Speaker 1This is the Commodity Culture Podcast, where we interview prominent investors, fund managers, analysts, and company CEOs to give you an edge when it comes to investing in the commodity space. Mark Faber, it is great to have you back on Commodity Culture. It feels like a lifetime has passed since we last spoke. There's so much I want to get your thoughts on, but first, let's start with precious metals markets. I'm wondering what your current thoughts are on gold and silver's price action since falling from all-time highs earlier this year, and do you think we're still in the earlier stages of a longer-term bull market here, or are you cautious of a potential further drawdown in gold and silver?
Speaker 2A further decline in gold and silver is, of course, a possibility. But we have to realize that although gold and silver and also platinum have gone up significantly, compared to financial assets and to the size of the stock market and the global bond market, the precious metals are not very large in terms of asset allocation. In fact, globally, maybe around one percent is allocated to precious metals, and within the S&P 500, mining companies make up for less than one percent of the stock market capitalization. Now, of course, I admit that the stock market capitalization is probably way more important than the financial asset allocation, and I think it's a good thing that we're not going to see a decline in the S&P 500, but I think it's also a good thing that we're not going to see a decline in the S&P 500 in terms of asset allocation, and I think it's a good thing that we're going to see a decline in the S&P 500 in terms of asset allocation, and I think it's a good thing that we're not going to see a decline in the S&P 500 in terms of asset allocation, and I think it's a good thing that we're not going to see a decline in the S&P 500 in terms of asset allocation, and I think it's a good thing that we're not going to see a decline in the S&P 500 in terms of asset allocation, and I think it's a good and bond market capitalization as a percent of the global economy. In that scenario, I suppose that gold and mining stocks would go down less than, say, the investors' favorite like SpaceX and Tesla and NVIDIA and microtechnology. So as an investor, I still think that people should have an allocation to precious metals and probably they should have much more in precious metals than they currently have. Because when you go out and you talk to people and you say, you know, what do you invest in? And of course, they will say, yes, we have gold. But. How much compared to the real estate they own compared to the allocation to semiconductor stocks they own and so forth? It's probably very small. And my view is in this world, which increasingly looks like desperate and with wars and heading towards a major crisis at some point in future. In this environment, I think people must think, how do I lose the least money? And precious metals
Speaker 1are probably an
Speaker 2instrument how to lose less money.
Speaker 1And when it comes to the mining shares, are you seeing opportunity in those as well right now? Because we have seen a big rally over the last few years. However, by many metrics, the big producers still look pretty undervalued here. Even their free cash flow and the current gold and silver prices. How are you currently viewing the precious metals mining sector?
Speaker 2Well, some precious metal stocks, they have come down significantly. I mean, I'm still involved in the large shareholder of Ivanhoe Mines. Ivanhoe Mines went down significantly. And compared to the. All time high in copper that we're witnessing at the present time. The stock is depressed and offers a good entry point in my view. But. I'm a little bit concerned about anything that has to do with paper. Stocks is a certificate is paper. I prefer. Philosophically and also in an emergency situation, I prefer physical precious metals. And then the question arises, where do I keep these precious metals? I wouldn't keep them in the United States. Certainly not in the US where the president could grab it because it's likely that the Trump family. Will continue to steal goods from individuals.
Speaker 1Now, I want to get your view on the broad market as well, because you mentioned you think the valuation there is set to deflate up ahead and very interesting to note that with two wars raging, the big indices keep hitting you all time highs. I think if you went back before the wars started and said, hey, there's going to be two major wars breaking out, what do you think the stock market's going to do? I don't think many people would say, well, keep hitting multiple. Multiple all time highs in the aftermath is this peak complacency in your view? And what will it take for this bubble to finally burst?
Speaker 2I've analyzed the market behavior over the history of capitalism, and they are wars that have no impact on stock prices and the wars that do have an impact on stock prices and quite badly. And especially they are wars that have a devastating impact on bonds, prices and on the currency. This we have to consider. So it's possible that people buy stocks and because they think that bonds are even worse and that cash is even worse because the fact is simply that over the last, say, 10, 20, 60 years, there's been a lot of speculation that the stock market is going to be even worse. And especially there are wars that have a devastating impact on bond prices and on the currency. And especially there are wars that have a devastating impact on bonds, prices and on the currency. the Trump administration has a different view. According to Mr. Trump, he would like to cut interest rates to 1%.
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Speaker 2Usually, and not always, but usually, investment bubble is burst, I mean burst, or is pricked by a credit event. Because the credit event will then tighten market forces and not through some central banker who thinks that he can plan economic activity better than the marketplace. I mean, you have to be an arrogant son of a bitch to think that you know better than the market when you think about it. I had a higher opinion of myself a Besson before he embarked on his bond buying binge. I think it's a complete nonsense what he's doing. And it's not going to help in the long run. Actually, it will make things worse in the long run. Like every intervention into free market worsens conditions in the long run. The worst bond market return has been over the last 10 years in history of the U.S. bond market. Why? Because Mr. Bernanke and Ms. Yellen and so forth, they kept interest rates artificially low for too long. And by doing so, they laid the groundwork for future inflation.
Speaker 1Now, you mentioned intervention. We're seeing more of a, you know, polarization politically, particularly in the United States, but really all around the world. But when it comes to the U.S. in particular, we're seeing a rise in the interest of socialism with figures such as Zorin Mamdami coming into power. I think this largely stems from the fact that people don't understand why prices are going up. They don't have the time or the inclination to look into it. So they just say, some politician needs to do something about this. And so they're willing to listen to people with socialist ideology. We'll take from the rich and we'll give it back to you. In your latest market commentary, you quoted Daniel LaCalle, who wrote on why elites love socialism. He said, quote, it allows them to speak in the language of compassion and humanity while building structures of dependency. So end quote. Let's focus on America here and the rise of figures such as Mamdami. What dangers could a widespread rise in socialism represent for the U.S.? And we also have to keep in mind with the midterm elections coming up, by and large, I think a lot of people are predicting the Democrats sweep that. I think we will see a Democrat president in the next term, perhaps a Gavin Newsom, God forbid, AOC or somebody like that. I mean, these things are all on the table. What would the spread of socialism potentially do to the United States?
Speaker 2Well, it's not going to be favorable for the society, but on the socialists, usually stocks go up. It's a bizarre thing, but socialists, you know, they believe in central banking and they believe in money printing and they have to print money because of all the social programs. But to be fair to the left in the United States, if we look at wealth distribution and income distribution, over the last, say, since the Second World War, the share of the U.S. economy has been very, very low. The share of GDP that goes to wage earners, in other words, to workers and to salaried people, has shrunk as a percent of the economy to the lowest level ever. And the share that goes to asset holders, including myself, I'm not complaining, but you understand, I am an asset holder. But at the same time, I'm an economist and a social observer. I've studied these things. And I have to say for society that most of the income accrues to 0.1 percent of the people is not desirable because the people that the 0.1 percent, including myself, we don't need to spend more. We have already everything. Okay. I don't have a private plane and I don't have a Bentley and so forth. So I could spend on that. But it's not my character to do so. But the rich people, basically, they cannot eat five steaks a day. They eat the same food as the poor. But the poor, they would like to consume. They would like to buy a home, but they can't afford to buy the home. So they suffer. They suffer from affordability. And as you know, approximately 70 percent of people in America, they need their salary check to arrive in order for them to pay the bills. They have no money. And this is the paycheck to paycheck society. And this is very unhealthy and leads to eventually social problems, including it's then easy to argue. Look, the reason you're so poor, the reason you have nothing is that these rich people over there have so much. And we have to change taxes. We have to increase the taxes on them and so forth and so on. But the inequality arises mostly because of money printing, mostly because of money printing. Because say you're born, you go to school and study. And you start to work. And I'm born exactly the same day under the same conditions. We have the same amount of quality. So ignorance. But I'm born into a family where I inherit already with 20, a very large sum of money. And so I have a huge advantage because the money is invested in stuff. And that goes up vertically. And you with your salary, you can't buy it because you get the salary and you have to pay tax at the end of the month. You have no savings. So this leads to this in affordability issue, which is a very complex issue. In Trump, he doesn't want real estate to go down. But in order to become affordable, it should go down and should go down meaningfully. And that in the supermarkets, the people struggle to buy food because the food prices are up substantially. I mean, we talk about commodities. What is at the present time still dirt cheap, you know, compared to everything else is wheat, soybeans, and corn and sugar, very inexpensive components. compared to the rest of the commodity complex like, say, oil or gold or silver or platinum. So I think food prices may go up further. And then the Fed, well, like in the 70s, they will increase rates. But under Trump and Besant, they don't want to increase rates because the problem is government debt. We didn't have the problem of government debt in the inflationary 70s.
Speaker 1Yeah, national debt now surpassing $40 trillion, pretty outrageous to see. Let's talk about, because you're mentioning commodities and the rise in commodity prices. We should talk about the Strait of Hormuz and the war in the Middle East and also the Russia-Ukraine conflict. Because that's escalating as well. Oil refineries, other energy infrastructure getting hit. We're seeing oil tankers get hit. The Strait of Hormuz seeming to be, by all intents and purposes, still closed. An active war going on there. And then, of course, the Strait of Bab al-Mandab may also end up being cut off. What are your thoughts here on how this could impact financial markets, the global economy and commodities? Because we saw, you know, obviously a lot of energy goes through the Strait. A lot of urea, nitrogen. Nitrogen for fertilizer, etc. How do you see that whole situation playing out, assuming that this war doesn't wind down anytime soon?
Speaker 2Well, this is a good observation. Provided the war goes on. Yes, I think the war may go on. Because the Iranians are not just going to give up. And Israel will not want to terminate or finish the war before they reach their objective. And the objective is basically the destruction of the Iranian infrastructure or society. And, I mean, you understand the Middle East is very complex. And it's absurd, absurd to have started this war. Because there's no exit strategy. At what stage do you go back and say enough is enough? And so the other complication is, of course, that none of the surrounding countries is particularly enthusiastic. For the U.S. to control the Strait of Hormuz. You understand? This should be clear. And none of the surrounding countries or the countries in the Middle East, Central Asia, North Africa are interested that Israel controls the Strait of Hormuz. So, I think the conflict may actually last. And the Chinese. And the Russians, they are quite happy to sort of plead the U.S. military in the Middle East. I'm not a military expert in terms of how. I'm not a general in the army. So, I don't know about the supplies. But I hear that the supplies are tight in the United States. That they're running out of rockets and missiles and so forth. And it sort of immobilizes them. And then we have the situation in Russia and Ukraine. I don't think that Putin can just withdraw and say, okay, it was a mistake to attack. I think he wants to settle for the territories in the east of the country of Ukraine. The rest. The region that is bordering Russia. But at the same time, the Ukrainians, they don't want to give up. And especially not as long as the Western countries provide them financing and provide them the money. Because of that, half of it is stolen by the elite in Ukraine and enriches the Ukrainian oligarchs. Everyone. The war is a goldmine. Talking about goldmines. The war goldmine is the most profitable goldmine in the world. And so the wars keep on going as long as the money flows.
Speaker 1I want to move over to what's going on in Germany politically right now and get your thoughts. Because we've seen, you know, we're seeing all the headlines declare it's the rise of the far right in Europe. Of course, anybody that is not far left is considered far right in the media's view. The AFD winning the recent Saxony-Anhalt election now looking like they could start to shape policy in the country at some point. Of course, there's calls to ban them. That's what always happens. They've called for tougher immigration laws, remigration and leaving the EU. Do you think any of this is a realistic proposition? Or do you think this is another situation where they're saying whatever they need to say to potentially get elected? Once they're in power, they'll do a little song and dance. They'll maybe deport a few hard criminals and then everything will resume as normal. What are your thoughts here on what's happening politically in Germany right now?
Speaker 2Well, I happen to know Alice Weidel. She's the leader, essentially, of the AFD. Yeah. And of course, she. Politically, is on the right side of the aisle. But the socialists in Europe, and by the way, also in the US, they paint everyone who is a centrist. They call him a right-wing politician. And for them, left is. Extremely left. I mean, close to communism. I mean, in Switzerland, I had a discussion with the leaders of the Socialist Party. I was invited to a panel discussion and so forth. And interviews. And in a perfect world, they would like to essentially implement state ownership of assets. In other words, take entire. Buildings away from rich people. This is their philosophy. Now, the right-wing in Germany, of course, has nothing to do with the Nazi party of Hitler or something like this. They are of the view that the immigration into Europe without limits leads to disaster, which is. It's true. I mean, our jails are full of foreigners. And the criminality is 70-80% among foreigners and not among locals. And the foreigners without education in particular, you know, people who believe they can go around and rape everyone. Anyway, and then the police is corrupted. And also left-wing, they prosecute white people more likely than, say, colored people and so on. I mean, I think that for Germany and Europe, the solution is not a solution, but a way to control. An already uncontrollable situation, particularly in France. There's some areas that are just Muslims. To keep it under control, I think we need parties like the AFD. It's the same in Switzerland. We need to limit immigration. But that is not the view of the socialists. They want to bring in. These characters. And because they benefit from it, the society does not benefit from it. I'm not saying that no immigration. I'm saying controlled immigration. Because European countries, they're dying out. It's like Japan. Japan. This is. The demographic issue also in China, the population is shrinking. But the Chinese, they're smart. They did something about it. They produce more and more with robots, so they need less and less workers.
Speaker 3But if we contemplate humankind or mankind,
Speaker 2then one of the most difficult problems to understand and also then to solve is how do we organize society? I mean, we had throughout history kingdoms and we had feudal systems and then, and now in the last 200 years, and I'd like to remind people that our written history is about 5,000 years old. So 200 years is not representative. Statistically, it's a very tiny period in history. We had democracy, and of those 200 years of democracy, half of it was not a pure democracy because women couldn't vote and only rich people could vote in Britain in the 19th century. So, I mean, people say that democracy is the best of all the bad systems. I'm not sure. I think it's likely to be the worst system because it leads to chaos and eventually it leads to either a fascist taking over or a socialist taking over, right? Both of which are undesirable.
Speaker 1Yes, and all the way back in the day when Plato wrote the Republic, he spoke about democracy leading to tyranny. Always. I personally don't think it's a great system. Yeah, the mob. Yeah. Yeah, exactly. Now, when it comes to the immigration issue around Europe, obviously it's a touchy subject. Cries of racism always come at you whenever you talk about it, but it's just a fact that you need stronger immigration laws to protect you. To protect your citizens, to ensure the advancement of society in a positive way. And if people commit crimes, particularly sorts of violent crimes happening in Europe, there should be no question you should be kicked out of the country forever. It doesn't matter the color of your skin or which country you're from, you're out and you're out for good. However, I'd like to get your take on the reason why this is happening because you mentioned certain people benefit from it. Also, there's the idea that there's a group of people behind this. who are trying to destabilize societies, throw them into chaos so that they can get greater control over those countries. Is this a controlled demolition in your view or just misguided policy?
Speaker 2There may be different factors at play. I'm sure there are some people, they love to create chaos and weaken the Western societies. But at the same time, I also believe that it's incompetence whereby it's interesting that, say, I look at the high society in Switzerland, a lot of high society people, and these are rich people, they own the assets and everything. They don't support right wing parties. They support the socialists, it's interesting. I mean, for me, it's astounding that they don't understand that their support gives the socialists more and more power. And eventually it causes them some inconvenience and eventually it causes them maybe to lose some assets or be taxed very heavily. Then they complain about high taxation and so on. Of course, but partly it's due to their inaction. And I mean, I would have voted for Mr. Trump anytime. I think he's an idiot, but the others are not much better. And I think the advantage he has is that he's done business not very successfully, but for, say, capitalists in general, he's a better man than say, to have a Kamala Harris or an AOC at the helm of the United States.
Speaker 1Yeah, it's a tough choice. You're presented with two very bad choices and have to pick the least worse one.
Speaker 2But I'd just like to say, it's interesting that in the case of Rome, two of the worst emperors, Nero and Caligula, they lived relatively early on. And the empire then survived this period of horrible leaders for another 600 years. And in the case of the Eastern Roman Empire, it survived for another 400 years. So it is possible in societies to have bad leaders, and then again, better leaders come along. -
Speaker 1And do you think that's a possibility up ahead for the Western world? Because obviously a lot of people are black pilled these days. They believe everything's going down. There's no hope for humanity. It's just a cacistocracy ruled by the absolute worst of the worst everywhere. And it's all fake. It's all theater. And nobody's telling the truth, which it really does feel that way. Is this like a fourth turning event that we're going through that will eventually lead to a new golden age, to better times ahead in your view? What are your thoughts there? -
Speaker 2Well, you're a little bit younger than I am. So you're of course thinking about this and concerned about this. I'm not so concerned. I think in my lifetime there will be a major financial crisis. And I think it's actually begun. But as crises develop, they're not visible immediately. You remember 2007, people right into 2008 didn't realize the curiosity of the credit problems. And then it occurred at the end of 2008, and at the beginning of 2009. But it then occurred with violence. I mean, it was a devastating crisis, a financial crisis. And to be fair, I mean, it could have been worse if they didn't throw money at the system. The problem is that they threw money at the system. And saved the system. But afterwards, they didn't tighten liquidity sufficiently to sort of cool down the party. You understand, 2009, if you recall, the mood was very depressed. And I mean, people thought the world is coming to an end. And then things started to improve. And they launched, at the end of 2008, quantitative easing. And the question was then, well, when will they stop? And my view was immediately, once a central bank embarks on monetary easing, it's possible to stop it. But in a democracy where people are elected based on good feelings, feeling and so forth, it's not going to happen. And now we have this quantitative easing and easing of monetary policies that is going on. And to be fair, it's driven the S&P higher. But as I said, it also created side effects that are undesirable.
Speaker 1Now, based on everything we've discussed so far today, final question here, how would you approach portfolio construction in this current market environment? Just your own personal thoughts, not financial advice. You mentioned physical gold and silver being important. We talked about the miners. I know you're involved in emerging markets from time to time. Perhaps I'd love to get your thoughts there. Where would you be allocating capital if you were entering the market today?
Speaker 2Good question. I think in absence of knowing how the world will look like in five years' time, and there are many possibilities, because Mr. Trump changes his mind all the time, And it's very impulsive and not exactly a deep thinker. But I would advise individuals to be diversified. And I would advise to be diversified in different asset classes, in real estate stocks and precious metals and commodities and different sectors within the market. But I would also advocate geographical diversification because, say, I'm in the U.S. If I have all my money in gold in the U.S. and suddenly Mr. Trump wakes up in the morning and says, oh, it might be a good idea to take the gold away from the citizens and put it in our vaults, then you might be stuffed. I don't think they will do that, but I think they will take the gold away and pay for it. But they pay for it in dollars that will then become worthless. So under these conditions, you want to hold some of your assets in other countries, not the U.S. Or wherever you are, if you are in Zimbabwe, you want to keep some money outside of Zimbabwe. And if you're in Canada, you want to keep some money outside Canada. And don't think that you hold something outside a country. If you have a custody account and all the securities are in, say, State Street, Boston, or in New York, in Manufacturers Hanover, Morgan, J.P. Morgan, you have to have the account, actually, physically, or the precious metals physically, in Russia or in China or in Singapore, Dubai, Hong Kong, London, wherever. So individuals should prepare themselves. I tell you, people should prepare themselves for, I mean, really a lifetime crisis that is going to be devastating. For asset holders, devastating. The people have nothing. They are not going to lose very much. But they will also suffer because once the people who have assets lose, their consumption will decline and there will be less economic activity.
Speaker 1Great thoughts and really appreciate you coming on the show. The Gloom, Boom, and Doom report, what's that all about? Where can people find it?
Speaker 2They can find it on my website, gloomboomdoom.com. And I mean, some people have come to me and said that my writings changed their lives. I don't know, but for sure that I'm confident you can see that I'm reasonably well read. And I admit that I haven't read every book from page one to page, the last page. But I've read a lot. And I think if someone reads my reports for three years, and, but he has to do some homework because I discuss certain events or some economies, and the person who reads the report would have to look it up. So there's some time involvement, but I think if someone spends an hour a day or an hour or two hours a week or so, I think after three years he would know about economics as much as someone who went to university and studied economics under a professor, most of which are socialists and communists.
Speaker 1That's a great summary. I'm going to put a link in the description below to Gloom, Boom, and Doom. Mark, as always, thank you so much for coming on the show.
Speaker 2Well, it's my pleasure. Thank you very much. And I wish much success. And of course, success is also good health to your viewers and listeners.
Speaker 1Thank you for joining us today on Commodity Culture. Earn up to a 4% annual yield on your physical gold paid in gold ounces through Monetary Metals. Go to monetary-metals.com slash commodity. And find out how to put your gold to work for you. Link is in the show notes below.
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