Marc Faber: Gold, Oil and War — My Outlook and Strategy Now
Summary
Macro Liquidity: The guest argues global liquidity is tightening due to war-related disruptions, falling commercial real estate values, and weak equity performance.
Inflation & Rates: He expects persistent inflationary pressures and a long-term rising rate trend, with the Fed unable to control long-duration yields.
Capital Preservation: Prefers a defensive stance, highlighting bonds—particularly US Treasuries—as lower-loss instruments versus equities in a downturn.
Precious Metals: Maintains a significant gold allocation for safety, noting low institutional ownership and a rationale for holding despite potential short-term weakness.
Oil Stocks: Sees oil equities as reasonably valued with historically low index weights; if forced to buy stocks, he would choose oil names.
Equity Caution: Warns that many popular tech names, including the Magnificent Seven, could fall further, advocating caution over return-seeking.
Regional Shift: Highlights the rise of China and India and recommends diversification into Emerging Markets and Asia alongside Western assets.
Risk Outlook: Expects poor economic data, consumer strain, and policy-driven money printing, reinforcing the case for defensive positioning.
Transcript
I'm Charlotte Mloud with investingnews.com and here today with me is Mark Bober, editor and publisher of the Gloom, Boom, and Doom Report. Thank you so much for being here. Great to have you for the very first time. I'm excited. >> Thank you very much for giving me the opportunity and uh good day to your viewers and listeners. Well, thank you again so much for being here. I know many of our viewers are fans of you, so excited for this conversation. There's definitely a lot to go over. There's so much going on in the world right now. But where I thought we could start is with your recent piece talking about how the Iran war is tightening global liquidity. I wonder if you could talk about what you see happening and the impact there. Well, I I think that uh the concept of liquidity is frequently misunderstood and uh one looks at the m supply of central banks and the interest rates movements and people say when interest rates are going up that the Fed is tightening and when interest rates are going down that they're easing. But that is not entirely correct. There are many other factors that influence global liquidity and especially liquidity in individual markets. Say if you look look at uh commercial properties in the United States and also elsewhere they have declined significantly in price. So if the fed fund rate is at say 4%. and commercial properties drop by 8% peranom then the interest rate for the property owners for the commercial property owners I must specify is incredibly high and the same will happen in um say the stock market if the margin debt which is very large is over a trillion ion dollar. If that margin debt is faced with asset prices that go down, liquidity becomes tight. And my point is that in because of the war in the Middle East, many businesses have slumped and many central banks have essentially less money than they had before the crisis occurred. the intervention in Iran. And so we have many different uh influences that have an impact on global liquidity. We have, as I mentioned, the collapse in commercial property values has reduced the liquidity. We have stocks that basically haven't really gone up for the last 12, 18 months. In fact, since 2021, many stocks have gone down. If you look at say the two most favorable uh favorite stocks at the beginning of 20 and 25, in other words, a year ago were Nvidia and Tesla. They've gone nowhere. And these stocks are all down very substantially. And then we have a ill liquidity occurring in cryptos because many crypto traders they came in late. They didn't buy bitcoins below 10,000. They bought bitcoins around 100,000. They're all underwater now. And they bought speculative memes stocks and token stocks and so forth. And they're all underwater. And now we also have the illi liquidity that occurs when prices go up and the salaries of people don't go up at the same rate. So they are squeezed. So uh what people call in through inflation what people call but actually it's a monetary phenomenon that occurs uh because money when it's increased when the quantity goes up it doesn't flow evenly into the system but it lifts asset prices somewhere or it lifts inflates asset prices somewhere and occasionally it inflates uh the necessities of life. In other words, the prices in supermarkets go up and this is happening right now. And then as you know in life the psychology of people is very important. Do people feel good? Are you feeling happy? Are you willing to buy something? or are you feeling somewhat restrained by conditions that occur around you? And I think uh from my observation because I go out a lot and so forth and I meet a lot of people. My observation is that people are worried, they are concerned and they spend less. And in my view, the economic statistics that will be published will be very bad. >> I think that is my sense too. People are worried and when they're going out they they don't want to spend. >> I wonder so there's a lot of complex dynamics playing out right now. I wonder what you see happening with oil prices. I know you're talking about in general asset prices going on. We've seen so much oil price volatility and I I know that people are curious how that will play out and what the impact on inflation could be if we do see higher or elevated oil prices continue. So any thoughts there? >> This is a very good question because it's not obvious whether an increase in oil prices is inflationary or deflationary. It depends what the central bank does because in theory if people spend more money on oil they have less money on other things. But if at the same time the monetary authorities print money then uh the increase in oil prices can be financed and it can lead to higher prices but with more money in the system. So in nominal terms GDP expands but in real terms it contracts. And here I have to say the government always publishes GDP figures. But if you really measure your cost of living increases compared to your salary increase or to your increase in the value of your assets and so forth. At the present time most people in the world are being squeezed. Yes. the prices that they pay for necessities whether is or rice or spaghetti or bread or potato is going up more than their salaries. And that's why the housewives when they go to the supermarket they suddenly notice that the basket of goods they buy costs more or they cannot afford it and they have to buy less. This is happening right now and in my view this has tightened the money that is available to speculate and so the asset price bubble that we experience. I mean since 1980 asset prices have basically gone up until most recently say 2020 to 2021 but since then interest rates are in a rising trend. My view is they could go down somewhat in the next 6 months but the long-term trend is a rising trend because inflation is likely to increase especially under Mr. Trump who has no regard for debts. He doesn't care how much they spend. I want to make this very clear to your viewers. When people talk about inflation, it is nothing else than a a diminishing purchasing power of money. In other words, your $100 today buys much less than your grandmother's $100 because the purchasing power has gone down significantly. And uh I can tell you when I grew up and I started to work in 1970 in the 70s there were one or two billionaires. That's all. In 1980 there were six billionaires and now you have in in every country thousands of billionaires the and it's not that the world has become all that much richer. It has become richer because and I want to explain this very clearly because of the opening of countries like China and Russia and Kazakhstan and uh India and so who abandoned socialism and moved into a capitalistic system. Thanks to capitalism, these countries prospered uh relatively speaking that I want to make clear because so many young people they think the government should do this and the government should do that. No, the government shouldn't do anything. they should stay out of the economy because whatever the government touches and we've seen that now with all our own eyes whatever they touch they mess up. >> Yeah. Yeah. I think that would resonate with many people and it's a a great point about the increase in the number of billionaires. I want to go back and talk a little bit more about interest rates. So you mentioned maybe they go down in the short term but in the longer term higher. We're at a pretty interesting point right now when it comes to the US Federal Reserve. We have Jerome Powell on his way out. We have a new Fed share coming in and we know that Trump wants to have lower interest rates. So, can you share a little bit more about what you see coming in terms of the Fed's path forward right now? >> Well, this is a very interesting subject and we need a few hours to discuss it in details. But the essence of interest rates is that they move in long-term cycles. So if I go back 200 years, I can say they went up until then and then down and so forth. And in this century, they went up until 1921 and then they had a declining trend until the Second World War. And after the Second World War, they started to gradually increase. And this increase in interest rates then accelerated in the late 60s and 70s with a peak in interest rates in 1981 to be precise September 21, 1981. And then after this September 81, we had a declining interest rate structure in the US and worldwide until say May to August 2020 when the 10 years note the 10 years Treasury bond which had yielded more than 15% in 1981. one in uh August 2020 it went down and had a yield of 0.57% 0.57%. And from there the trend of interest rates has been up. Now the Fed started to cut rates under Mr. Biden in September 2024 gradually but they started to cut and what happened and this is very interesting and be investors must realize this. The Fed does not control interest rates. They control short-term rates to a large extent. In other words, they can cut the Fed fund rate to zero. But the long bond, the tw the 10 years and 30-year bonds, they may not go that the interest rates on these bonds may not go down, but it may go up. And this is what has happened since September 2024. Instead of bonds rallying, the bond market went down and Mr. Trump in his complete ignorance about everything including economics and Mr. Bessant is not much better. They think they can cut rates and that bonds will rally. That is a fallacy. it the bonds will rally the day there is a recession and the day there is an absence of inflationary pressures but right now the inflationary pressures are there and it they are not on the downside on the upside so whereas I'm relatively bullish about bonds but I want to explain why I am bullish about bonds because I think that people should learn to invest with the philosophy or the strategy how do I lose the least money in the next 5 years you understand so in bonds say a 10 years treasury I don't think you you lose a lot of money you lose some purchasing power but in stocks many stocks in my view they they will drop another 50% from where they are and they've dropped already 50% from the highs. >> Okay. So, so right now it's more about preserving what you have and not losing anything versus making money. So, you've got bonds as one way to do that. And I've got to ask about gold and precious metals. Do they fit into your strategy? How how do you look at gold? >> Yes. I think I mean I'm known as being say some people would say a gold bug. I don't think I'm a gold bug, but in my asset allocation, I've written about this for the last four years. I have about 25% of my assets in gold and 25% in real estate and 25% in stocks and about 25% in um bonds and cash and I feel the most comfortable with gold but I want to stress here that I don't think that gold will necessarily go up in an environment of tightening liquidity, but it may go down less than other items and it may be relatively safe. Do you understand if you have nowadays a deposit with a bank? I'm not sure they will repay you. The US government will repay you because they can print money. that what we what they're doing that they have a debt of what is it now $39 trillion and the interest payments are monthly $88 billion at the moment. If interest rates go up is going to be a hundred billion dollars a month's interest payments. If interest rates go down, maybe a little bit less. But the trend is upwards and the deficits are not being solved because neither the Democrats nor the Republicans have any interest to cut government expenditures. Mr. Musk tried to do it. He his idea was right where he got sucked because everybody said we I don't want to cut my expenditures act and so was you understand the the it's the democracy is such a system that they're going to spend too much money and collect too little taxes because if you want to become the president of the US and you go to the people and say oh you have to tighten your belts and uh we have to increase your taxation, you're not going to get elected. But if you bring up up a theory, you know, uh make America great again and you know, of course, people think, oh, that's great and we going to be great again. But if you spend money like water, like Mr. Trump, and Mr. Trump has the additional uh qualification that as a businessman he's never repaid any debts. Never. He his companies went bankrupt several times. I think this is historically historically this is one of the most interesting periods. It's a comical period because if you look at the quality of the last few presidents we had in the US, you have to laugh. >> I want to go back and talk a little bit more about gold. It's a a topic of high interest for our audience. So, you mentioned the price of gold could go down. Price of assets overall is looking like they're going down. But I know a lot of people are wondering right now why the gold price isn't higher when we've got a war going on. We've got the the high debt and all the economic situation in the US that you're outlining. So I wonder I wonder if you can talk a little bit more about that and why we could see gold go down instead of up as many people might expect. >> Yes, this is a very good question and I can give you an answer. Say in a poor country people have as assets uh the the main asset is a house because uh when they get some money they know something uh about the house price because the neighbor has sold his house or you understand is something that is near to their daily lives. They have in poor countries whether it's Indonesia or Bangladesh, India or here they have no clue what the stock is. They don't know they don't know what bonds are. So they buy properties. And what they also buy is when they get into some monetary uh conditions that are favorable, they buy a motorcycle because then they can go to work further away and uh they become mobile. They can go into the city and earn a higher salary which they couldn't do before. And then they buy if they do well and uh they're become they become more affluent they buy a car and then they buy uh life insurance for the children and so but stocks is very mo moved but most people around the world they know what the coin is of gold and silver that everybody knows And so when the prices of gold and silver go up, they store some money in gold and silver, but also they store it there because they've seen how the purchasing power of money has diminished. You understand? 20 years ago, a soup on the street or some street food would cost say 20 cents and now it costs a dollar. So they know that gold keeps its value. But when there is a crisis, an economic crisis, what do they sell? They have children, they have wives, they have uh obligations. They don't want to sell the house because then they have to move into more unfavorable social conditions and that is embarrassing for the children and the wives and they don't want to sell the car which is mortgage and they have installment credit because they need the car to go to work. And so when they have a liquidity issue for themselves in the household, it can also be someone is sick and or the or someone needs urgency money. The one thing they can always sell and nobody sees it is the gold they own. And so when prices go up and they are relatively high in the current crisis, they are selling it. And then there are central banks. You understand? In the Middle East, the Middle Eastern uh countries had big surpluses and they have these large sovereign funds and the sovereign funds they are there to basically is like a pension fund of the population of Saudi Arabia or of the population of the United Arab Emirates and so forth. But now the cash flow of these countries is down because although the price of oil is up, they are selling less. And uh so there is some selling pressure among gold holders. But I want to reassure your viewers since you told me that they're interested in precious metals. If you look at the ownership of gold and silver and platinum around the world, especially among financial institutions, it's tiny, tiny. In other words, say if you look at portfolio managers in the US, most of them in their portfolios have next to zero exposure to gold. They also have very little exposure to oil. Say in 1980 at the last peak of the oil boom of the 70s when oil had gone from essentially a dollar in 1970 to close to $50 on the spot market. At the at the time oil and oil related stocks made up for 35% of the S&P 500. We're now down to around 5%. So, I think oil stocks are reasonably good value. I mean, if you ask me, Mark, you must buy stocks today, which I don't really want to do. But if I have to buy stocks, I would buy some oil stocks. But I think I would also buy some mining companies. Although I think that the mining stocks are not acting well that they will go down first. But as I said, I personally I sleeve very well with my gold holdings and the bonds I have as a cash flow instrument that I consider reasonably safe. I mean I I think I lose less on my bond positions which are different maturities. Every year some bonds mature, but uh I think I lose less money on bonds than on Nvidia and Tesla and the F seven stocks and the magnificent seven stocks and all these popular investments. >> Yeah. Going >> your viewers should be sleeping well if they own some gold and silver. >> Absolutely. Going back to that that idea of preserving wealth right now, I wonder if we if we put together the topics we've been speaking about, you've really outlined how the average person is is probably facing a pretty tough time right now and in the years to come for for the US economy. How do you see it shaping up? I've heard a lot of different views lately on what could be coming. I've seen headlines about stagflation. I've started to hear even about deflation. What What is your US economic outlook? I mean my outlook for the western societies and I'm not singling out the US because some countries are even worse. They have lived on uh borrowing money. If you look at the the economic growth GDP and is a questionable question is a questionable to look at uh the figure of GDP. I think a better measurement of people's prosperity is their or would be their standards of living. Now that it's not quite easy to measure the standards of living because it varies a lot but in general one has to be very careful by using GDP which just as the production of apples and oranges and cars and insurance premiums and so forth. You understand? There's so many different things that go into GDP. It doesn't tell you very much whether you are richer than your grandmother was or poorer. I can say that my grandparents lived a relatively high life standard. I'm not saying I live a better standard or a worse standard. But my grandmother that she just cooked for my grandfather and my grandfather he was an engineer and uh they had a permanent they had actually two permanent servants. One lived with them and one came for the day and so was very few families have permanent servants nowadays. I happen to have three, but I have a large property and so forth. So, they need to look after the house and they need to cook and they need to look after the motorcycles and so and they are not terribly expensive and is a huge convenience for me. But uh I I'm concerned that the lifestyle my colleagues had who finished school at about the same time. I finished school in 1964 and university in ' 69 with a PhD. And uh my impression is that at the time with my salary I could live relatively good life and that uh you could buy assets at at a low price relative to today. You understand? In when I grew when I started to work in 1970, the stock market capitalization as a percent of the economy in America was 25%. So in other words, the economy was this big and the stock market was this big. Now the stock market is everywhere and the economy is a bit larger. So the economy has become very dependent on stocks going up or going if they go down they hurt consumption and so forth. And Trump and his fellow billionaires they don't want stocks to go down. They they want to keep them up. And whenever Trump does something where the stock market goes down, you can be sure that he gets a telephone call from the bodies that give him money for the elections and they tell him, "You idiot, can't you do something to make stocks go up?" And so, as in every society throughout history, they're going to print money. And when there is money printing for sure in the long run, your viewers and I and you and everybody is well advised to have the ownership of some gold. But there's a question mark about where you should hold your gold and so forth. I would prefer to hold gold in a place and you don't tell anyone about it or as an American I would be concerned that the government will take my gold away one of these days. It's the same in Switzerland. the government. This is my only fear that the government if they could lock in you and your family during COVID, they can also take things away from you and the governments all over Europe and in the US is bankrupt. That nobody should have any doubts about it. They cannot pay the current expenditures in the long run. It's not possible mathematically not possible >> definitely there's there's a lot of issues in the west and we're coming to the end here the other piece that I wanted to make sure to ask you about so as you've been talking about all of these problems in the western world I've also had a lot of conversations heard a lot about the rise of the bricks countries and I wonder I wonder your thoughts I know that's a huge topic but maybe some brief thoughts on that and and how that trend could play out in the years to come as we continue to face these issues in the west. Yes, this is a very interesting subject and again it would take a long time to discuss but I believe the war in the Middle East is sort of a symptom that uh we have a country that coming out of the second world war there's no question that the US was miles ahead in everything compared to the rest of the world in standards of living, in wealths, in power, in military influence and so forth and so on. And then came the opening of China which had experienced in 1978 under Deng Xiaoing. I was at the time in Hong Kong. I moved in 73 to Hong Kong and uh it was an experiment initially but it became successful and then expanded to the whole of China and we had a incredible growth in China over the last 30 40 years. I'm not saying that everything that China has done is good and I'm not saying that the quality on this and that is perfect and the worst. But I'm just saying in 1970 China consumed 2% of all industrial commodities in the world and now they consume 50% or more. Do you understand? And it wasn't a factor in the global economy in 1970, but today it has the largest car market. It produces more cement and steel than the rest of the world combined. And now we have India coming up. So the world is changing and Mr. Trump, he's suffering under the illusion that the US can still control the entire world, which it cannot because the population of the rest of the world is 88% of the world's population and Europe and the US combined with Japan is just 12% of the world's population. Now they can control many things but not everything. And my view and my advice to anyone in the world is to have not only a diversification between stocks, bonds, commodities and real estate but also diversification. I you have some assets in America but you should have some assets in Asia now. You should have maybe some assets in Europe and maybe some assets in Australia. I don't know. But you understand? I think it's better for you to have some assets in the emerging world that will not be controlled by the US. >> Yeah, I think that makes a lot of sense in the world today. Thank you for going into that. I know I asked a lot of big questions today that probably take more time than we have, but hope to have you back in the future. For now, for now, I'll let you go unless you had any final thoughts you would leave investors with. Well, I I I think that we live in a a time when u some people will make a lot of money because during war times there are huge profit opportunities for a selected few. But I believe we also in a time where asset holders will lose money no matter what you do. But as I said, if you go down in your assets by 10%. And you all your neighbors go down by 50%. And most people go down by 90%. Your loss of 10% is actually a relative increase compared to everybody else. And then you should be very happy. >> Well, I think that's a a good message to end on. So, thank you so much for for taking the time today. This was great. It was a pleasure to speak with you. >> Okay. Equally, thank you. Bye-bye. >> Of course. Once again, I'm Charlotte Mloud with investingnews.com and this is Mark Fabber. Thank you for watching. If you like this video, make sure you hit the like button and subscribe to our channel. We'd also love to hear your thoughts, so leave us a comment below.
Marc Faber: Gold, Oil and War — My Outlook and Strategy Now
Summary
Transcript
I'm Charlotte Mloud with investingnews.com and here today with me is Mark Bober, editor and publisher of the Gloom, Boom, and Doom Report. Thank you so much for being here. Great to have you for the very first time. I'm excited. >> Thank you very much for giving me the opportunity and uh good day to your viewers and listeners. Well, thank you again so much for being here. I know many of our viewers are fans of you, so excited for this conversation. There's definitely a lot to go over. There's so much going on in the world right now. But where I thought we could start is with your recent piece talking about how the Iran war is tightening global liquidity. I wonder if you could talk about what you see happening and the impact there. Well, I I think that uh the concept of liquidity is frequently misunderstood and uh one looks at the m supply of central banks and the interest rates movements and people say when interest rates are going up that the Fed is tightening and when interest rates are going down that they're easing. But that is not entirely correct. There are many other factors that influence global liquidity and especially liquidity in individual markets. Say if you look look at uh commercial properties in the United States and also elsewhere they have declined significantly in price. So if the fed fund rate is at say 4%. and commercial properties drop by 8% peranom then the interest rate for the property owners for the commercial property owners I must specify is incredibly high and the same will happen in um say the stock market if the margin debt which is very large is over a trillion ion dollar. If that margin debt is faced with asset prices that go down, liquidity becomes tight. And my point is that in because of the war in the Middle East, many businesses have slumped and many central banks have essentially less money than they had before the crisis occurred. the intervention in Iran. And so we have many different uh influences that have an impact on global liquidity. We have, as I mentioned, the collapse in commercial property values has reduced the liquidity. We have stocks that basically haven't really gone up for the last 12, 18 months. In fact, since 2021, many stocks have gone down. If you look at say the two most favorable uh favorite stocks at the beginning of 20 and 25, in other words, a year ago were Nvidia and Tesla. They've gone nowhere. And these stocks are all down very substantially. And then we have a ill liquidity occurring in cryptos because many crypto traders they came in late. They didn't buy bitcoins below 10,000. They bought bitcoins around 100,000. They're all underwater now. And they bought speculative memes stocks and token stocks and so forth. And they're all underwater. And now we also have the illi liquidity that occurs when prices go up and the salaries of people don't go up at the same rate. So they are squeezed. So uh what people call in through inflation what people call but actually it's a monetary phenomenon that occurs uh because money when it's increased when the quantity goes up it doesn't flow evenly into the system but it lifts asset prices somewhere or it lifts inflates asset prices somewhere and occasionally it inflates uh the necessities of life. In other words, the prices in supermarkets go up and this is happening right now. And then as you know in life the psychology of people is very important. Do people feel good? Are you feeling happy? Are you willing to buy something? or are you feeling somewhat restrained by conditions that occur around you? And I think uh from my observation because I go out a lot and so forth and I meet a lot of people. My observation is that people are worried, they are concerned and they spend less. And in my view, the economic statistics that will be published will be very bad. >> I think that is my sense too. People are worried and when they're going out they they don't want to spend. >> I wonder so there's a lot of complex dynamics playing out right now. I wonder what you see happening with oil prices. I know you're talking about in general asset prices going on. We've seen so much oil price volatility and I I know that people are curious how that will play out and what the impact on inflation could be if we do see higher or elevated oil prices continue. So any thoughts there? >> This is a very good question because it's not obvious whether an increase in oil prices is inflationary or deflationary. It depends what the central bank does because in theory if people spend more money on oil they have less money on other things. But if at the same time the monetary authorities print money then uh the increase in oil prices can be financed and it can lead to higher prices but with more money in the system. So in nominal terms GDP expands but in real terms it contracts. And here I have to say the government always publishes GDP figures. But if you really measure your cost of living increases compared to your salary increase or to your increase in the value of your assets and so forth. At the present time most people in the world are being squeezed. Yes. the prices that they pay for necessities whether is or rice or spaghetti or bread or potato is going up more than their salaries. And that's why the housewives when they go to the supermarket they suddenly notice that the basket of goods they buy costs more or they cannot afford it and they have to buy less. This is happening right now and in my view this has tightened the money that is available to speculate and so the asset price bubble that we experience. I mean since 1980 asset prices have basically gone up until most recently say 2020 to 2021 but since then interest rates are in a rising trend. My view is they could go down somewhat in the next 6 months but the long-term trend is a rising trend because inflation is likely to increase especially under Mr. Trump who has no regard for debts. He doesn't care how much they spend. I want to make this very clear to your viewers. When people talk about inflation, it is nothing else than a a diminishing purchasing power of money. In other words, your $100 today buys much less than your grandmother's $100 because the purchasing power has gone down significantly. And uh I can tell you when I grew up and I started to work in 1970 in the 70s there were one or two billionaires. That's all. In 1980 there were six billionaires and now you have in in every country thousands of billionaires the and it's not that the world has become all that much richer. It has become richer because and I want to explain this very clearly because of the opening of countries like China and Russia and Kazakhstan and uh India and so who abandoned socialism and moved into a capitalistic system. Thanks to capitalism, these countries prospered uh relatively speaking that I want to make clear because so many young people they think the government should do this and the government should do that. No, the government shouldn't do anything. they should stay out of the economy because whatever the government touches and we've seen that now with all our own eyes whatever they touch they mess up. >> Yeah. Yeah. I think that would resonate with many people and it's a a great point about the increase in the number of billionaires. I want to go back and talk a little bit more about interest rates. So you mentioned maybe they go down in the short term but in the longer term higher. We're at a pretty interesting point right now when it comes to the US Federal Reserve. We have Jerome Powell on his way out. We have a new Fed share coming in and we know that Trump wants to have lower interest rates. So, can you share a little bit more about what you see coming in terms of the Fed's path forward right now? >> Well, this is a very interesting subject and we need a few hours to discuss it in details. But the essence of interest rates is that they move in long-term cycles. So if I go back 200 years, I can say they went up until then and then down and so forth. And in this century, they went up until 1921 and then they had a declining trend until the Second World War. And after the Second World War, they started to gradually increase. And this increase in interest rates then accelerated in the late 60s and 70s with a peak in interest rates in 1981 to be precise September 21, 1981. And then after this September 81, we had a declining interest rate structure in the US and worldwide until say May to August 2020 when the 10 years note the 10 years Treasury bond which had yielded more than 15% in 1981. one in uh August 2020 it went down and had a yield of 0.57% 0.57%. And from there the trend of interest rates has been up. Now the Fed started to cut rates under Mr. Biden in September 2024 gradually but they started to cut and what happened and this is very interesting and be investors must realize this. The Fed does not control interest rates. They control short-term rates to a large extent. In other words, they can cut the Fed fund rate to zero. But the long bond, the tw the 10 years and 30-year bonds, they may not go that the interest rates on these bonds may not go down, but it may go up. And this is what has happened since September 2024. Instead of bonds rallying, the bond market went down and Mr. Trump in his complete ignorance about everything including economics and Mr. Bessant is not much better. They think they can cut rates and that bonds will rally. That is a fallacy. it the bonds will rally the day there is a recession and the day there is an absence of inflationary pressures but right now the inflationary pressures are there and it they are not on the downside on the upside so whereas I'm relatively bullish about bonds but I want to explain why I am bullish about bonds because I think that people should learn to invest with the philosophy or the strategy how do I lose the least money in the next 5 years you understand so in bonds say a 10 years treasury I don't think you you lose a lot of money you lose some purchasing power but in stocks many stocks in my view they they will drop another 50% from where they are and they've dropped already 50% from the highs. >> Okay. So, so right now it's more about preserving what you have and not losing anything versus making money. So, you've got bonds as one way to do that. And I've got to ask about gold and precious metals. Do they fit into your strategy? How how do you look at gold? >> Yes. I think I mean I'm known as being say some people would say a gold bug. I don't think I'm a gold bug, but in my asset allocation, I've written about this for the last four years. I have about 25% of my assets in gold and 25% in real estate and 25% in stocks and about 25% in um bonds and cash and I feel the most comfortable with gold but I want to stress here that I don't think that gold will necessarily go up in an environment of tightening liquidity, but it may go down less than other items and it may be relatively safe. Do you understand if you have nowadays a deposit with a bank? I'm not sure they will repay you. The US government will repay you because they can print money. that what we what they're doing that they have a debt of what is it now $39 trillion and the interest payments are monthly $88 billion at the moment. If interest rates go up is going to be a hundred billion dollars a month's interest payments. If interest rates go down, maybe a little bit less. But the trend is upwards and the deficits are not being solved because neither the Democrats nor the Republicans have any interest to cut government expenditures. Mr. Musk tried to do it. He his idea was right where he got sucked because everybody said we I don't want to cut my expenditures act and so was you understand the the it's the democracy is such a system that they're going to spend too much money and collect too little taxes because if you want to become the president of the US and you go to the people and say oh you have to tighten your belts and uh we have to increase your taxation, you're not going to get elected. But if you bring up up a theory, you know, uh make America great again and you know, of course, people think, oh, that's great and we going to be great again. But if you spend money like water, like Mr. Trump, and Mr. Trump has the additional uh qualification that as a businessman he's never repaid any debts. Never. He his companies went bankrupt several times. I think this is historically historically this is one of the most interesting periods. It's a comical period because if you look at the quality of the last few presidents we had in the US, you have to laugh. >> I want to go back and talk a little bit more about gold. It's a a topic of high interest for our audience. So, you mentioned the price of gold could go down. Price of assets overall is looking like they're going down. But I know a lot of people are wondering right now why the gold price isn't higher when we've got a war going on. We've got the the high debt and all the economic situation in the US that you're outlining. So I wonder I wonder if you can talk a little bit more about that and why we could see gold go down instead of up as many people might expect. >> Yes, this is a very good question and I can give you an answer. Say in a poor country people have as assets uh the the main asset is a house because uh when they get some money they know something uh about the house price because the neighbor has sold his house or you understand is something that is near to their daily lives. They have in poor countries whether it's Indonesia or Bangladesh, India or here they have no clue what the stock is. They don't know they don't know what bonds are. So they buy properties. And what they also buy is when they get into some monetary uh conditions that are favorable, they buy a motorcycle because then they can go to work further away and uh they become mobile. They can go into the city and earn a higher salary which they couldn't do before. And then they buy if they do well and uh they're become they become more affluent they buy a car and then they buy uh life insurance for the children and so but stocks is very mo moved but most people around the world they know what the coin is of gold and silver that everybody knows And so when the prices of gold and silver go up, they store some money in gold and silver, but also they store it there because they've seen how the purchasing power of money has diminished. You understand? 20 years ago, a soup on the street or some street food would cost say 20 cents and now it costs a dollar. So they know that gold keeps its value. But when there is a crisis, an economic crisis, what do they sell? They have children, they have wives, they have uh obligations. They don't want to sell the house because then they have to move into more unfavorable social conditions and that is embarrassing for the children and the wives and they don't want to sell the car which is mortgage and they have installment credit because they need the car to go to work. And so when they have a liquidity issue for themselves in the household, it can also be someone is sick and or the or someone needs urgency money. The one thing they can always sell and nobody sees it is the gold they own. And so when prices go up and they are relatively high in the current crisis, they are selling it. And then there are central banks. You understand? In the Middle East, the Middle Eastern uh countries had big surpluses and they have these large sovereign funds and the sovereign funds they are there to basically is like a pension fund of the population of Saudi Arabia or of the population of the United Arab Emirates and so forth. But now the cash flow of these countries is down because although the price of oil is up, they are selling less. And uh so there is some selling pressure among gold holders. But I want to reassure your viewers since you told me that they're interested in precious metals. If you look at the ownership of gold and silver and platinum around the world, especially among financial institutions, it's tiny, tiny. In other words, say if you look at portfolio managers in the US, most of them in their portfolios have next to zero exposure to gold. They also have very little exposure to oil. Say in 1980 at the last peak of the oil boom of the 70s when oil had gone from essentially a dollar in 1970 to close to $50 on the spot market. At the at the time oil and oil related stocks made up for 35% of the S&P 500. We're now down to around 5%. So, I think oil stocks are reasonably good value. I mean, if you ask me, Mark, you must buy stocks today, which I don't really want to do. But if I have to buy stocks, I would buy some oil stocks. But I think I would also buy some mining companies. Although I think that the mining stocks are not acting well that they will go down first. But as I said, I personally I sleeve very well with my gold holdings and the bonds I have as a cash flow instrument that I consider reasonably safe. I mean I I think I lose less on my bond positions which are different maturities. Every year some bonds mature, but uh I think I lose less money on bonds than on Nvidia and Tesla and the F seven stocks and the magnificent seven stocks and all these popular investments. >> Yeah. Going >> your viewers should be sleeping well if they own some gold and silver. >> Absolutely. Going back to that that idea of preserving wealth right now, I wonder if we if we put together the topics we've been speaking about, you've really outlined how the average person is is probably facing a pretty tough time right now and in the years to come for for the US economy. How do you see it shaping up? I've heard a lot of different views lately on what could be coming. I've seen headlines about stagflation. I've started to hear even about deflation. What What is your US economic outlook? I mean my outlook for the western societies and I'm not singling out the US because some countries are even worse. They have lived on uh borrowing money. If you look at the the economic growth GDP and is a questionable question is a questionable to look at uh the figure of GDP. I think a better measurement of people's prosperity is their or would be their standards of living. Now that it's not quite easy to measure the standards of living because it varies a lot but in general one has to be very careful by using GDP which just as the production of apples and oranges and cars and insurance premiums and so forth. You understand? There's so many different things that go into GDP. It doesn't tell you very much whether you are richer than your grandmother was or poorer. I can say that my grandparents lived a relatively high life standard. I'm not saying I live a better standard or a worse standard. But my grandmother that she just cooked for my grandfather and my grandfather he was an engineer and uh they had a permanent they had actually two permanent servants. One lived with them and one came for the day and so was very few families have permanent servants nowadays. I happen to have three, but I have a large property and so forth. So, they need to look after the house and they need to cook and they need to look after the motorcycles and so and they are not terribly expensive and is a huge convenience for me. But uh I I'm concerned that the lifestyle my colleagues had who finished school at about the same time. I finished school in 1964 and university in ' 69 with a PhD. And uh my impression is that at the time with my salary I could live relatively good life and that uh you could buy assets at at a low price relative to today. You understand? In when I grew when I started to work in 1970, the stock market capitalization as a percent of the economy in America was 25%. So in other words, the economy was this big and the stock market was this big. Now the stock market is everywhere and the economy is a bit larger. So the economy has become very dependent on stocks going up or going if they go down they hurt consumption and so forth. And Trump and his fellow billionaires they don't want stocks to go down. They they want to keep them up. And whenever Trump does something where the stock market goes down, you can be sure that he gets a telephone call from the bodies that give him money for the elections and they tell him, "You idiot, can't you do something to make stocks go up?" And so, as in every society throughout history, they're going to print money. And when there is money printing for sure in the long run, your viewers and I and you and everybody is well advised to have the ownership of some gold. But there's a question mark about where you should hold your gold and so forth. I would prefer to hold gold in a place and you don't tell anyone about it or as an American I would be concerned that the government will take my gold away one of these days. It's the same in Switzerland. the government. This is my only fear that the government if they could lock in you and your family during COVID, they can also take things away from you and the governments all over Europe and in the US is bankrupt. That nobody should have any doubts about it. They cannot pay the current expenditures in the long run. It's not possible mathematically not possible >> definitely there's there's a lot of issues in the west and we're coming to the end here the other piece that I wanted to make sure to ask you about so as you've been talking about all of these problems in the western world I've also had a lot of conversations heard a lot about the rise of the bricks countries and I wonder I wonder your thoughts I know that's a huge topic but maybe some brief thoughts on that and and how that trend could play out in the years to come as we continue to face these issues in the west. Yes, this is a very interesting subject and again it would take a long time to discuss but I believe the war in the Middle East is sort of a symptom that uh we have a country that coming out of the second world war there's no question that the US was miles ahead in everything compared to the rest of the world in standards of living, in wealths, in power, in military influence and so forth and so on. And then came the opening of China which had experienced in 1978 under Deng Xiaoing. I was at the time in Hong Kong. I moved in 73 to Hong Kong and uh it was an experiment initially but it became successful and then expanded to the whole of China and we had a incredible growth in China over the last 30 40 years. I'm not saying that everything that China has done is good and I'm not saying that the quality on this and that is perfect and the worst. But I'm just saying in 1970 China consumed 2% of all industrial commodities in the world and now they consume 50% or more. Do you understand? And it wasn't a factor in the global economy in 1970, but today it has the largest car market. It produces more cement and steel than the rest of the world combined. And now we have India coming up. So the world is changing and Mr. Trump, he's suffering under the illusion that the US can still control the entire world, which it cannot because the population of the rest of the world is 88% of the world's population and Europe and the US combined with Japan is just 12% of the world's population. Now they can control many things but not everything. And my view and my advice to anyone in the world is to have not only a diversification between stocks, bonds, commodities and real estate but also diversification. I you have some assets in America but you should have some assets in Asia now. You should have maybe some assets in Europe and maybe some assets in Australia. I don't know. But you understand? I think it's better for you to have some assets in the emerging world that will not be controlled by the US. >> Yeah, I think that makes a lot of sense in the world today. Thank you for going into that. I know I asked a lot of big questions today that probably take more time than we have, but hope to have you back in the future. For now, for now, I'll let you go unless you had any final thoughts you would leave investors with. Well, I I I think that we live in a a time when u some people will make a lot of money because during war times there are huge profit opportunities for a selected few. But I believe we also in a time where asset holders will lose money no matter what you do. But as I said, if you go down in your assets by 10%. And you all your neighbors go down by 50%. And most people go down by 90%. Your loss of 10% is actually a relative increase compared to everybody else. And then you should be very happy. >> Well, I think that's a a good message to end on. So, thank you so much for for taking the time today. This was great. It was a pleasure to speak with you. >> Okay. Equally, thank you. Bye-bye. >> Of course. Once again, I'm Charlotte Mloud with investingnews.com and this is Mark Fabber. Thank you for watching. If you like this video, make sure you hit the like button and subscribe to our channel. We'd also love to hear your thoughts, so leave us a comment below.