Marc Faber : China wins The Trade War in the long run











In a recent interview with the economic times of India , Commenting on the investment opportunities available and the ongoing trade war between the US and China, Dr Marc Faber said investors would make more money in emerging economies than in the US over the next few years. He said the trade tension is favourable for China in the long run. “Trade war will hinder economic growth,” Faber said the trade tension is favourable for China in the long run. He also believes India and China would grow with a proviso of peace. On the other hand, he is hoping for peace in global economies. He highlighted that war-like conditions have always ended very badly for financial markets because they lead to a lot of defaults. “In this case, I presume some countries would say that they are not going to pay and then it spreads and so we need to hope that there will be peace,” he said. In recent months, the US Fed and 19 other central banks have already cut policy rates. With the Fed cutting rates, Faber expects the US dollar to be weaker in the next two years. Investors should lower their long-term return expectations from the equity market, says Marc Faber, renowned global investor and author of The Gloom, Boom & Doom report. “If you are a prudent investor, then you are not going to make a lot of money in equities over next three years,” he said . He advised investors to start accumulating gold from a long-term perspective amid global growth concerns and heightened trade tensions. Faber expects gold rise about 20 per cent over next 2-3 years. He said most of the commodities do not have a structural bull market. “Gold is not an industrial commodity and it does not depend on demand from China. It depends on investor sentiment towards gold and central banks’ monetary policies. If they print money, then it is likely that the price of yellow metal will go up in the long run, while in the short run, it does not have much of a correlation,” Faber said, adding that commodity has bottomed out. “Timing is very important if you invest in commodities,” Faber said, and added that he is also bullish on agricultural commodities including soy bean, corn, wheat and coffee. Commenting on the investment opportunities available and the ongoing trade war between the US and China, Faber said investors would make more money in emerging economies than in the US over the next few years. if you are a prudent investor you are not going to make a lot of money in equities over the next three years. Maybe one company will go up 10 times and 900 companies would not. You have to take big risks if you really want to make a lot of money. My return expectations are very low. In Europe, in 2017, the Austrian government issued a 100-year bond. The coupon was 2.10%. It was issued at a 100, the interest the 2.10% which is not a lot but people buy these bonds and you are not going to make a lot of money out of these bonds. Now you made a lot of money by buying US treasuries over the last six months. The stock market in the US is not higher than it was in January 2018. In other words, 18 months ago we have been trading sideways and that maybe the pattern that we have to look for. So in terms of return expectations, investors have to really lower their long term expectations. I think gold is okay. In the near term, it is overbought I think we will go down may be $50. and Marc Faber added that you will make more money in the emerging markets over the next years : I understand everybody is looking for the next big investment scene. As I said, you will make more money in emerging economies than in the US in the next few years but I would also like to introduce the thought and this thought is that 1980 to today we have had huge asset inflation; look at Mumbai real estate prices, 1980 and today, you look at Delhi real estate prices, you look at Chennai real estate prices, Bangalore, New York, London, Hong Kong, Singapore, you look at stock prices 1980 to today, you look at bond prices 1980 and today all asset prices had huge moves, huge moves and this asset inflation could come to an end. The question is not which group will do best in future but maybe the question should be how do I lose the least money over the next 10 years . A lot of people are wondering why someone would buy a bond with a negative yield, say you buy Swiss Franc bond you pay 105 and in 10 years it will pay you back say a 100. So it has a negative interest rate. Now the reason bonds in Europe trade at negative rates is that insurance companies and pension funds they are forced by government regulation to buy these bonds which is fraught to start with but in addition to that, if you are the salesman and you come to me say here is a bond, it has a negative yield, say 5% over 10 years. So, it is 0.5% per annum negative yield grossly. Then why should I buy it . But if you are a good salesman and say the whole world would likely collapse and stocks will be down 40%. Bonds will go down, a lot of currencies will collapse, the Euro may collapse, but maybe it is not all that bad to only lose 5% over 10 years on your money than to lose 40%! You understand the reasoning and there is a group of people that buy these bonds. If you had come to me and said buy these Austrian bond 100 years at 2.10%, I would not have bought it, but in two years, it has doubled in price. So, it was a great investment. regarding the trade wars between china and trump and the Brexit Marc Faber had this to say : I do not think that Brexit is a big deal because the British economy is not what it was under the British empire at the end of the 19th century. Today Britain is an insignificant economy in the context of a world that has an Indian economy that is very large, the Chinese economy that is very large and these economies are still growing. They have some children sicknesses from time to time and setbacks but in general the Indian economy will grow as well as the Chinese economy with one proviso; we need peace. The US has a group of people the neocons they are in favour of creating trouble everywhere, not just in Iraq, Afghanistan and maybe Iran. They want to create trouble everywhere and so maybe one day someone will lose patience and there will be war, which the neocons like because in wartimes, people can make a lot of money. So, this is about money. Obviously, for financial markets war conditions would be very bad because there would be a lot of defaults. Some countries would say well in this case I am not going to pay and then it spreads and so we need to hope that there will be peace.










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