.S. changed their very nature – from being essentially institutions that accept deposits and then make loans to people, into big institutions that gamble with clients’ money. And so the first problem occurred with Bear Stearns and then Lehman Brothers in the U.S. and then AIG, and that was then bailed out. But the bailout did not lead to cleaning-up of the system. The banks were allowed to continue to gamble with their capital. And now with zero interest rates and with more leverage than in 2007 in the banking system and in total debt as a percentage of GDP, now there is a problem with Deutsche Bank. I suppose the bank is basically bankrupt. But the government will not let it go bankrupt. They will engineer some kind of a bailout. Either the government can ask the private sector to help Deutsche Bank or the government can help Deutsche Bank. But it is not that the bank will disappear. But I think what will happen over the time is that these banks like Deutsche Bank, Credit Suisse, UBS , JPMorgan, Citi will not be allowed to gamble in all kinds of speculative markets - whether it’s equities, swaps, currencies. So I think that in general we’ll move over time to sound the financial system. But it is not going to happen overnight, it will take a lot of time.