The Bubble Could Burst Any Day

12 comments

Posted on 15th January 2014 by Administrator in Economy |Politics |Social Issues

Read the words of Marc Faber carefully and decide for yourself who is lying. If Faber is correct, then Bernanke, Yellen, Obama, CNBC and every other MSM outlet is lying to you. Who do you believe? What do the facts mean? Think for yourself.

 

Prepare yourself… “In China, if I say what I am saying about the USA, they would not let me in the country”

 

Faber on the Fed and how far the ‘rubber band can be stretched':

We have to distinguish between the financial economy, the financial sector, and the economy of the well-to-do people that benefit from rising asset prices, from rising prices of wines, and paintings and art, and bonds, and equities, and high-end properties in the Hamptons and West 15 here in New York and so forth — and the average person, the typical household, the so-called ‘median household’, or the working class people. And the Fed’s policies have actually led to a lot of problems around the world in the sense that they’re not only responsible, but partly responsible that energy prices are where they are, they’re up from $10 or $12 in 1999 to now around $100 a barrel. Food prices are up and a lot of other prices are up. So on your income, energy prices have very little impact because you at Bloomberg – you, young man – you make so much money. But for the poor people, it has an impact. Some people in the lower income groups, they spend say 30% of their income on energy, transportation, and so forth, electricity and gasoline.”

On whether the Fed is creating a two-class system:

“Correct, largely. The problem is then that you have people like Bill de Blasio, they come in and say: ‘you know what’s the problem? All these rich guys. Because of these rich people, you are poor. They take advantage of you. So, let’s go and tax them.’ The IMF has come out with a paper in Europe that essentially the well-to-do people should pay a 10% wealth task — a one-time wealth tax. I can assure you, a one-time wealth tax, 10%, will become an every-year’s tax eventually.”

On how to help the people on the lower end of the economic spectrum:

“This is the point I’d like to make. All of these professors and academics at the Fed who never really worked in the private sector a single day in their lives, and write papers nobody reads and nobody’s is interested in. Why would they want not write about how you structure an economic system that lifts the standard of living of most people? You can’t lift everybody.”

 

“We had that in the 19th century in the U.S. because we had very small government at the time. The entire government — local, state federal — was less than 20% of the economy. Now it is close to 50% of the economy.”

On whether the government is spending too much money:

The larger the government becomes, the less economic growth you have and the more crony capitalism and corruptions you have. Because big corporations — and especially the money printers, they’re the most powerful people in the world, they control the governments. The U.S. Treasury, the Federal Reserve, and the government is one and the same. The Fed, they finance the Treasury, so the government can go to war in Iraq and Afghanistan. Then they finance transfer payments to essentially buy votes so you can get elected.”

On bitcoin:

“I prefer physical gold and silver, platinum to bitcoin. Bitcoin can have a lot of competition. Gold, silver, platinum — they have no competition. How do you value a bitcoin? I can value gold to some extent and compare say gold to the quantity of money that is floating around the world, to the wealth increase, and to the monetary base increase, to the credit increase, and so forth and so on, and to the production costs. So I have an idea of where gold should be. I’m not sure because prices overshoot. How do you value Netflix? Is it overpriced or underpriced? Is Tesla overpriced, underpriced?”

On interest rates:

“But one thing I wanted to show you and talk about because you said that lower interest rates help people. Well, if money trending helps everybody, then why does not everybody in the whole world always have zero interest rates? And everybody would be rich. You keep on printing money and you don’t need to work here, you don’t need to put on makeup. I could stay in bed the whole day and go drinking in the evenings. So, let’s just print money and be all happy. It doesn’t add up. One thing about the figures you showed: first of all, you live in New York. Do you really think that your cost-of-living increase is a 1.2% per annum? You really believe that? It doesn’t feel like more, it feels like five times more, or even ten times more.”

 

“Number two, by keeping interest rates at zero percent on the Fed fund rate — i want to emphasize that this is now going on in March of 2014 for five years. It is not something new. For five years this has happened. You penalize the income earners, the savers who save, your parents, why should your parents be forced to speculate in stocks and in real estate and everything under the sun?

On his view of overvalued stocks, including Facebook:

I think it is to a large extent a fad. People they go on Facebook – what they do is they put pictures on and the only people that watch these pictures are themselves. They all want to be stars. It is a very distractive kind of occupation. I can’t imagine that this would have a lot of value. I would rather own – I don’t own it because I think it is very highly priced – I would rather own a company like Alibaba or Amazon or Google, than Facebook, personally. This is my view. Other people have different views. That’s what makes the market. Some people are buying it and some people are selling it.”

On overall market valuation concerns:

I think we are in a gigantic financial asset bubble. But it is interesting that that despite of all the money printing, bond yields didn’t go down. They bottomed out on July 25, 2012 at 1.43% on the 10-years. We went to over 3.0%. We’re now at 2.85% or something thereabout. But we’re up substantially. Now, this hasn’t had an impact on stocks yet. In fact, it pushed money into the stock market out of the bond market. But if the 10-years goes to say 3.5% to 4.0%, then the 30-year goes to close to 5.0%, the mortgage rates go to 6.0%. That will hit the economy very hard.”

 

“[The bubble] could burst before. It could burst any day. I think we are very stretched. Sentiment figures are very, very bullish. Everybody’s bullish. The reality is they’re very bullish because they think the economy will accelerate on the upside. But my view is very different. The global economy is slowing down, because the global economy’s largely emerging economies nowadays, and there’s no growth in exports in emerging economies, there’s no growth, in the local economies. So, I feel that the valuations are high, the corporate profits have been boosted largely because of the falling interest rates.”

http://www.zerohedge.com/news/2014-01-14/marc-faber-warns-bubble-could-burst-any-day-prefers-physical-gold-bitcoin

12 Comments
  1. BUCKHED says:

    I’d ask Mark…who the hell is going to force the Fed to end the 75 billion a month of QE…..right now no one. Who’s going to force interest rates to the point that they should be….right now,no one.

    Who is going to force the banks to go back to mark-to-market accounting…right no,no one .

    So to me it seems that no one is going to anything to fix the economy in the near term. It’s only when the bubble pops again will something be done. Alas once again the folks who caused it will NEVER be held accountable by those in power.

    15th January 2014 at 12:39 pm

  2. bb says:

    Good, may the bubble pop.Cash at the crash will be king .

    15th January 2014 at 1:29 pm

  3. Billy says:

    bb

    “Cash at the crash will be king”

    Uhh… no.

    “Cash”? As in “worthless fiat dollars”? I really doubt it.

    Once folks start watching their savings (if any) melt away under the blowtorch of inflation, they will rush to yank whatever they have out of the banks. Which will shut the banks down. They’ll rush to buy anything that might hold value. Which will superheat the economy. Which will, oddly, create a demand for even MORE phony baloney dollars…

    I’ll put my faith in Plomo y Plata.

    15th January 2014 at 3:40 pm

  4. bb says:

    Have cash on hand so you can take advantage of the good deals.I think the dollar will still have some value after the crash.Everything will be in a deflationary state for a while and that’s when prices come down and some good deals will be out there.I’m thinking stocks.

    15th January 2014 at 4:32 pm

  5. dc.sunsets says:

    @BUCKHED,

    Denninger points out that there are POWERFUL people and LARGE forces who are (no doubt) beating the Fed’s managers bloody over QE and ZIRP.

    Just because it has NOT YET been Big News does not mean that the DISASTER that ZIRP is visiting on pension funds is unimportant.

    ZIRP (and QE) will end, and end soon. The Fed has no choice, as the unseen consequences of these idiotic policies are building up into their own sub-catastrophes.

    http://market-ticker.org/akcs-www?post=227616

    15th January 2014 at 4:50 pm

  6. dc.sunsets says:

    @bb, maintaining access to cash during a deflationary credit collapse is difficult. Banks fail, insurance companies fail, brokerages fail….

    Ironically, it may be drug dealers (sitting on piles of banknotes) who are the best-off during the deflationary period.

    Everyone else will likely be selling anything that’s not nailed down in order to just keep the lights on. It will be One Big E-Bay, with tons of sellers but next-to-no buyers.

    Those who maintained their access to cash in the 1930’s made a killing as prices for stocks, land and everything else plummeted. The only exception was gold, and that was only because its price was fixed by legislative fiat. Everything that floated, floated down….hard.

    That said, we are governed my idiots. Once a credit collapse is complete I have no doubt whatsoever that our rulers will literally try to reflate the economy with banknote printing and we’ll get our Zimbabwe Inflation in spades following that.

    15th January 2014 at 4:55 pm

  7. dc.sunsets says:

    Billy, what you are saying makes no sense.

    IF stocks are cratering, people will be short of cash, not drowning in it.
    IF bonds are collapsing in value (as interest rates rise), people will be short of cash, not drowning in it.

    If real estate resumes it’s fall, people will be defaulting on loans and everyone will be short of cash, not drowning in it.

    What we are experiencing NOW is inflation. Stocks up, bonds up, real estate back up, artwork is up, everything is rising as the Fed is able to engineer credit inflation. When the process rolls over it will not be due to TOO MUCH MONEY, it will be characterized by a desperate shortage of it as the wealth people THINK they now own gets destroyed in the market.

    15th January 2014 at 5:00 pm

  8. dc.sunsets says:

    Billy, think this through:

    A typical bank might have a total of $100,000 in cash (for operations) on hand. All it takes is a few depositors cashing out to wipe out all of the banknotes from a bank.

    It won’t even work that way anyhow. In reality, a well-heeled depositor with connections to the bank’s owners will electronically withdraw his savings and shut that bank right then and there, overnight even.

    If not, only perhaps 2% of depositors will get their money before the system crashes.

    Of the 98% who get stiffed, how many have enough cash on hand to even fill their Yukon’s gas tank ONCE?

    We have a system with almost NO cash. If the banking system hiccups, all those people are penniless in an eye-blink.

    People dumping their money? What money? They’ll be BROKE.

    A world full of broke people is a world where EVERYTHING is on sale for pennies on the dollar…if you’ve got the dollar.

    15th January 2014 at 5:11 pm

  9. archie says:

    dc sunsets, yeah i agree with you, but you said yourself that afterwards, “our rulers will literally try to reflate the economy with banknote printing.” will not the final outcome be the utter destruction of currency? if so, wouldn’t it be prudent to have cash on hand (for the deflationary crash, the massive credit contraction), and hard assets like gold and land? in the end, billy is correct, no? or am i missing something?

    15th January 2014 at 7:38 pm

  10. Billy says:

    dc

    We’re pretty much on the same page… I’m no expert in the stock market, and frankly the majority of what Admin puts up about the stock market, written by folks who have studied it for decades and probably worked there longer, is a fucking mystery to me as well as being a crashing bore. Might as well be String Theory written in Chinese.

    What I do know is that fiat currency is awful, and The Fed pumping out billions of Benny Bucks that ‘monetize’ the debt is worse. Buying our toxic debt, throwing it under the bed and pretending it doesn’t exist. All that cash printed stopped at the banks and hasn’t hit the population yet. It’s being kept out of circulation. For now. Billions printed, artificially keeping interest rates low has fueled a Wall Street boom. It isn’t even a house of cards, since cards are substantial. The only differences between toilet paper and fiat currency is that toilet paper actually has worth and a use. Fiat currency is held up by faith, nothing more… and also Wall Street, it appears.

    I know that most folks don’t use actual cash for day to day shit. BUT, if they see their money fast becoming worthless, you think there won’t be a bank run? Of course there will be. Which will shut the banks down when they run out of actual cash… at least until more trucks arrive with freshly-printed Benny Bucks. Meanwhile, folks will sink their soon-to-be-worthless cash into anything that will hold value. And if I ran a business, I would insist on actual cash in hand, not e-bucks. Which will heat up the economy. Which will create a need for even more cash.

    The same thing happened in Zimbabwe, Argentina, Germany… whether it gets kicked off by a stock market crash or a bond sale gone wrong, does the cause matter? Because the end result is the same. Once hyperinflation hits, the same shit happens… we’re not immune because ‘MURICA, FUCK YEAH!!

    Like I said, I’ll put my trust in silver and lead. Yeah, we do have a thick wad of cash in the safe, right next to the big heavy bags of silver coins – because businesses will probably use cash right up until the dollar actually implodes. After it implodes, the Goobermint will probably issue “New” phony baloney currency to replace the “Old” phony baloney currency… and that will last until folks catch on and lose faith in that… lather, rinse, repeat…

    By the way, anyone got any idea of what will happen if the dollar gets booted as world’s reserve currency?

    15th January 2014 at 8:50 pm

  11. DC.SUNSETS says:

    I concur, fiat currencies are a disaster.

    On a practical level I’m stuck with the one I have to use to buy gasoline and food, so in the short run I want to keep as many of the few I possess as possible.

    Then, if fortune smiles on me I hope to trade my paper money for something real, selling at a deep discount (hopefully), and hope for the best as upheaval continues.

    Who knows? It’s going to be challenging no matter what, I’m sure.

    15th January 2014 at 11:21 pm

  12. Nick. A says:

    ” By the way, anyone got any idea of what will happen if the dollar gets booted as world’s reserve currency? ”

    For the vast majority, it’ll be a certain goodbye to any semblance of First World living conditions, and I’ll comfortably wager that there will be “lots of Change, buy not much Hope” to paraphrase a certain well-worn phrase, associated with a certain Political figure . . . .

    16th January 2014 at 4:01 am

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