Dr. Marc Faber

In an interview with CNBC, Dr. Marc Faber, economist and investment strategist, stated that gold’s shiney new price label is here to stay:

Basically we had a good move in gold whereby we had fluctuated for two-years between USD 800 per ounce and USD 1000 per ounce and now we’ve broken through the USD 1000 per ounce level with quite conviction and heavy volume. I believe that whereas in the past the USD 1000 per ounce level was kind of a resistance level, now it becomes a support level. I don’t think that you’ll see gold below a USD 1000 per ounce probably ever again So I’m actually quite positive. Maybe gold at this level is a better buy than it was at USD 300 per ounce in 2001.

Now, Dr. Faber predicted the 1987 crash and safely herded his clients out of the market. He is known for his uncanny insights and investment prowess. In the same interview he warns off the stock market, which may drop another few hundred points. Faber also is short on the US dollar.

Dr. Marc Faber, economist and Swiss fund manager who predicting the financial crisis, sees the metal continuing to rise far into the future. Gold’s strength is its ability to hold value while paper currencies weaken under the weight of mass printing. The US Budget is nearing the debt ceiling allowed by Congress and the administration is petitioning to be allowed to raise the debt ceiling another $1 to $1.5 trillion. For this reason, Faber says that he can’t even predict how high the metal’s price will rise. As long as the government continues to inflate away its debt, gold will increase in value.

What will continue to happen is that the S&P 500 and the Dow Jones will go down relative to gold. I think gold will go up more from its support level.

Will it go $2,000, $200,000 or $2 trillion? I don’t know. But if you have money printing in the world, then the price will over time rise. It will go up more for things that you just can’t increase the supply, and the supply of precious metals is very limited.

Dr. Marc Faber, who predicted the 1987 stock market crash and saved his clients, has made a statement the US stock holders will find depressing.

Stock price movements become extremely volatile and erratic in countries with a depreciating currency. In the long run, the depreciation of the currency will usually more than eliminate the gains in local currency terms. So, whereas in 2007 both the Dow Jones and the S&P 500 exceeded their previous highs reached in 2000 in US dollar terms, these indices failed to make new highs in Euro terms.

By examining the gains in both dollars and euros, it appears the outstanding stock market rebound may be little more than evidence of stealth inflation. Companies aren’t making more dollars, it just takes more dollars to buy a piece of one because our purchasing power has decreased. Buy gold and avoid the next market fallout.

Happy-go-lucky Ben

Dr. Marc Faber told Bloomberg this week, “As long as Mr. Bernanke is the Fed Chairman, gold will be a very good investment.” Watching the below video, I see where he’s coming from! The video is a series of clips of Bernanke’s news appearances, beginning with his denial of any signs of a housing bubble in 2005. I’m not sure if he’s a liar or just incompetent. What do you think?

Is this guy blind?

And, apparently, he’s still not learning from his mistakes! The LA Times Blog reports,

Federal Reserve Chairman Ben S. Bernanke reiterated Monday that the central bank now knows enough to be worried about asset bubbles. He just doesn’t see any in the U.S. at the moment despite some investors’ concerns about stock market valuations and the still-ravenous global appetite for Treasury securities. In a Q&A session after a speech in New York, Bernanke at first channeled his predecessor, Alan Greenspan, on the subject of bubbles: Bernanke said it was “inherently, extraordinarily difficult to know whether an asset’s price is in line with its fundamental value or not.”

Let’s say you were in Congress and decided to implement tougher laws for sexual assault crimes. What resources would you consult to help your committee make the best possible decision? Perhaps a victim or a victim’s family member. Perhaps a prosecutor or an SVU officer. What if instead of asking any of those people, you only decided to ask a panel of rapists how they would feel about tougher laws? And then decided to move forward with the legislation based on what a group of child molesters thought was fair? That course of action would appear insane. Yet that is what Congress is doing to legislate Wall Street.

An excellent Harper’s piece is out discussing the inability of Congress to deliver necessary and substantial reforms in just one area of Wall Street – the derivatives market. The report is called “An Object Lesson in Governmental Failure: Derivatives Reform,” and it basically highlights our worst fears – you can buy the law.

Congressman Barney Frank’s committee invited guest panelists to help them determine necessary reforms. Who was on the panel? Oh, someone from Morgan Stanley and all his buddies. The only man offering an alternative viewpoint (“I believe that I represent a third group that comes to the table, which is the taxpayers, the working people of the United States,” he said) was given only a few minutes to testify and the records of his talk were lost amid “technical difficulties” that never really got resolved.

It’s certainly frustrating and makes me feel like the game is rigged. It makes me remember my anger as a 10 year old, giving my allowance money to a fast talking carnival worker to throw softballs into milk jars. It’s not that I thought I could make easy money, but I thought I had as a fair a shot as making a free throw, I didn’t think the set up would be deliberately rigged against me and my allowance. But as more and more reporters bring stories like this to our attention, the less faith I have in the market.

Maybe it doesn’t matter, if Dr. Marc Faber’s prediction is right, “I could envision a time when gold will sell for at least two or three times the value of the S&P 500.”

Dr. Marc Faber, the economist and entrepreneur who made his name by warning his clients to get out of stocks a week before the October 1987 crash, is still calling today’s gold price a “bargain.” His advice? The metal will rise as the S&P drops, and you’d be smart to buy gold before its too late:

“Some pundits will argue that precious metals are expensive, but this isn’t my view. Why would anyone not own some gold, rather than US dollars, when interest rates are near zero? Dollars can and will be printed en masse, whereas the supply of precious metals is extremely limited.

Returning to the argument that gold is expensive, it would appear that it is actually still a bargain compared to the S&P 500. At present, gold sells at about the same level as the S&P 500, but if I am right about the size of future US fiscal deficits and about the Fed neglecting to protect the purchasing power of the US dollar, I could envision a time when gold will sell for at least two or three times the value of the S&P 500. Also, if an investor were convinced that equities will do better than gold, he should consider investing in a basket of gold and silver shares, which are relatively depressed compared to the price of gold.”

Dr. Marc Faber was interviewed on Bloomberg TV yesterday. Calling Fed Chairman Bernanke nothing else but “a money printer,” Faber is bracing himself for a disaster

“The dollar will become worthless when people eventually realize the fiscal situation in the US is a disaster. It will go to a value of zero eventually, but not right now. Looking at Mr. Obama’s administration, it should already be there…In my opinion about 50% of tax revenues will be used just to cover interest payments on the government debt. That’s unsustainable. Then you’ll really be forced to print money. The best investments right now are foreign currencies, commodities, and equities.”

Peter Schiff explained his logic behind his exuberant prediction a month back that gold would hit $5000 an ounce in the next couple years. He compared the current administration’s government spending to that of the 1960s. Lyndon Johnson’s Great Society was a massive government spending program that supported the president’s noble war against poverty and reforms to eliminate racial injustice. The program had beautiful aspirations and directly helped a lot of people, but it also paved the way for the inflation of the 1970s and gold’s massive rise in value in that decade. The all night dollar printing press appears to be running on energizer batteries because the US Treasury announced another $123 billion will be injected into the economy this week (hey, a new record!).

The 1970s culminated in an all time high for gold in January of 1980 when gold made an unheard of at the time record of $873 an ounce. Using the U.S. Department of Labor’s inflation calculator, in today’s dollars that would be $2,287. Gold appears to be sitting at a bargain price today.