Interesting insights from Dr. Marc Faber's interview with the CNBC (hat tip Zero Hedge). Below are my notes:
-Germany will issue Eurobonds. Quality of euro will diminish
-Euro is oversold, potential to rebound along with stock market for the short term
-People are focusing excessively on Euro while ignoring the rest like India and China
[my comment: very true.]
-Danger level—any outright default by any countries. Better to take losses now than to wait for the risk of “gigantic systemic failure”
-Market will be relieved if Greece exited the Eurozone. There would be some clarity. It wouldn’t be good for bank and financial shares. The markets are oversold and on exit of Greece, I think markets would rally
[my comment:
Indeed. People hardly realize that the banking system is NOT the economy as mainstream pundits would have it.
While a banking meltdown may impact business activities over the short term (like 2008), the world does NOT operate on a vacuum, people will continue to trade and resort to other means of obtaining credit, e.g. consumer financing companies filled the niche of Japan's immobilized banking system as alternative sources of credit during post-bubble bust, in 2008 trades have been conducted through barter and through bilateral financing deals, during the recent Euro crisis, in Italy the mafia has stepped up the void as a major creditor
This will especially be true, if reforms would allow for greater economic freedom, which would allow parties to fill in the void. For instance, Walmart's application for bank license was turned down from opposition by big banks, unions and etc...]
-More and more stocks are breaking down around the world. He says that this means many economies are likely to weaken. We might see “some asset deflation”
[my comment: Dr. Faber seems to be vacillating from an oversold rebound to asset deflation.]
-We could have a global recession starting sometime in the fourth quarter of this year or early 2013—100% certainty
-Hold cash US dollars and some gold.
-Although gold prices may breakdown below the low on December 29 2011 of 1,522.
[my comment: the risks seems to be tilted towards a meaningful downdraft alright, which may signal some asset deflation or even global recession, but we can't rule out the possibility that political authorities, particularly of central bankers, may confront these with even more aggressive money printing measures, which again may defer interim trends.
Nonetheless, current environment highlights the state of uncertainty we are in]
-Germany will issue Eurobonds. Quality of euro will diminish
-Euro is oversold, potential to rebound along with stock market for the short term
-People are focusing excessively on Euro while ignoring the rest like India and China
[my comment: very true.]
-Danger level—any outright default by any countries. Better to take losses now than to wait for the risk of “gigantic systemic failure”
-Market will be relieved if Greece exited the Eurozone. There would be some clarity. It wouldn’t be good for bank and financial shares. The markets are oversold and on exit of Greece, I think markets would rally
[my comment:
Indeed. People hardly realize that the banking system is NOT the economy as mainstream pundits would have it.
While a banking meltdown may impact business activities over the short term (like 2008), the world does NOT operate on a vacuum, people will continue to trade and resort to other means of obtaining credit, e.g. consumer financing companies filled the niche of Japan's immobilized banking system as alternative sources of credit during post-bubble bust, in 2008 trades have been conducted through barter and through bilateral financing deals, during the recent Euro crisis, in Italy the mafia has stepped up the void as a major creditor
This will especially be true, if reforms would allow for greater economic freedom, which would allow parties to fill in the void. For instance, Walmart's application for bank license was turned down from opposition by big banks, unions and etc...]
-More and more stocks are breaking down around the world. He says that this means many economies are likely to weaken. We might see “some asset deflation”
[my comment: Dr. Faber seems to be vacillating from an oversold rebound to asset deflation.]
-We could have a global recession starting sometime in the fourth quarter of this year or early 2013—100% certainty
-Hold cash US dollars and some gold.
-Although gold prices may breakdown below the low on December 29 2011 of 1,522.
[my comment: the risks seems to be tilted towards a meaningful downdraft alright, which may signal some asset deflation or even global recession, but we can't rule out the possibility that political authorities, particularly of central bankers, may confront these with even more aggressive money printing measures, which again may defer interim trends.
Nonetheless, current environment highlights the state of uncertainty we are in]
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