Marc Faber: Global Markets Will "Implode"
âI donât think markets are going down because of Greece, I donât think markets are going down because of the âfiscal cliffâ â because there wonât be a âfiscal cliff,â â Marc Faber told CNBCâs âSquawk Box.â
Marc Faber: Actually, Iâm so happy to be on your show, because whenever I feel depressed and I see you, you group of people that are so optimistic, I feel enlightened, and again full of life. So I think actually you should open up a psychiatric clinic for depressed people, and you would do very well, because everybody would be good after talking to you.
Host: But would we be fooling them into feeling good?
Faber: I think the point is this: I don't think markets are going down because of Greece, I donât think that markets are going down because of the fiscal cliff, because there won't be a fiscal cliff. They'll do some patch work, a little bit of tax increases come into play in five years time, and a bit of spending cuts that come in 100 years, and then everybody will be happy and they'll be a rebound in the market. But the market is actually going down because I think that corporate profits will begin to disappoint, and that the global economy will hardly grow next year, or even contract. And for that is the reason that stocks, from the highs in September at 1470 on the S&P, will drop in my view at least 20%. Apple has already dropped more than 20%.
Host: What's causing this global slowdown? Is there any way out of this or is this a mess that we have created and weâve got to live with right now?
Faber: Each country has specific problems. In some countries we have overcapacity problems. I was in Vietnam. Iâve seldom seen such an overbuilt real estate market. It will take years to absorb everything. And if Vietnamâs property market is a microcosm of the Chinese property market, it will also take years in China to absorb all the properties that are being built. In the western world, including Japan, the problem is we have too much debt and that debt now will have to be somewhere, somehow, repaid or it will slow down economic growth. And so, I think that we live beyond our means 1980 to 2007 and now it's payback period.
Host: It's payback period, but if you have a situation that you expect, where the fiscal cliff is one that we never address, we just kick the can down the road, and deal with it another day, when does it actually start to catch up with us?
Faber: i can't tell you precisely the day, but I think the whole global financial system will have to be reset at some problem. And it won't be reset by central bankers, but by imploding markets; either the currencies or the debt markets or the stock markets, but it will happen. It will happen one day big time and then we will all be lucky if we still have 50% of the asset values that we have today.
Host: So, if we were to handle the fiscal cliff --
Faber: It's a very optimistic scenario.
Host: There are a lot of people who have talked about this scenario. Something that definitely worries me, too. But, do you is it a situation that could be avoided if we tackled the fiscal cliff and actually made some tough decisions right now? If we grasp at austerity the way some of the Europeans have done it, there are people who say we don't want to do it that way, look at what's happened to Europe, theyâve gone back into recession, but is it your thought we need to deal with the medicine and suffer the pain at some point?
Faber: For sure there will be pain, and there will be very substantial pain. The question is do we take less pain now through austerity or risk complete collapse of society in five to ten years time. And in a democracy, they're not going take the pain now. They'll kick down the problems and they'll become bigger and bigger.
Host: So, you think we won't be able to do anything until it's too late, that we won't have the political will to go ahead and at that time tough decisions now, and that's why we'll end up --
Faber: Correct. But, I don't want to leave you without some optimistic words.
Host: Yes, now that you've talked about the complete collapse of society, tell us about the bright side of things.
Faber: Iâve recently been on to Vietnam, Cambodia, Laos, of course Thailand, because I have a house there, and Myanmar. that whole region is known as Southeast Asia, and I think that region of 250 million people will continue to grow regardless because you have a relatively high GDP per capita in Thailand, maybe 3,000 or 4,000 US Dollars, and the surrounding countries GDP per capita less than $1,000. And these countries are opening up now, and I think with the trade links and transportation links that are being expanded regardless of what happens in the world, can grow. Provided there is geopolitical stability in Asia which is a big question mark.
Host: So the situation in Vietnam, you said the housing bubble is going to take years to get through. But you still think the growth statistics will trump that? Yes, but, you see, in Vietnam from the peak exports in 2008 up to today, the export performance of Vietnam has been the best of any emerging market. Better than China, better than Columbia, and much better than say Eastern European economies.
Host: So, your bright spot is that all of western society is going down the toilet but if we move to Laos, we might be able to make $3500 a year? I know I can buy a lot --
Faber: Joe, you're a nice person, but --
Host: That doesn't sound that great, Marc, to me. And I resemble that you said that we're like Pollyannaâs, that we're constantly optimistic. That's the wrap on -- I got to sue for you definition of character.
Faber: Sorry, I didn't mean to insult you. I wanted to say something nice about you that you're an optimistic person.
Host: I'm buying a gun. Iâm not optimistic. Don't throw me in there. Iâm reading about the U.S. Military forces training for zombie apocalypse.