Marc Faber says QE unlimited now ahead and that's good for gold, oil and silver but not for US stocks
Peter Cooper

As the Fed backed off from winding down QE today Bloomberg spoke to Marc Faber, publisher of the Gloom, Boom and Doom Report, about the market outlook now. He told Trish Regan, Adam Johnson and Matt Miller to expect ‘QE unlimited’ and that Janet Yellen would ‘make Mr. Bernanke look like a hawk.’

Faber also said, ‘When I look at the market action today, I would like to see the next few days, because it may be a one-day event. The markets are overbought. The Feds have already lost control of the bond market. The question is when will it lose control of the stock market.’

Faber on the reaction that there’s going to be no taper for now:

‘My view was that they would taper by about $10 billion to $15 billion, but I’m not surprised that they don’t do it for the simple reason that I think we are in QE unlimited. The people at the Fed are professors, academics.

'They never worked a single life in the business of ordinary people. And they don’t understand that if you print money, it benefits basically a handful of people maybe not even five per cent of the population, three per cent of the population.

'And when you look today at the market action, ok, stocks are up one per cent. Silver is up more than six per cent, gold up more than four per cent, copper 2.9 per cent, crude oil 2.68 per cent, and so forth.

'Crude oil, gasoline are things people need, ordinary people buy everyday. Thank you very much, the Fed boosts these items that people need to go to their work, to heat their homes, and so forth and at the same time, asset prices go up, but the majority of people do not own stocks. Only 11 per cent of Americans own directly shares.'

On whether interest rates are held down when the Fed continues this type of policy:

'On September 14th, 2012, when the Fed announced QE3, that was then extended into QE4, and now basically QE unlimited, the bond markets had peaked out.

'Interest rates had bottomed out on July 25, 2012 — a year ago — at 1.43 per cent on the 10-year Treasury note. Mr. Bernanke said at that time at a press conference, the objective of the Fed is to lower interest rates. Since then, they have doubled. Thank you very much. Great success.'

On what the endgame is:

'Well, the endgame is a total collapse, but from a higher diving board. The Fed will continue to print and if the stock market goes down 10 per cent, they will print even more.

'And they don’t know anything else to do. And quite frankly, they have boxed themselves into a corner where they are now kind of desperate.'

On Janet Yellen:

'She will make Mr. Bernanke look like a hawk. She, in 2010, said if could vote for negative interest rates, in other words, you would have a deposit with the bank of $100,000 at the beginning of the year and at the end, you would only get $95,000 back, that she would be voting for that.

'And that basically her view will be to keep interest rates in real terms, in other words, inflation-adjusted. And don’t believe a minute the inflation figures published by the bureau of labor statistics.

'You live in New York. You should know very well how much costs of living are increasing every day. Now, the consequences of these monetary policies and artificially low interest rates is of course that the government becomes bigger and bigger and you have less and less freedom and you have people like Mr. De Blasio, who comes in and says let’s tax people who have high incomes more.

'And, of course, immediately, because in a democracy, there are more poor people than rich people, they all applaud and vote for him. That is the consequence.'

On where he sees markets heading:

'When I look at the market action today, I would like to see the next few days, because it may be a one-day event. The markets are overbought. The Feds have already lost control of the bond market.

'The question is when will it lose control of the stock market. So, I’m a little bit apprehensive. I would like to wait a few days to see how the markets react after the initial reaction.'

On whether the 10-year yield will float back up to where it was before 2pm today:

'I will confess to you, longer-term, I am of course, negative about government bonds and i think that yields will go up and that eventually there will be sovereign default.

'But in the last few days, when yields went to 2.9 per cent and three per cent on the 10-year for the first time in years i bought some treasuries because I have the view that they overshot and that they could ease down to around 2.2 per cent to 2.5 per cent because the economy is much weaker than people think…I think in the next three months or so.'

On gold prices:

'I always buy gold and I own gold. I don’t even value it. I regard it as an insurance policy. I think responsible citizens should own gold, period.'