저자: ECONOMY OF WORLD · 외국인
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u.s trade war that seems to be developing, what is your perspective? Do you think it can get worse from here?
In a real trade war, I actually doubt it will get that far, because I believe the U.S. will realize it has more to lose than China. For China, exports to the U.S. are meaningful, but they're not as important as they would have been 40 years ago. When I went to Hong Kong in 1973, until the end of the 1980s, the saying was: "If America sneezes, Asia catches a cold," because up to 70 percent of Asian exports went to the U.S., directly or indirectly. That is no longer the case. Nowadays, the largest trading partners in Asia are actually other Asian countries. All Asian countries, with the exception of India, export more to China than to the U.S., and globally China exports more to commodity producers and to countries with free trade agreements with China than to the U.S. So the U.S. is still an important trading partner, but it's no longer the most important one.
Dr. Faber, I just wanted to ask your thoughts. I know this is more of a short-term question. There are a lot of people out there who are U.S. dollar bulls, at least in the short to medium term. I think there's going to be a rebound. Last year it devalued 10 percent versus other major fiat currencies. Do you see any type of rebound on the dollar, and if so, why? Potentially?
Well, there has been a big long position in euros and a short position in U.S. dollars in recent weeks, and just the talk about the trade war essentially leads to the dollar strengthening. But I don't think this strength will last very long. Under Mr. Trump, the U.S. would actually like to make America great again. In other words, he wants to make America more competitive. Trump is complaining about the weakness of other currencies in the world. In his view, the dollar is too strong compared to other currencies. I'm not sure he can think that far, but that is the implication. So the last thing the U.S. administration wants today is a strong dollar, because that makes the U.S. even less competitive. So I think the dollar may strengthen for maybe another month or two, and then eventually weaken again, as it becomes obvious that other countries, with or without tariffs or a trade war, remain very competitive.
Now, as for the stock market, do you believe Asian stocks, or specifically Chinese stocks, are more bullish than U.S. stocks?
Yes, in the very long run. But I believe we've seen a high for the U.S. stock market and global markets, essentially on January 26, 2018, with the S&P at 2,872. We're now approximately 200 points lower than we were at the time. The market is unlikely to crash, in my opinion. But what could easily happen is a market decline like we had between 1969 and 1982. We didn't collapse in those days, although we had a major bear market between January 1973 and December 1974, almost two years. But we didn't really have a crash. It was more a slide, a slope of hope, where markets would go down, rebound, go down lower than the rebound, then go down even more. I think that may be a scenario that unfolds.
I'm looking at a chart of the Dow-to-gold ratio for about 100 years, and at the time period you discussed, from 1969 to 1982. The Dow-to-gold ratio reached about 1.4 at the peak in January 1980. The Dow obviously isn't the greatest measure of the stock market, because it's 30 rotating companies that get changed all the time depending on how they're doing. I think GE is the only one still around from the original concept. It's barely around, right? It's been a terrible stock, that's true. But I'm just looking at the S&P 500-to-gold ratio. Right now we're around 2 or so, roughly S&P versus gold. But in 1980 it hit 0.2. So if we went back to a situation like 1980, that's a 10x multiplier of gold versus the S&P 500. Do you foresee that happening, let's say in the 2020s? Is that a potential peak?
I could easily foresee that happening again, in the sense that the S&P would grossly underperform gold in the years to come. That wouldn't surprise me at all. But the point is it may not happen right away. It may happen in the future, but it may take a few years until we're there, because the belief right now among investors is very strongly geared toward equities globally, and especially among young investors, it's skewed toward cryptocurrency. So at the moment, gold and silver are not particularly popular among young investors. But I think this will change, especially when a major fraud is revealed in the crypto space, and people lose faith in cryptos as a store of value, and they buy gold again. My advice is: I don't know when gold will go up. I suppose it will go up relative to other assets.
Now, there's one point I need to clarify. Everybody thinks asset inflation, as we've had for a century, since 1981 for bonds, bonds rallied from September 1981, and equities from August 1982. Equities rallied over the last 34 years. Real estate prices went up, art prices went up, collectibles went up. People and investors are conditioned to think this will continue. They may argue about which assets will perform best, but I think this asset inflation will continue. But I'd like to introduce an element: maybe all assets will go down, and gold would go down far less than other assets, or maybe even increase in value. That is a possibility, an extremely deflationary scenario. I'm not necessarily talking about huge price deflation, but about a huge asset deflation where asset prices really tank. That is a possibility, because don't forget, this is a subject that isn't discussed much. Normally, towards the end of a bull market, the subject of debt takes a back seat. People mention the government debt, but then they argue, "Well, it's already so large, and it hasn't caused a problem yet. It can expand much further, and the Fed can expand its balance sheet much further." That's what people believe, but it may in fact not help, and may actually depress asset prices.
Can you expand on why you see cryptocurrencies falling in the future, and people moving out of that space?
Well, I didn't say they will fall. My sense is that as a citizen I have no idea what these cryptocurrencies should be worth. I really have no idea. It's a little bit like you and me printing a new currency or a new banknote, say a 500 or a million-dollar note, and restricting the number of bills we print to, say, a million or 10 million or 20 million. Our neighbor, seeing that we were able to sell these freshly printed banknotes, says, "That's a great idea," and starts his own printing machine, printing his own paper currency, and so on and so forth. The crypto craze has now created more than 1,500 different cryptocurrencies, and whether they'll all be worth anything is a big question. I have my reservations about that. Can one or another have some value? Yeah, maybe. But I don't know what the value will be, and if I have no idea what the value will be, I'm not terribly interested in investing a large amount of money in the concept.
I'm not sure if you're familiar with it, Dr. Faber, but I think there was an academic study about Mt. Gox and the price of bitcoin going from 150 to a thousand dollars. You can Google it. I think it's called "price manipulation in the bitcoin ecosystem," and it's a long academic study about the data. No one was indicted for this, except for the people who ran Mt. Gox. So my hunch is that bitcoin traders were simply emboldened. And if you look at the concentration of who owns bitcoins, it's only about a thousand or so entities that own about 40 percent of the bitcoin in the world. So for them to collude and ramp the price up and down and make money in futures, it's possible to make money both ways. I'm sure I can envision that. I don't know how much worse it will get.
What I have observed, however, should be a warning signal. I have a house here in northern Thailand, specifically in Chiang Mai. Chiang Mai is a city that consists mostly of people who have no share ownership. They never owned a single bond, they never trade foreign exchange, and there are just a few people I know who occasionally trade stocks. But the bulk of people have no interest in stocks, and no money to buy stocks. If they have money, they'll buy a house. But all these people, over the last year, people who never speculated, are now all involved in cryptocurrency. And this is not just happening here in Chiang Mai. I get emails from people in Estonia, from people in Hungary, in Korea, in China, everywhere, in Japan. They all gamble on these cryptos. Whenever the public is so fully involved in one object of speculation, it's always a warning signal. But anyway, the future will tell. I don't want to say anything negative about cryptos, and I don't want to say anything positive either. I think blockchain technology is here to stay, but it's not new; it was developed before. I have no idea about the end value of cryptos. I suppose 90 to 98 percent of cryptocurrencies will be worthless, but maybe one or another will have some value.
Moving on, if I heard you right, you're bullish on gold, and you think people will move into gold and silver. What is your perspective on which is better, gold or silver?
Right now, from my technical indicators, I think silver probably has the greater upside potential. But I'd like to qualify my bullishness by saying I've been buying gold since the late 1980s. Most of the gold I bought was around $300 an ounce, and I continued to buy during the bull market between 1999 and 2011. I've never sold an ounce of gold. For me, whether the price is here, goes lower, or goes higher doesn't change my lifestyle, but I want to have some reserves that are not held in paper form. I hold some gold in Switzerland and some here in Asia.
Dr. Faber, just to drill down on that for a minute, is there a specific type of gold bullion that you prefer? I assume you'll go bullion outright?
Yeah, I own physical gold, yes. Some physical, but it's in coin form, like Krugerrands, or there are some coins issued by various mints. These are essentially pure gold investments.
Great, thank you. I also got some gold shares.
Oh yeah, yes, but not much. Just a little bit. We'll have a huge move, but it hasn't happened yet. I think they are again in a range from which they could have, say, a 30 percent upside move.
All right, well, Mark—
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