Subscribe now and watch my free trend following VIDEO.

Ep. 223: Marc Faber with Michael Covel on Trend Following Radio

Marc Faber
Marc Faber

Subscribe to Trend Following Radio on iTunes

My guest today is Marc Faber, a Swiss investor based in Thailand. He is the publisher of the Gloom Boom & Doom Report newsletter and the director of Marc Faber Ltd, which acts as an investment advisor and fund manager.

In this episode of Trend Following Radio we discuss:

  • Current state of Russia
  • Changing geopolitics
  • Faber’s experience living through the Cold War
  • The difference between Crimea’s value to the west and its value to Russia
  • Why the Russians perceived the uprising in Kiev to be financed by western power
  • China’s reaction to the situation in Crimea; the construction boom in China
  • The difficulty of forecasting China’s geopolitical changes
  • Positive and negative valuations of the market, and finding investments to be “cheap” or “expensive”
  • Faber’s advice to young people following his path today in the face of money printing and bailouts
  • What can be done about wealth inequality
  • Central banks’ role in wealth inequality
  • Why money printing leads to bubbles
  • Warren Buffett’s involvement with the bailouts, and how his government connections have helped his investments
  • How governments are assimilating everything
  • “Capitalism and Freedom” by Milton Friedman
  • The cost of large government in the US and elsewhere
  • Faber’s views on relationships, contrasting the West and Asia along with Facebook fame

In this episode of Trend Following Radio:

  • The geopolitics of Russia, China, and the West
  • Faber’s view on the situation in Crimea
  • How trading is different in the world of instant communication
  • Faber’s trading advice to young people today
  • How money printing leads to bubbles, directly and indirectly
  • Wealth inequality, the central banks’ role in it, and what can be done about it
  • How Warren Buffet’s government connections affected his investments
  • How the governments today are different from a hundred years ago
  • Faber’s view on relationships and freedom, contrasting the West and Asia

Mentions & Resources:

Listen to this episode:

[toggle Title=”View Full Transcript”]

MICHAEL: Today on the show I have Marc Faber. Marc is the editor and publisher of “The Gloom, Boom & Doom Report.” Everyone knows Marc, even if by his voice alone. Fantastic voice. My conversation today was with Marc in Chiang Mai, Thailand, in his office. We discuss a wide variety of topics. To be in Marc’s office is to see a fantastic cathedral ceiling, just walls filled with books. It’s a great opportunity to really pick the mind of a man who’s seen one tremendous amount of econ geopolitics. He’s seen quite a bit.

So today, we have a historical narrative. We talk about Russia; we talk about China. We also bring up Warren Buffett. Marc expands on Warren Buffett and some of his success. Also, we talk about relationships in Asia. A wide ranging conversation. Very fun. I was very excited to do this interview in person. Just a blast. I hope you enjoy.

MICHAEL: So we’ve got no shortage of current events, Marc. Speak to me a little bit about how you – and maybe I’m wrong about this, so speak to me a little bit about how you see what’s unfolding in Russia. I’m not old enough to remember all the details of the Cold War, but I grew up in the ’80s, teenager in the ’80s, and I have a feeling of what that fear was like, and it sure looks like to me that by Putin basically grabbing Crimea, isn’t that giving a signal to other players in the world that normal geopolitics might have changed?

MARC: I think if we look at international tensions or geopolitical trends as a function of economics, then it’s very clear that the dominance the U.S. had until the ’50s, ’60s, has relatively diminished, and other players have come up who have funds, like the Chinese has become a large economy, and a very prosperous one in totality. So the Chinese have certain territorial aspirations in Asia which, from their perspective, has to be clearly understood, because for them to have access to resources and guaranteed the access to resource, very important, so they can’t afford to be encircled and blackmailed by a foreign power such as the United States.
Even if the U.S. does at the present time not have any bad intentions, but for security reasons, they need to have let’s say control over the supply lines. Similarly, I lived through the Cold War, and actually I went in August 1968, I just completed my studies to Czechoslovakia at the time, and the day I arrived, at night, at 2:00 in the morning when I came out of a night club, I saw planes flying over Prague, and then I asked around what was happening, and they said “The Russians are coming.” At that time, there was a Czech string under Dušek, and the Russians invaded Czechoslovakia and occupied Czechoslovakia against the will of the people, because they wanted essentially to break loose from the Soviet Union. As most former Soviet countries, they resented to be part of the Soviet Union.
But this is quite different in Ukraine, and certainly in Crimea, where most of the people are on the eastern side of Ukraine, Russians, and in Ukraine and in Crimea, I think about 80% of the people are Russians. And Crimea has practically no value to the Western world, but it has huge strategic value to Russia. So I think that the American foreign policy of trying to encircle Russia and also China has some limits, where these countries simply will say “This is as far as you go and no further.”

MICHAEL: Crimea could be a crack.

MARC: And Crimea is basically Russian, has always been Russian; they have their most important navy ports there for the Navy, and the Black Sea fleet is stationed there, and through the Black Sea they have access to the Mediterranean, which is very important if there are conflicts. And don’t forget that part of the reason for the invasion of Libya, which has now turned to be a complete catastrophe, a complete catastrophe, by the Western power, part of that reason was that the Russians were either building or considering building a naval base in Libya. They also have a port in Syria.

So for them, Crimea is very important, and the Russians perceived the uprising in Kiev to be essentially financed by Western power. Because Putin, he didn’t like the Ukrainian Premier. He didn’t like him at all; he thought he’s a fool and corrupt and everything. But he didn’t like the involvement of foreign powers in Ukrainian politics, and strategically, Ukraine is important, and if it were part of NATO, Russia would have NATO in front of its door.

So we have to understand it in this context, and I think the Western powers will do, aside from some cosmetic sanctions, will do precisely nothing. Because A, they don’t have the money, and B, I think most people in the Western world have actually sympathy for Putin, given that the Americans invaded Iraq, given that the Americans invaded Afghanistan, and everybody knows if a foreign power, China or Russia, were to start trouble in Guam, where the U.S. has a major naval base, then obviously the Americans will also make sure that Guam stays in the American fold. So I think most people have sympathy. But of course, politicians can’t stand there and say “Yes, we agree, this is Russian territory,” so they have to bark.

But we can also see that basically, the Western politicians are complete ignorant politicians and basically have no power compared to someone like Putin, in his territory.

MICHAEL: This extends – and I’ve seen you make this comment, but what does this say to China? China has territorial disputes. What does this say?

MARC: Well, the reaction of China will be very clear. First of all, I have to say that the Chinese are not the greatest supporters of Russia, because Mongolia was part of the Soviet Union before, and the Chinese perceive Mongolia as their own territory. But it gives a signal to China – from my perspective, living in Asia, it’s not a dangerous signal; it’s just a fact of life: China one day, if they have territorial disputes with Japan, like the Senkaku Islands, they will just one day occupy them. That’s it. Who’s going to start a World War because of the Senkaku Islands? You understand?


MARC: So there are some borderlines, say if someone were to build – say the Chinese would build a major naval and military base in Mexico or in the Caribbean, I suppose the Americans would not let it happen, because that’s their territory. Similarly, the Chinese are surrounded by American military and naval bases, plus the Americans have 11 aircraft carriers. At these bases in South Korea, 25,000 Americans are still in South Korea. For what, nobody really knows. They have bases in Japan, in Guam, in Hawaii, and they have actually military practically in every country in Asia. We also have Americans here, of the military, in Thailand. They come from the Philippines, but they’re every year a few times here, training.

So from the perspective of China, one day they will make a move. They will not invade Cambodia, they will not invade Myanmar, they will not invade Thailand. Basically, the Chinese already own Southeast Asia because, as you know, the leading businessmen in Malaysia, in Indonesia, in the Philippines, Thailand, Hong Kong, Singapore, are all Chinese. So they already own it. Why would they take the territory? They have a territory large enough, they have a population large enough, they have problems enough. But they need oil, and they need copper and iron ore, and they can’t afford that one day the U.S. or Japan or anybody would block the access to these resources.

MICHAEL: So as I sit in your office – I wanted to start with that question – I can see a few books in your office, and I wanted to just pick your brain a little bit about the geopolitics, but I want to shift into the investment side of things. I know you have a deep respect and fondness for Asia. I do, too. As an American, I do, too, and I really appreciate being here for the last year.

MARC: Well, anything is better than America. Let’s put it this way.

MICHAEL: That’s in context. There’s a lot of reasons, and you’re well known for stating why you say that, so it’s pretty clear. Last year, I took the bullet train from Shanghai to Beijing, and I’ve never – that’s about the distance from Washington, D.C. to Orlando, Florida. I’ve never seen more construction in my life. So you’ve got an absolutely astounding economic miracle going on that the average American or European that have never traveled to China can’t even begin to appreciate by reading news articles. It’s impossible. You have to see it.

MARC: Correct.

MICHAEL: But given that context and so much success and so much redevelopment, fantastic growth… there’s a lot of this real estate is empty. It reminds me of Las Vegas and Arizona, pre-bubble. What’s going to unfold with this whole thing, Marc?

MARC: We have to understand the construction boom in China from an essentially economic, historical perspective, because under the Communists, until the opening under Deng Xiaoping in 1978, nothing got developed, and people lived very poorly. And even until 1990, very little happened outside of the special economic zones in the South. But after 1990, they began to build the infrastructure and to build housing for people and so forth and so on. So here, you have a country who is essentially 1.3 billion people that had no infrastructure until 20, 25 years ago, and there is a huge catch-up phase, which explains the colossal investments in infrastructure and in construction.

But as the business cycle theory explains, there is always the error of optimism and then the error of pessimism, and in my view, in the last few years, there was an error of optimism among developers and among people that real estate prices would always go up and so forth, and so we have overbuilding in China and we have a gigantic credit bubble. The economy grew soundly, I would say, until about 2007, and the response to the global crisis and the downturn in exports and in economic activity was, in China, a massive fiscal stimulus that was, as a percent of the economy, larger than in the U.S., and massive money printing.

In other words, credit growth exploded on the upside, and very few or no country has ever had an expansion of total credit as a percent of the economy as rapid as China in the last five years. Total credit has grown as a percent of the economy by 50%. This is incredible rapid growth, and of course, there are lots of mal-investments. My sense is that we are headed into a significant downturn in China. Will it turn out to be negative contraction in the economy, in other words, negative rates of growth, or will growth simply slow down from say – who knows what growth was in the first place, because you can play around with statistics – but say it was between 8% and 12%. That will slow down to say 4%, or has already slowed down to 4%.

MICHAEL: As I look at how you describe China, it’s very difficult to put a prediction, a time prediction, on these situations.

MARC: Yes. In everything that concerns the future, forecasts are of no great value, and number two, I would say we can say okay, a market is high; it doesn’t mean that it can’t go higher before it goes down. But say if you look at the total market cycle, stocks or commodities or real estate and so forth that go up and down, you can say that something is relatively inexpensive when, say, stocks or properties sell below book value, below replacement costs, and they’re high when they sell at the substantial premium to replacement costs or the book value. So there are some ways to say something is relatively inexpensive and something is relatively expensive.
But to put the finger on, say, a date, and say “The Chinese bubble will unravel on April 15th, 2014,” that is impossible for the simple reason that with monetary measures, you can postpone a lot of the problems. In 2009, I remember very well, because at that time, I thought stocks had become very cheap in the world and that they would go up. Not necessarily because of a significant economic improvement, but because of low valuations and extremely negative sentiment among investors, and some investors, when the S&P was at 666, were heavily short the S&P, and some of the – say among the five most well known strategists in the world, at least four of them predicted an S&P of 400.

So I would say at that time, sentiment was very negative and valuations were low; today, sentiment certainly in the U.S. is very positive and valuations are high. So if we look at cycles, we can say there are times when asset prices become inexpensive. Can you say they will bottom out on such-and-such day? No. Can you buy at the low of a market? No. And there are times when markets become expensive. Can you sell everything at the day the market peaks out? No. Moreover, a market consists of thousands and thousands of different stocks. Not every stock will bottom out and peak out on the same day.

Similarly, a real estate market consists of – in the U.S., you have what – we have to ask Mr. Obama how many states there are; perhaps it’s 51 states. So in one state, the real estate market may go up, and in another one, it may go down and so forth, and some properties within a state, like high end properties, by and large in America, they are now at the record. If you go to Aspen, if you go to the Hamptons, the better locations in New York, San Francisco, Newport Beach and so forth, it’s all at the record. Whereas the middle end of the market and the lower end is still way below the peak.

So we have to distinguish, what are we talking about? Are we talking about a broad index, or are we talking about individual opportunities?

MICHAEL: Let me take a step back. So you got your Ph.D. in econ age 24?

MARC: Yes.

MICHAEL: Young man. If somebody else is going down a similar track today, has what we have seen in the last five or six years since ’08, this kind of unicorn-style printing money, “everything’s rosy, we can resurrect stocks from the dead,” so to speak and make everything rise, make everything levitate with no downside, how is a young person today supposed to dig through this landmine field and try and make sense of it? It seems terribly difficult.

MARC: Well basically, he has to think for himself. If money printing would make a society rich or the world rich or a country rich, then nobody would work. We would all have a printing machine on the beach and we would be printing money, and each central bank around the world would just be printing money, and there would be no businessman. You understand? Nobody would produce anything. So the money printing per se, if we have an economic system – say I have this room, and suddenly the quantity of money doubles in this room, it’s still the same room. It’s just that the unit of account, money, has changed and has depreciated.

Now, the problem with money printing – and that is misunderstood by a lot of people – is that they focus on the impact of money printing, say on inflation or deflation and so forth, but the viciousness of money printing is that the more money you print, the more prices will go up. The problem is that they don’t go up at the same time and with the same intensity. So if I print money in this room, what can happen is that for a while, where you sit, real estate prices go up, and then after awhile, they become relatively expensive compared to say equities, to stocks, and the money flows out of the real estate market and then the real estate market goes down and the stock market begins to rise. Then the money can flow out of stocks and go into commodities, and then commodity prices go up. Or it can go into wages of people and into consumer prices and so forth.

But it doesn’t happen all at the same time; it happens very irregularly, and I have maintained that the expansionary monetary policies of the central bankers around the world, most of whom are basically neo-Keynesian; they want to intervene into the free market because they think – that’s their thinking, certainly not mine – they think that they are so smart that they can just guide the economy the way you drive your car. You accelerate in front, and then you brake, and then you turn left and then you turn right, although in traffic you can have accidents.

Basically, the idea of these central bankers – and that has been the idea already of the pre-Keynesian and of Keynesian and so forth – is to intervene into the free market with fiscal and monetary measures and to smoothen out – that is basically the idea – to smoothen out the business cycle. In other words, when there are downturns, you try to prevent the downturn from becoming severe as it was in the Great Depression, and when there is a boom, you should essentially take the punch bowl away and try to slow down the economy and the asset prices that inflate too much. Unfortunately, the central bankers in the world, they’ve done just the opposite, basically. They let the boom go, and when there’s a crash, they just print more money, and that then leads to numerous unintended consequences, including – I started to write about this four years ago – including this huge increase in wealth and income inequality.

MICHAEL: Well, there’s no doubt we have that. I guess the issue – and that seems to be the buzz in just about every piece of news media that you can find – but what can be done about wealth inequality?

MARC: Well, there are many things that you can do. And I have to say, there will always be wealth inequalities. You go to a horse race, some horses are faster than others, and they win the race. There are some factors in today’s world that essentially have led to an economy where the winner takes all. In other words, say you were a singer in America in the 1940s. Your audience was basically American; you went from concert to concert, and so your audience was limited. Today, with instant communication around the world and with globalization, if you have a successful tune or song, immediately it can be heard all over the world. So your audience has become that much larger, and so people that become famous, whether that is in soccer or in motor racing or in any other sport, in golfing, or in the show business, these people, they earn much more relative to the rest of the world than they earned before. Some of them have become billionaires.

I’m not saying that central banks are the only ones responsible for higher wealth inequality, but very clearly, when you print money, who does it benefit the most? It benefits people the most that already have assets. That should be clear. “I have a house, I have stocks, I have bonds, I have gold,” and so forth. These assets, in a money printing environment, tend to appreciate. Farmland as well. So people that don’t own these assets, they suffer relative to the ones that own them.

MICHAEL: One example of that would be that there’s no more interest income. In the last five or six years –

MARC: Yes, absolutely, yes. They call it financial repression; I call it to penalize decent people, because you cannot force an individual to speculate in stocks and in bonds and in commodities. My grandmother, she never owned shares unless they were companies where she grew up, so she had a few shares of the air cable company and so forth and so on, and the electricity company. But her money was basically cash in the bank. My parents, they also had mostly cash in the bank and occasionally they would own some shares, but in a very limited way. These people have now been penalized very badly.

Number two, again, what I alluded to before, that the fed’s policy creates more volatility, because the money printing leads to bubbles. We had an emerging market bubble in ’97, ’98, and then a collapse, which was very vicious, particularly here in Asia; then we had the NASDAQ bubble and the collapse, and then we had the housing bubble in the US and then the collapse, and so forth. The problem is that in bubbles, when this has been observed already by so many economies, already by Copernicus and by David Hume and by Irving Fisher, the majority of investors lose money and the minority makes the money.

So it shifts money essentially from the majority to a limited number of people, and when the bubble collapses – say stocks drop 50% or properties drop 40% or 50% and so forth – a lot of poor people are wiped out. Then assets become relatively cheap, and the rich people, represented nowadays by hedge funds and private equity funds, they have then the opportunity to buy thousands of homes in the U.S. at below construction cost, which an individual can’t buy because he has no access to credit. But the private equity fund, they can borrow money at 2% or 1.5%. That then takes essentially the ownership away from the middle class and lower classes and transfers it to the moneyed class.

It’s interesting if you look at say the list of the richest people in the world 100 years ago; they were industrialists, either in steel or in manufacturing and so forth and so on. And then in 1970, the richest people were basically still largely in manufacturing, had industries, and there was in 1980 just six billionaires in the world. Now we have probably officially around 2,500 billionaires. I have a book here, The Penniless Billionaires.

So now we have among the list of richest people, lots of people that have actually never done anything in terms of industries. They are just money shufflers: the hedge fund managers, the bankers, the real estate guys, and private equity guys and so forth. It’s an amazing world. The money printing has led to this huge monster, Dracula, basically, the financial service industry. This financial service industry has become disproportionately large to the real economy, and I think one day it will be deflated very badly.

MICHAEL: You brought up the example of the wealthy going ahead and having extra opportunity when there’s a collapse.

MARC: Yes.

MICHAEL: I’m thinking of a particular individual who I don’t intend to denigrate at all, but I remember in the fall of ’08, Mr. Buffett swooped in and got these homerun deals with Goldman Sachs and whatnot. And there’s nothing wrong with that. He’s in the position – I mean, you might argue there’s something wrong with it, but he’s in the position, he makes the deal. I think what’s more interesting about when he makes those deals is that I watch in America; the same people that are getting burned by these very situations that you just described then turn around and cheer Mr. Buffett for taking advantage of the situation. It’s become certifiably wacky.

MARC: Yes, yes, but I want to say one thing. I’m not blaming any rich guy who takes advantage of the system. I’m in the financial sector. Had I not gone into the financial sector, I don’t think I would have the assets that I have today. So I’m not complaining as an individual, but you have to look at the cause of Mr. Buffett being able to take advantage of all these situations. Basically it’s money printing and government intervention, because in fact, AIG should have gone bust. It was bust. If AIG went bust, Goldman Sachs is also bust.

MICHAEL: Morgan Stanley.

MARC: But the government came in and bailed them out, and Buffett, he had presumably the information that this would happen, so he made a favorable deal with Goldman Sachs – a deal that you and I couldn’t do. You understand? And he also influenced the government, because in America, the corporate sector, with the lobbyists and all these characters, they have a huge influence on politicians. They basically bailed out the banks. And Mr. Buffett, he would have probably gone bust if the banks hadn’t been bailed out. You understand?

So this has be very clearly viewed, and an increasing number of people see Mr. Buffett from the perspective I have: he pretends to be kind of the small American, normal American, hardworking, frugal person, farmer from Omaha, Nebraska, and the reality is he flies in private planes. He has a luxury condo in New York City and so forth and so on. The reality is quite different than what he portrays to be. Now, I’m not saying – I have nothing against him. I met him; I don’t think he’s that great an individual, but he was a great investor.

Now, in the last few years, his great investments were made possible by his government connections, and as I said, the private equity guys, they can go and buy a thousand homes. You as an individual, you can’t do that. You don’t have the money and you don’t have access to the credit. But they have it. So we no longer have what I call a level playing field. Some people are very privileged. But I’m not blaming Wall Street, I’m not blaming Mr. Buffett. He acts as a capitalist. He just takes advantage of the money printing and the intervention by the government. But to the detriment – we have to see this very clear, to the detriment of the majority of people.

MICHAEL: Two questions left, unless you want to keep going more here, but one kind of more serious and a big philosophical and one a little more fun, about the world that we’re in right now. Maybe you won’t want that one public, but we’ll see. As I look at government and I look at people’s desire for government to help them across the world – and a friend of mine wrote a book combining government and monopoly, and he was looking at it from the standpoint that government is assimilating everything. Just slowly but surely, the government assimilation just marches on. He was calling it “Govopoly”, which is the idea of corporate monopoly and government kind of combined into one, and that is assimilating the entire system, making it harder and harder for the average guy to break in.

You’ve actually talked and touched a lot about those issues, but maybe you might touch on the idea of that. If you see it from a similar perspective, if you see that the role of government in our lives just seems to expand and expand and expand. And instead of people questioning it and saying, “Hey, I really don’t want this. I might want to live in Thailand or I might want to do this or I might want to do that,” they just kind of accept it and say, “Hey, great, Daddy Government, take care of me.” What’s happened to us, Marc?

MARC: Well, I am not sure that everybody endorses that, but let’s look back say 150 years. In a period of rapid economic growth in the 19th century, before there was a federal reserve, and actually we had stable prices between 1800 and 1900, and real, in other words, inflation-adjusted GDP per capita in the U.S. grew at a faster pace than after we had the federal reserve. Government in all developed countries of the West, including the U.S., was never more than 20% of the economy. All of it. State, local, municipal, and so forth. The government at the time was very small, and the economy was growing rapidly.

Under the influence of the Keynesian, and already before him, the government has become bigger and bigger. But as Milton Friedman – and this is really a book that I recommend to anyone, because it’s easy to read even for someone who has no economic background – Capitalism and Freedom by Friedman, he precisely talks about this in many different chapters, about monetary policy, about fiscal policy, about labor and so forth and Social Security. He precisely explains the larger the government is, of course, the less freedom you have.

And you also have to see very clearly now we have recently IBMed. They announced suddenly that the Dutch subsidiary has 170,000 employees. Of those, 200 work in the Netherlands. But they can save tax, and so their tax rate is very low. They have an army of lawyers and an army of accountants and auditors and so forth, and lobbyists, and so they can do with the government more or less what they want. The small businessman is fucked. You understand? Because my friends, who are well-to-do but they are small businessmen, suddenly the government comes and audits the tax. Then they waste two weeks’ time collecting all the receipts and so forth, and the government can basically shut down their business because the government has an army of lawyers and they can waste these people’s time endlessly. The small businessman in America or in Europe, he doesn’t have the option to move his staff to a Netherland subsidiary, as IBM does. So he’s at the disadvantage.

But we have to see this very clearly. As maybe your friend said, or wrote – I don’t know, I haven’t read the book – basically a large government implements more and more regulation. You look at the tax code in the U.S.; it’s gone from a few hundred pages to, I don’t know, more than 70,000 pages, the IRS federal income tax law. The large corporations, they love regulation, because they know they can influence regulation and laws through their lobbies, and they know the more regulation there is, the more difficult it is for a competitor to come up.

MICHAEL: It’s like building that moat around Angkor Wat, huh?

MARC: Yeah, you understand, that’s why the larger the government is, the more concentration of power you will have among a few players in the United States, the less competition, and the more crisis will be relatively high. It’s like the U.S., for the average household, the typical household – I’m not talking about the people at Goldman Sachs and so forth – but for the typical household, real compensation, real household income has been down for many years, maybe 12 years. Wages in real terms are down for more than 20 years. But the corporations have record profits. You have to think about this: why is it that corporations have record profits and wages are so low? Something is not right.

My view about this is this money printing – we have to also look at it from this perspective – has actually, with its artificial low interest rates, allowed the government to become bigger and bigger and bigger. Because the government can borrow money essentially at zero interest rates by issuing T-bills. They can borrow money at 2.7% yield on 10 years. Can you as an individual borrow at those rates? I mean, my friends here in Thailand, if they wanted to borrow some money to buy a house, they would have to pay 8% interest. So you understand, the government can borrow all this money at very low rates; as a result, it becomes bigger, has more regulation, and harasses the businessman even more.

MICHAEL: Marc, I appreciate you taking the time today. That kind of ends my more serious question. I have one question, though, and if you don’t want this to be a part of the podcast, we’ll cut it out. As a single man, I came to Asia last year, and it’s quite the experience. I heard you make some comments on a radio show that I think have been well listened to now, where you were kind of giving an introduction to people on nightlife and ladies in general across Asia. Look, when I left – I was in Asia all last year and I flew back to the States for the holidays. I left Bangkok and landed in Zurich. What a transition. It’s smiling and happy. Your home city is not smiling and happy.

So what would you tell to those gentlemen out there in the West, Europe, America, and maybe they’ve not really figured out what they want to do with relationships or they’ve not had a great time or this or that – what is it about this part of the world? It’s a big question. I know it’s a big question. If you want to expand, I’d love to have you expand.

MARC: Basically, we in the Western world, we have, again, regulations and laws. We have so-called democracies. I don’t believe that we really have a democracy. The closest to democracy is probably a country like Switzerland, where we have referendums, and where the local governments, the so-called Gemeinde and the Canton, they have relative high autonomy. But in general, in the U.S., whether you have the Democrats in power or the Republicans, not much changes. The one party steals money for that, for warfare, and the other party steals money to buy robes. Obama. So it’s all the same mafia, basically. It’s a cancer government. Everywhere, not just in the U.S.

The government – some people are still naïve, because they go to school and then the teachers tell them that democracy is the best system and so forth, and maybe it is the best system. I don’t know. But I lived in Hong Kong; we never had democracy. I live in Thailand. We never – well, we have kind of a democracy, but it’s not much of a democracy. But we have a lot of freedom. That is the difference. You can do things. And in Hong Kong, the government was always relatively small compared to the economy.

It has some disadvantages. The disadvantage is basically people have to rely on themselves. You can’t say “Oh, my back hurts. Now I need disability insurance.” Nobody will give it to you. You understand? Whereas in the Western world, the entitlement society has gone far too far in the sense that young people, they don’t want to pay a lot of tax, but if something happens to them, they want the benefits from the government. It just doesn’t matter – we don’t have a sufficient tax base to pay for all the obligations that will come to you in future, the so-called unfounded liabilities arising from Social Security, Medicare, Medicaid, and so forth. The system is basically broke.

In Asia, we don’t have really democracies, but we have a lot of freedom. You just can’t go and say something very nasty in Singapore about Lee Kuan Yew, and you can’t say something very nasty in Thailand about the King and so forth. But okay, then we don’t say that, but we have, on the personal level, a lot of freedom. And this extends essentially to one’s personal life. In Europe – basically men everywhere in the world have mistresses and girlfriends and go to whore houses and nightclubs and so forth and so on – and women do the same, by the way, as we know.

But at least here in Asia, it’s done openly in the sense that everybody knows that it’s happening, but it’s done in a more elegant way in the sense that if someone is in high society, then he seldom will have a girlfriend also from high society. He may have a mistress from a different society level. So there is less competition for the wife. She doesn’t compete against the mistresses. And as a bachelor, of course, you have a wide open area. We have in Asia 56% of the world’s population, so we’re talking about almost 4 billion people, and of those, half are women, and so 2 billion are women. Of those, say half are in the age bracket between 18 and 40, so you have a billion women in front of your door. As a man. As a woman, you have a billion men in front of your door. So it’s a very free society in this respect.

Of course, if there is a rape case, it will be prosecuted, but there is very rarely a rape case because most people do it with consent, and afterwards, they don’t go to a lawyer and say “Oh, can I maybe sue this guy because he’s a rich guy? Maybe I can extort some money from him.” The legal system in Europe and in the U.S. is conducive to people spending half their life suing each other. This doesn’t exist in Asia. We have a problem, we may discuss the problem, or if the problem is not resolvable, I’ll kill you. Simple as that. That’s a much better solution.

MICHAEL: No more drama.

MARC: Yes. It’s a clean solution. I’m not saying that I’ve been killing people.

MICHAEL: Yeah, I have not been killing people either.

MARC: But you understand, the point is usually, baseless disputes, certainly in the Chinese community, they are discussed among people, and you try to find some solution. If really no solution can be found, then nowadays, more and more because we have now structured corporation, which didn’t exist before, now occasionally lawyers get involved and so forth. But frequently, the dispute will be solved with some unpleasant consequences.

MICHAEL: You know, I love your wit about things. When I heard you talk about this, you said to the effect, that if you’re a Western guy and you’re planning on getting married, come to Asia, and that problem will be solved.

MARC: Yes. I would say first of all, in the Western world, if you are a man and you work hard and you have some money to get married, it’s from a risk-reward point of view very unfavorable, because when you divorce, you have to basically give 50% of your money to your wife. And I can tell you, I know lots of people in Switzerland; they were employees at banks and so forth, and still are, and suddenly after 20 years, the wife has a young boyfriend or whatever it is. And she walks away. Then he has to pay half his salary to her, half his pension, and after living in decent conditions, he then lives in a one bedroom apartment. I tell you, many of them. Equally, I know women, they married a poor man; the man walks away with millions.

So I think that system is a disincentive towards actually forming a family. If I were European or American nowadays, or if I were a divorced guy, never again marry in my life. But never again. I happen to have a reasonably good relationship with my wife because she lives most of the time in Bangkok and I live here in Chiang Mai. Living apart keeps marriage happy a long time.

MICHAEL: Those are great words of wisdom. I appreciate you taking the time today, Mark.

That was the end of my official interview. I’ve got a few minutes of extra banter with Marc that I thought was appropriate to add on as an addendum conversation.

MARC: I don’t understand why not more young people from the West come to Asia, because as you say, I also go to Zurich and have fun and have my group of friends and so forth and we go out, but if someone is interested in sex and in women, nothing beats Asia. Nothing. If someone goes to Brazil, I tell him, yes, I’ve also been to Brazil many times, but you never will have the quantity that you have in Asia. Never. You go to a nightclub in Brazil, there are 20 girls or 30 girls. Here in Asia, there are clubs with a thousand girls.

MICHAEL: It’s kind of hard to talk about, too, without some people listening in and thinking, “Hey, these are just two guys with a randy conversation.” It’s bigger than that. It’s kind of hard to explain it till you get here. You’ve kind of got to get on the plane and go, don’t you?

MARC: Yes, but many people, they have a comfortable life in America, and as you say – and this I will never understand – they actually kind of support the government, and they think that government is good. Because they’ve been brainwashed by the media, “Oh, the government will do this and the government will do that.” As Milton Friedman said, “Government programs are judged by their intentions and not by their results.”

MICHAEL: A few more minutes of extras, as I shift into one final subject with Marc.

I have these gut-level feels about where it’s all going to go. I always kind of feel like if they can’t keep the Dow and the S&P levitated, that’s when the shit hits the fan.

MARC: Yeah, sure. The whole expansion – which has been weak, but there has been an expansion – is partly because of rising asset price. So the rich guys, they make money. Then they go to restaurants, they spend. It’s like my friends, we go out in Southern California. Then he invites eight, ten people. The dinner is maybe a thousand dollars or whatnot. He gives the waiter a 20% tip, maybe 25%, so the waiter, in one night, he makes $300. Easily. Easily. Assuming he works 30 days a month, because he can work in two different restaurants, he makes $9,000. Mostly tax-free. He has to pay some tax, because they have now become tougher on that, but a good waiter, he can make a lot of money. A lot.

MICHAEL: Yeah, no doubt.

MARC: This is also – a lot of people, they prefer to serve at the bar in a place or as a waiter in the restaurant because it’s also more fun than to be on the factory floor. So you have a shortage of qualified workers. Then you have all these idiots with the Facebook. They all want to be famous. This is the bit tick nowadays.

MICHAEL: Famous with no work. No work. Just be famous for the sake of being famous.

MARC: Yes, yes. Famous and no accomplishment. And actually, fame today is valued more highly than money.


MARC: If people come to me and say “Oh, you’re very famous,” I say, “What?”

MICHAEL: Yeah, whatever. It’s like the last thing you’re thinking about.

MARC: Yes.

MICHAEL: If you want to learn how to be a trend-following trader, the first place to go is My firm can help you with educational, research, and systems trading packages to get you started immediately. Take advantage of my 15 years of experience. Take advantage of all the insights that I’ve accumulated and put into one research and educational package. These are systems that you can use immediately to start making money. Once again, go to


Rate and Review Trend Following Radio on iTunes

Join over 12,000 others on the Trend Following mailing list.

Have a question or comment about this episode? Post it below. I hope that you enjoyed some of the Marc Faber Gold given out in this episode. If so you’ll may enjoy some of the following of my podcasts:

John Galt Interview

Asymmetric Information

 Go Forward and Move Ahead

Marc Faber Podcast Coming

Marc Faber, editor & publisher of “The Gloom, Boom & Doom Report”, and myself March 20, 2014 in Chiang Mai, Thailand. Podcast up soon!

Marc Faber

How can you move forward immediately to Trend Following profits? My books and my Flagship Course and Systems are trusted options by clients in 70+ countries.

Also jump in:

Trend Following Podcast Guests
Frequently Asked Questions
Markets to Trade
Crisis Times
Trading Technology
About Us

Trend Following is for beginners, students and pros in all countries. This is not day trading 5-minute bars, prediction or analyzing fundamentals–it’s Trend Following.

Learn to be a trend following trader.
Sign up free today.