Insider Monkey, your source for free hedge fund data, interviewed Marc Faber during the Ira Sohn Conference. People tend to focus on the “Doom and Gloom” side of the glass when they think of Marc Faber, but he is bullish about real estate, equities, precious metals, and commodities. Our first question to Faber was about Barack Obama. Here is our interview with Marc Faber:
Faber: He is by far one of the worst Presidents the US has had. I’m very upset that none of what he said he would do, mainly change, has actually occurred. So I think he’s certainly intellectually dishonest. And he’s probably made the geopolitical situation worse and also the economic situation worse. And he’s actually vote-buying through handing out money and through increased transfer payments.
IM: Don’t you think he has his priorities straight?
Faber: No I don’t think so, because the priority would be to essentially make the US competitive, and by pursuing expansionary fiscal policies that enlarge the government, you atrophied the private sector. In other words, the private sector is hurt by too much government involvement.
Like my friends, they say, we have to pay more and more tax for government officials to harass us more and more and implement more and more regulation. And that of course is not a way to create prosperity. If you have a large corporation or a corporation, you are more likely to hire people outside the US than in the US.
IM: So what advice would you give for the next election cycle?
Faber: I think he will be reelected because we have some kind of a tyranny of the masses. You have essentially more people getting handouts than large tax payers. And so they are huge voting block. Then you have the unions, also large voting block. And then you have the government officials. They don’t want to have cutbacks in government and be fired. They essentially are paid more than the private sector. So again a large voting block.
I think it is quite likely that he will be reelected. But that is the problem of the US. In maximum 2-4 years, he will be gone, but the big people who vote in the US will still be there. And I think that in today’s presentations many observers have expressed a view that it’s very difficult to cut entitlements. In other words, social security, Medicare, and Medicaid because nobody wants to do that.
Nobody wants to accept that because everybody lives from that, so essentially the fiscal deficit will stay very large, and it will mean that over time the US dollar will lose its purchasing power, more money will have to be printed, more quantity of easy measures will have to take place, and so forth.
And eventually, the children, your children will be affected by all this.
IM: So is it safe to say that you’re a critic of the Bush tax cuts as well?
Faber: I think for me the tax cuts are not the issue. What they should have been accompanied by are spending cuts, and that’s the problem. That the tax cuts occurred, but no spending cuts. Actually spending went up, and the US embarked on expensive foreign expeditions where basically they have no business, in Afghanistan now, more and more involvement in Pakistan and involvement in Libya and so forth and so on.
And what it shows is the duplicity of the US. On the one hand, they go and attack Ghaddafi, who is not a nice man. I’m not defending him. But at the same time, they are kind of supportive of the King of Bahrain and the ruler of Yemen, who are equally vicious. And they are supportive of the Saudi Arabia regime.
IM: What could they possibly do against Saudi Arabia or Bahrain?
Faber: Well then they shouldn’t do anything at all then. They shouldn’t get involved in Libya. But obviously you seem to be a great admirer of Mr. Obama so you keep on admiring him, and you will see how the country will look like if he’s elected for another four years.
IM: It’s all in context. You have to take who’s running and go with that.
Faber: I’m an economist. I’m not a political servant.
IM: Okay. Do you have anything positive to say, against, just the backdrop of your Dr. Doom, Dr. Gloom forecast. Anything positive on the horizon?
Faber: Well the positive aspect of my negative view is essentially that you shouldn’t own cash and government bonds but you should be in assets like real estate or equities or precious metals or in commodities.
That is the positive view. In other words, the more negative you are about the world and the geopolitical trends which will lead to war, the more likely it is that you will do better in equities than say in bonds and cash.
IM: And so that would be your advice to any novice investor right now?
Faber: My advice would be to diversify heavily and have money in other jurisdictions than the United States, in other assets than US assets. In say Asia, Asian equities, Asian real estate. And I would have some money in custody outside the USA, in Australia or in Singapore or in Hong Kong or in Switzerland and not have all my assets here in the United States.
IM: What assets do you have in the United States?
Faber: Well we don’t have a lot of assets in the US. We own some corporate bonds and we own some shares, because they are international mining groups, for example, and they’re listed in the US exchange. But they’re not really US companies.
IM: So your forecasted outlook for the US is dire.
Faber: It doesn’t mean that the stock market will go down a lot. Because if you print money, eventually everything goes up. But as we have seen, when you print money certain asset classes go up first too much, like housing, and then they come down, and then they don’t recover for a long time.
I think that real estate value in America is reasonably cheap, but I don’t think that it will go up a lot.
IM: What’s your favorite investment right now?
Faber: Well there’s no such thing as a favorite investment. But I think I tend to invest in Asia in promising countries, in equities, in real estate, and I own precious metals, obviously.
IM: Okay. Dr. Faber, thank you so much.
Faber: You’re welcome. Okay. Good luck with Mr. Obama.
Related Article About the Ira Sohn Conference: Transcript of David Einhorn’s Presentation