four and six percent, the Euro is weak or has been weak and is at the low level and these yields of four to six percent are very attractive considering the bonds yield in Europe. And so, I think that this year European stocks and especially the stock I mentioned, infrastructure plays, utilities and also food (stocks) will way out perform the U.S. I also happen to think that there will be more and more American companies and foreign companies that will be interested to acquire European companies.
Mike Gleason: How about the geopolitical side, I know many of those nations over there the people are watching what happens with Brexit and have watched what’s taken place there. France, the Netherlands, some other nations have some important votes coming up. What do you make with everything that’s happened there with the state of the European union and how those votes might go as we go throughout the year and see some of these important elections come to fruition.
Marc Faber: Well, this is the big question and we all don’t know exactly what the answer is. My sense is that the Euro will stay and if some weak countries decide to leave the Eurozone, their currencies will be obviously punished. And if some weak countries decide to leave the Eurozone, I think the euro will strengthen. It’s just that if Italy decides to leave the Eurozone, the euro will strengthen but obviously, the new currency (of Italy) will weaken. And so, I think that this Is not a big concern for me.
Furthermore, with the euro having declined so much against the U.S. dollar, if there is further weakness in euro, European stocks will adjust on the upside and foreign companies from Asia… China, Japan and the U.S. will increasingly acquire European companies and European assets.
Mike Gleason: Gold is often referred to as the anti-dollar, if we see the euro strengthen and last as a currency, does that then weigh heavily on the U.S. dollar and might we see gold spike as a result of that because the dollar finally is starting to weaken a little bit?
Marc Faber: Yes, I mean the consensus was, at the beginning of the year that the only game in town are U.S. stocks and the U.S. dollar. I don’t believe that the U.S. dollar is structurally a strong currency. Now can it stay high as it’s rallied a lot against the euro but at this level, I don’t think that the U.S. is very competitive. So, my sense would be the U.S. dollar is vulnerable as well as asset prices in the U.S. both.
Mike Gleason: Dr. Faber, do you see the tide changing world wide when it comes to the importance of gold ownership? We know Asians are buying it relentlessly and so are folks in Europe, maybe that mindset hasn’t made its way to the U.S. yet, but do you sense that may be coming? And once it does do you foresee any problems with being able to get physical metal once the masses, especially in the western world, wake up to the idea that they ought to own some?
Marc Faber: Well, the gold market is very interesting because it consists of a very limited number of people who are “gold bugs” as they call them. And these are people that will accumulate gold, physical gold and gold shares and so forth, but this is the minority. And then there are the gold detractors. These are mostly fund managers and so-called central bankers. And central bankers are not particularly smart. And then there are people who simply haven’t heard about gold as an investment… and don’t forget that in the U.S. 50 percent of the people have no interest in investments for the simple reason that they have no money. You could show them any proposal for an investment, they wouldn’t be interested because they have not the money to invest in the first place.
But in general I think that people will gradually wake up to the fact that in absence of knowing how the world will look like in five or ten years, you need some diversification and in this environment, I think that some people will say “well, let’s own some gold.” Most people will only own five or ten percent but some people will own 20 percent and I think that if the whole world decides to own, just say three percent or five percent, and the fund managers who are very anti gold see gold prices running up again… the whole investment business has become a momentum game… so if they see that gold is moving up in a convincing way they’ll buy gold.
So, my sense is that you need some gold strength and then people will come in and buy gold simply because it moves up. I buy gold all the time, of course within my asset allocation… I also have shares and bonds and real estate… but I always buy some gold to maintain the proper weighting.
Mike Gleason: Well, as we begin to close here, what do you expect for the remainder of 2017 and what kind of second half of the year do you think it will be for hard assets like gold and silver specifically?
Marc Faber: Well, at the beginning of the year so many people have started to write reports about the surprise of 2017 and projections of 2017, so everybody has a view, nobody knows precisely and the lot will depend on central banks’ monetary policies. I don’t believe central banks can tighten meaningfully, maybe optically they do some, but in general I think they’ll keep money printing on the table as far as we can see, in other words, for the next few years. And eventually it will be friendly for precious metals and hard assets. Number two, hard assets such as precious metals are at the historical low point compared to financial assets, so I think that’s going forward there’s a huge discrepancy in the performance between financial assets which has been very good since 2009 and gold which has been more mixed… it’s also up but it’s been more mixed especially after 2011… that these hard assets will come back into favor.
So, if you’re asking what is my expectation for the rest of 2017, I think that gold shares are an attractive asset class. I think precious metals can easily move up another 20, 30 percent, possibly 100 percent or so. In general, I would say American investors should take the opportunity that the dollar is strong and that asset prices, in other words stocks and bonds in the U.S. has been strong to reduce their positions in the U.S. in terms of equities.
Mike Gleason: Yeah and certainly you hit the nail on the head earlier there with the whole momentum trade and it will be interesting to see what happens if we do start to see some positive upside momentum in the metals… more and more hedge fund managers getting into that space and it really feeding on itself and creating a snowball effect there, it could be interesting to see that play out. Well, Dr. Faber thanks very much for your