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00:00WORLD, ONE ASSET CLASS THAT OFFERS EITHER SAFETY, OR THE PROSPECT FOR CAPITAL APPRECIATION OVER THE SHORT TERM, WHAT IS IT? MARC: I THINK BECAUSE OF MODERN CENTRAL BANKING AND REPEATED INTERVENTIONS WITH MONETARY POLICY, IN OTHER WORDS, QE, ALL AROUND THE WORLD BY CENTRAL BANKS, THERE IS NO SAFE ASSET ANYMORE. WHEN I GREW UP IN THE 1950'S IT WAS SAFE TO PUT YOUR MONEY IN THE BANK ON DEPOSIT. THE YIELDS WERE LOW, BUT IT WAS SAFE. NOWADAYS, YOU DO NOT KNOW WHAT WILL HAPPEN NEXT IN TERMS OF THE PURCHASING POWER OF MONEY HEARD WHAT WE KNOW -- MONEY. WHAT WE KNOW IS IT IS GOING DOWN. IF I HAVE TO TURN ANYWHERE, WHERE, AS YOU SAY, THE OPPORTUNITY FOR LARGE CAPITAL GAINS EXISTS, AND THE DOWNSIDE RISK, IN MY OPINION, IS LIMITED, IT WOULD BE THE MINING SECTOR -- PRECIOUS METALS. MINING COMPANIES, IN OTHER WORDS, GOLD SHARES, AND I WOULD ALSO LOOK, AS YOU MENTIONED BEFORE, STOPS LIKE FREEPORT -- STOCKS LIKE FREEPOR T, THAT HAVE BEEN HAMMERED BECAUSE OF COMMODITY PRICES. THEY HAVE GONE DOWN BEFORE, BUT I DO NOT THINK THEY WILL STAY DOWN FOREVER. ERIK: YOU KIND OF ANSWER THE QUESTION I WAS GOING TO FOLLOW UP WITH -- ARE YOU EFFECTIVELY CALLING THE BOTTOM OF THE METAL CYCLE? IT IS NOT SELECTED IS NECESSARILY THE BOTTOM, BUT HOW LONG IS IT GOING TO TAKE BEFORE WE SEE THE PRICES -- GOLD HAS ALREADY STARTED TO RECOVER A LITTLE BIT, BUT THE BASE METALS ARE IN A DISASTROUS STATE, WHETHER IT IS COPPER, ALUMINUM, NICKEL, WHATEVER. MARC: I WOULD RATHER FOCUS ON PLATINUM, GOLD, BECAUSE THEY DO NOT DEPEND ON THE INDUSTRIAL DEMAND AS MUCH AS BASE METALS. AS I INDICATED ON THIS PROGRAM ALREADY A YEAR AGO, THE CHINESE ECONOMY WAS DECELERATING ALREADY THEN. IT WAS JUST THAT THE FUND MANAGERS DID NOT WANT TO ACCEPT IT. NOW IT IS OBVIOUS THAT THE CHINESE ECONOMY IS GROWING AT NOWHERE NEAR WHAT THE MINISTRY OF IS PUBLISHING -- MINISTRY OF TRUTH IS PUBLISHING IN CHINA. NO MORE THAN 2%. THAT IS A HUGE IMPACT ON COMMODITY PRICES AND IN TURN A HUGE IMPACT ON THE COMMODITIES OF ALL THE PRODUCERS OF THE WORLD, RUSSIA, AFRICA, AND THESE COUNTRIES, WITH FALLING COMMODITY PRICES, HAVE LESS MONEY TO BUY AMERICAN GOODS. MATT: WE SAW THE CHINESE DEVALUATION, AND THEN WE SAW VIETNAM FOLLOW, AND CAUSE EXTENT -- -- KAZAKHSTAN. DO YOU EXPECT TO SEE THAT CONTINUE? MARC: [LAUGHTER] THESE COUNTRIES FOLLOW THE EXAMPLE OF WHAT MR. MARIO DRAGHI TRY TO ACHIEVE WITH LOWERING THE VALUE OF THE CURRENCY, WHICH IS TO CREATE A DEPRESSION IN REAL INCOME AND A CONFESSION OF WORLD GDP IN DOLLAR TERMS, AND A CONTRACTION OF TRADE IN DOLLAR TERMS, WHICH IS NEGATIVE FOR ECONOMIC GROWTH AROUND THE WORLD. MATT: WHO IS NEXT, IF YOU HAD TO BET? MARC: I THINK THE CHINESE WILL LET THE CURRENCY GO DOWN SOMEWHAT, BUT THE SAFEST BET IF YOU WANT TO BET AGAINST THE CURRENCY, IN MY INCOME IS TOO SHORT THE HONG KONG DOLLAR BECAUSE IT WILL NOT BE REVALUED AGAINST THE U.S. DOLLAR. THAT IS OUT OF THE QUESTION. IF THE CHINESE CURRENCY, THE YUAN, CONTINUES TO WEAKEN, THEN THERE WILL BE A LOT OF PRESSURE IN HONG KONG ON ASSET PRICES, AND THEN MAYBE THE GOVERNMENT CHOOSES TO CAUTION THROUGH LIFTING THE PEG AND DEVALUING THE HONG KONG DOLLAR. SO, YOU HAVE UPSIDE POTENTIAL WITHOUT DOWNSIDE RISK. ERIK: MA RC, I KNOW YOU ARE OF QUANTITATIVE EASING, BUT U.S. STOCKS -- MR. BERNANKE IT, AND THEN JANET YELLEN AFTER THAT, GOT WHAT THEY WANTED. U.S. STOCKS, UNTIL RECENTLY, WERE ON A SIX-YEAR CARE. WHY IS IT WE SHOULD NOT EXPECT SOMETHING SIMILAR OUT OF JAPAN, WHERE STOCKS HAVE DONE WELL SINCE THEY BEGAN QUANTITATIVE EASING, OR EUROPE, WHERE STOCKS HAVE BEEN OUTPERFORMING? WHY IS THAT NOT GOING TO CONTINUE? MARC: BECAUSE IN MY HUMBLE BOOK OF ECONOMICS WEALTH IS BEING CREATED THROUGH, ESSENTIALLY, A MIXTURE OF CAPITAL SPENDING AND LAND AND LABOR. IF THESE THREE PRODUCTION FACTORS ARE USED EFFICIENTLY, IT THEN CREATES A PROSPEROUS SOCIETY. AS AMERICA BECAME PROSPEROUS FROM ITS HUMBLE BEGINNINGS IN THE 1800S, OR THEREABOUT, THROUGH THE 1960'S, THE 1970'S, BUT IT IS LUDICROUS TO BELIEVE YOU WILL CREATE PROSPERITY IN A SYSTEM BY PRINTING MONEY. THAT IS ECONOMIC STUFF IS HIM AT ITS BEST. ERIK: IN THE MEANTIME, THERE WAS A LOT OF MONEY TO BE MADE IN U.S. STOCKS, NOW? -- NO? MARC: I DID NOT SAY THE OPPOSITE, BUT UNFORTUNATELY THE MONEY MADE IN U.S. STOCKS WITH NOT SHOULD DID -- DISTRIBUTED EVENLY. WE HAVE SEEN ACTUALLY BENEFITED FROM THE STOCK MARKET POST-2009. IT IS NOT EVEN 1% OF THE POPULATION. IT IS 0.01% . THEY TOOK THE BULK. THE MAJORITY OF AMERICANS DO NOT OWN ANY SHARES ANYWAY. IN OTHER COUNTRIES, 90% OF THE POPULATION DO NOT OWN ANY SHARES. SO, THE PRINTING OF MONEY HAS LIMITED IMPACT ON CREATING WEALTH. AND WHY, MAY I ASK YOU, WHY IS IT THE HOMEOWNERSHIP RATE IS AT A RECORD LOW? PLEASE EXPLAIN THAT. ERIK: WHY WASN'T HOMEOWNERSHIP AT A RECORD HIGH BEFORE THE FINANCIAL CRISIS? MARC: [LAUGHTER] I HAVE TO LAUGH WHEN SOMEONE LIKE YOU TRIES TO LECTURE ME ON WHAT CREATES PROSPERITY. ERIK: I AM NOT AT ALL. I AM JUST AS ADJUSTED INEQUALITY AS YOU SEEM TO BE, BUT AS I AM TALKING TO YOU, BEING THE AGENT FOR OUR VIEWERS, I AM TRYING TO FIGURE OUT HOW TO MAKE MONEY. THAT IS WHAT THEY WANT TO KNOW. MARC: THAT IS WHY I TOLD YOU IF I WERE YOU, I WOULD BUY MINING STOCKS. I AM NOT SAYING THEY WILL GO UP, BUT THEY WILL GO DOWN LESS THAN OTHER SHARES. BY THE WAY, IF YOU ASK ME ABOUT RELATIVE VALUE, I THINK EMERGING MARKETS ARE NOT YET CHEAP, BUT THE RETURN EXPECTATION I WOULD HAVE OVER THE NEXT SEVEN TO 10 YEARS BY INVESTING IN EMERGING MARKETS WOULD BE MUCH HIGHER THAN, SAY, U.S. STOCKS. THE EMERGING MARKETS ARE OVERHYPED AND EXPENSIVE IN TERMS OF VALUATION FROM HISTORIC PERSPECTIVE. MATT: MARC, YOU MUST THEN HAVE, OVER THE NEXT SEVEN TO 10 YEARS, A NEUTRAL, IF NOT POSITIVE VIEW OF WHAT HAPPENS IN CHINA'S FUTURE. I WAS GOING TO ASK WHAT HAPPENS TO PRESIDENT XI? CAN HE HOLD ON TO POWER? HE HAS NO CONTROL OF THE MARKETS. IF THEY CONTINUE TO INTERVENE LIKE THIS, THEY WILL NOT HAVE FOREIGN RESERVES LEFT TO HOLD UP THE CURRENCY. I MEAN, CAN HE HOLD ONTO POWER AS WE HELD -- HEAD INTO THIS VICTORY CELEBRATION FOR WORLD WAR II? MARC: WELL, I MEAN, WE HAVE TO PUT THE ACHIEVEMENTS OF CHINA AND PRESIDENT XI IN THE CONTEXT OF WHAT CHINA WAS 20, 30 YEARS AGO, AND WHAT IT IS TODAY. IT IS A REMARKABLE CHANGE. WILL CHINA HAVE A SETBACK? DO NOT FORGET, THE U.S., AFTER THE 1800'S HAD SETBACKS, THE CIVIL WAR, WORLD WAR I, THE DEPRESSION YEARS, AND WORLD WAR II, AND THE COUNTRY CONTINUE TO GROW. I THINK CHINA IS, FROM A CYCLICAL POINT OF VIEW NOW, IN A VERY SERIOUS DOWNTURN. SERIOUS. AND FROM A SECULAR POINT OF VIEW, I THINK THERE IS STILL TREMENDOUS GROWTH OPPORTUNITY IN CHINA IN THE LONG RUN. BUT, AS I SAY, CYCLICALLY, THEY ARE GOING TO HAVE A TOUGH TIME. ERIK: MAR C, MAKE YOU VERY MUCH, JOINING US FROM THAILAND THIS MORNING. ONE OF MY FAVORITES, EDITOR OF "THE GLOOM, BOOM & DOOM REPORT." TIME FOR THE FIVE THINGS YOU NEED TO KNOW. THE "FINANCIAL TIMES" REPORTS

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Marc Faber: There Is No Safe Asset Anymore (Video)