"This Is OVER..." - Marc Faber

Added: 2026-05-22

[00:00:00]Nowadays, there's so many things happening at the same time. You know, you have geopolitics, and you have currency movements, and you have stock movements that are very volatile. And we have in America a rather unpredictable president. And then we have the rise still of emerging economies. And globally, we have, not only because of the war, but for also other reasons, including excessive debts, we have a slowdown in economic activity. But the slowdown in economic activity is accompanied by increasing cost of living increases. I mean, in other words, [music] what people call inflation. And in a situation where the economy is slowing down, bond yields should decline, or interest rates should go down. But because of the inflationary pressures, this doesn't seem to be possible at the present time. So, if you look at the bond market, the bond market was weak until about a year ago. And since [music] then, it's traded in a relatively tight range, determined partly by the slowdown in the economy, and partly by the increase in the rate of inflation. And the amazing thing is that the Fed started basically to cut rates in October 2024.

[00:01:25]And since then, bond yields have not declined, but they've gone up. This is most unusual configuration of events.

[00:01:34]And in my asset allocation, of course, I always own bonds of different maturities. So, my risk is reduced. But the big question for me, as an asset manager and asset owner, is how much do I want to increase my bond exposure for the long term? Because one risk that I could foresee is that the Federal Reserve will be forced to cut interest rates massively through the administration of Mr. Trump or maybe voluntarily because the economy weakens significantly. But it's not assured that the interest rate cuts of the Fed fund rate, which is a short-term interest rate, will be able to be beneficial for the bond market. The bond market may react negatively, but based on the economy, the economy is slowing down.

[00:02:27]That's for sure. Now, the government may not admit it because, you know, the government's major quality or major ability is misleading the public about everything, including the war in Iran. I have argued for the last 6 months or so that investors should change their strategy in the sense that usually an investor will say to himself, "How do I maximize my profits? How do I outperform an index or so?" Now, as you know, 80 to 90% of investors do not outperform the index. This is statistically proven. But now, in my opinion, the strategy should be, "How do I lose the least money?"

[00:03:15]Because if you look at assets for the last 40 years, since, say, 1982, for stocks, August '82, the Dow Jones bottomed out at 780, and the bond bottomed out with a yield of 15.84% on the 10 years in September 1981.

[00:03:40]So, we are up a bit more than 40 years of asset price inflation. When stocks went up and bonds went up and real estate went up and collectibles went up, art went up, old cars went up, everything went up. And I believe we're now approaching a period that is unfavorable for asset prices. And I like to remind you that despite of money printing and everything, commercial real estate now in the US in some cases is down 70-80% in major cities since 2018.

[00:04:16]Massive declines. Bond prices reached a high in May 2020.

[00:04:22]And since then, August 2020, interest rates have been increasing gradually on the long end. Now, they've come down a little bit recently, but in general, the downturn in interest rates that began in September 1981 ended between May and August 2020. And since then, we have a rising interest rate structure, which in my view will last for the next 20 years or so. Also, since 2010, we have [clears throat] a completely disregard among Democrats and Republicans for the government debt. The government debt explodes and combined with the rise in interest rates since then, the interest expenditures on the government debt goes through the roof.

[00:05:16]And what is it for? For nothing. They don't build bridges, they don't build tunnels and railroads or anything. They build weapons that are useless after 20 years because new technologies develop, like the whole fleet of the United States, the aircraft carriers, are sitting ducks for hypersonic rockets.

[00:05:42]They don't dare them to send them to areas that are dangerous, like the Strait of Hormuz. And then they spend money on social security, on transfer payments and so forth. I mean, the whole economic growth has to be put into question. If the debt growth exceeds the GDP growth, in my opinion, it's not true growth. It's all on borrowed money. And in my opinion, there's actually no way that it can end well. The question, however, is when. Because I knew the strategy that Merrill Lynch in the early '80s, I also thought that the debt explosion that began at the time, say after 1980, that by the end of the '80s, it will come to an end. But now, up to now, they were able to keep on bailing out the system through money printing.

[00:06:34]One of the most common features of war times is that prices go up. In other words, what they call inflation picks up. But in this inflationary environment, prices of necessities go up, but the asset prices don't go up.

[00:06:49]Now, many people, they benefited from asset inflation. Their portfolios grew in value, and their house grew in value.

[00:06:57]If that is no longer the case, I think the economy will be hit very hard. In 1970 or 1960, as interest rates went up, if you bought a Treasury bill, 3-months bills, was not as high as with holding the S&P 500, but wasn't that bad because during the '60s and '70s, interest rates went up. And at one time on Treasury bills, you got more than 15% interest.

[00:07:25]It went up to like 18% and on bank deposits, over 20%.

[00:07:30]But in general, the deposit that was perceived to be safe with these banks wasn't that safe. Many banks have failed over time. And the deposits, as I said, they didn't give you a return equal to the appreciation of land or buildings. I mean, my grandparents bought the house, it's gone up a lot in value. And I think now these asset prices, as I mentioned, are very high. And one thing that kind of caught with me was the idea of negative interest rates, which was propagated already around 1920 by some kind of lunatic in Germany. His name is Silvio Gesell. And Silvio Gesell, he wrote books about how the economy could be stimulated by negative interest rates. And Keynes and also Schumpeter in their economic histories and about economic thoughts, they both quote Silvio Gesell as a relatively unusual character. And it's very interesting because at the time I thought it's crazy. But in the last few years we had strongly negative interest rates about everywhere in the world. And certainly we had negative interest rates compared say to asset prices. And that's why I think asset prices have been badly inflated. Say, we could measure the price of a typical house in America compared to the typical salary. We would call that the median house price relative to the median salary. And that determines what we call the affordability. And say when I was young and I started to work in 1970, asset prices were low and salaries high. In other words, with my salary I could rent in the best location in Zurich an apartment or New York and it would not be more than 15% of my salary. But now is more than my salary. Young people have a problem to buy a house and to rent. So, they must move to the suburbs.

[00:09:41]Then the suburbs also go up in value.

[00:09:44]The problem is Trump and his buddies.

[00:09:47]They are all asset owners. They don't want to see stocks down 40%. They don't want to see their house in Beverly Hills down 40% in value. They don't want to see their luxury apartment around Central Park down 40-50% in value. No.

[00:10:05]They are the people that will demand for the Fed to print money. Even though the Fed shouldn't print money, but they will demand it so to protect their asset values. And as an economist, I have to condemn the action of central banks.

[00:10:21]They have destroyed society to a large extent and of democracies. But as an asset holder, I'm like all straight. I have brought each time they print money.

[00:10:33]Then the price of gold goes up and the price of stocks go up and my asset value goes up. But I as a social observer, as an economist, I don't like it. My view is that a major trend change has occurred in the last 2-3 years that will sort of bring up the emerging world and set back permanently the Western world.