Notes From Undergound: Marc Faber, Wow

It is a pleasure to have sat down with the paradigm of global macro, Dr. Marc Faber. We, alongside Richard Bonugli, talked commodities, currencies and bond markets. Enjoy the podcast and make it a double of your favorite libation. No, it’s not doom and gloom. It’s insights into the current global financial situation presented with potential investment opportunities.

But first, let’s review a few things:

After the first presidential debate, I said the problem for President Trump’s narcissistic rants was that the Republicans had lost the upper-hand in the budget negotiations as House Speaker Nancy Pelosi was sure to regain the high ground. Pelosi has seized her opportunity and the Democrats are going to get most of their demands because the president needs some sort of stimulus as the election is three weeks away.

But will Speaker Pelosi claim victory for the American people are act as a prophylactic and prevent a Trump “victory”? The President has gone from appearing as a stimulant for Main Street (and blocking aid to high population states and urban areas) to an abject failure in his quest to support his base. Whose side is time on? (Certainly not the American workers.) In one of his hissy fits, Trump told Secretary Steven Mnuchin to stand down from negotiating with Pelosi only to pivot and suggest Mnuchin attain an even greater stimulus package.

When the President told Mnuchin to cease negotiations it coincided with Powell’s Congressional testimony, which suggested that the need for more stimulus was preferable than less. The equity, commodity and currency markets were all buoyed by Powell’s fiscal prodding only to be massively disappointed by Trump’s tweets. If I were the Federal Reserve chairman, I would have turned the tables on the president and said: “Where did I get this guy Donald?” (That’s direct reference to one of the president’s many tweets about Powell when he wasn’t responding to calls for negative interest rates.) If the Congress fails to achieve a stimulus package will the FED be forced into more aggressive liquidity operations by instituting YIELD CURVE CONTROL?

Lost in the Washington swamp last week was a Financial Times story about the possibility of the U.S. Treasury signalling the Swiss National Bank and Switzerland itself as CURRENCY MANIPULATORS. In the first half of 2020, the Swiss engaged in currency interventions totaling CHF 90 billion as it tried to curb the strength of the FRANC, especially against the EURO. The SNB takes the currencies it purchases into the desired global asset purchases. The SNB’s success is limited as the FRANC has actually gained 1% against the EURO, 3% against the YEN and 6% against the U.S. dollar.

The SWISS have maintained the franc but have not weakened and risk being tagged by the U.S. with severe consequences. The first six months intervention is equivalent to 14% of the Swiss GDP (in other words, massive). If the SWISS are so named the result will be another major appreciation for the franc but overall will lead to a generally weaker dollar as the markets will wonder, who is NEXT?

Click here to listen to the podcast.

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7 Responses to “Notes From Undergound: Marc Faber, Wow”

  1. kevinwaspi Says:

    A wonderful podcast with executable investment ideas, put it on your must listen list. I have lately wondered if I was becoming too disrespectful of central bankers, and was delighted to hear that Dr. Faber also has harsh criticism for them. I personally think they should all (from all developed countries) be on the FBI’s “Most Wanted” list for the global destruction they have both directly caused, and facilitated big operators to profit from. I believe our academic wunderkind will drive capitalism and free markets into a wall, and then wonder what happened. None of them has an historical perspective on economic history!
    Thank you Yra for the HT, you were always a joy to have as a guest in the classroom. Students always asked me if you could come more frequently, as they wanted more after meeting you.
    Thank you again for all that you do.
    Kevin

    • TraderB Says:

      It is possible Ben Bernanke and his fellow central bankers considered the morality and longer term social fallout of altering the rules of capitalism in 2008. Perhaps they ultimately decided that the shorter-term benefit (to certain people) outweighed those consequences.

      The Economic Stabilization Act of 2008 and QE1 opened a can of worms that can never be closed. The only hypothetical solution I can think of is making the Baby Boomer generation pay back all of this debt & allowing a deflationary spiral to run its course. This will enable future generations to actually have a chance at accumulating assets and have a greater incentive to be productive. Capitalism works. Foreclosure & liquidation is absolutely a necessary component of that process. The world’s greatest economists understand that better than anyone. The fact that Ben Bernanke now works for Citadel (a company that would have gone under in 2008 had it not been for his actions) just adds insult to injury.

      The “FBI’s Most Wanted List” is probably being too kind to these people. They should at minimum all be incarcerated for the rest of their lives.

  2. Pierre Says:

    It’s all relative, right? Priced in gold TLT is down over 11% this year.

    Click to access Week-201009.pdf

    Also, the moves on the EUR/YEN have been pretty big in the last couple of days. What is up with this?

  3. just eric Says:

    Yra, could you share with us the authors you discussed on the FRA podcast? It was tough to hear and google was no help!

    I heard Verno Grodel?
    Giovanni Riggi?
    Emannuel Walrus – the “review” journal?

    What book do you recommend to begin with?

    Enjoy your discussions as always.

  4. BLT Says:

    Hi Ira – A blast from our CME past. The pundits were all bearish bonds from 2009 until a few years ago. Its been hard to find a bond bear since. What’s the chance now that the perennial bond bears have taken the cure that we enter into a true bear market. Maybe spending two to three times the social security trust fund in the past 6 months has something to do with it. As an aside, I wonder what would happen if it were put to a vote whether people wanted two $1200 checks in 2020 or social security when retiring.

    • yraharris Says:

      BLT—it will be hard to secure a true bond bear as the FED has to be committed to keeping rates low in order to finance the growing deficit–if they go to yield curve control we will have to listen to what duration they will invoke—-the 5/30 curve is steepening now but when an where the Fed come to its rescue–housing data was strong today and that is interesting because will the FEDlet/want mortgage rates to rise a little —trade the short side of the bonds but do not COMMIT–it could get very expensive

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