part 2 of Faber-Rogers interview on commods, gold, oil
Chinese Economy now has balanced trade
Chinese surplus with US, but deficit with Japan and Middle East nations for oil
(*) USDollar will depreciate badly versus hard assets
There are no longer ANY sound currencies
Worldwide central banks are printing money, leading to economic destruction
In time expect decaying societies, eventually war, and social breakdown
Faber: Chinese Yuan is the most sound currency in the world today
Big phenomenon now is relationship between Chinese Yuan and Asian currencies
An integration is underway among the Asian trading block
China has large US$ reserves and gold reserves
If Asia forms the ACU (Asian Currency Unit), then watch Yuan be valued 30% higher
China is fast becoming the workshop and service center of the world
Numerous levels of available workforce, with 600 million hoping to enter cities
US GDP is $11T, China is $1T, but China is larger in terms of unit sales
China is now approx 40-60% the size of the US GDP in volume terms
China imports steel now, but has large demand for commodities
China is in the genesis stage of tremendous growth
Commodities will be strong for gold, silver, oil, natural gas
Bull market in next 10 years in commodities requires change in investor mindset
Commodities will be eventually sponsored, promoted, subsidized by financial institutions
Public will come to the scene later, only then plan on exit strategy, but no rush
2002-2003 represented a milestone for Commodity Research Bureau index
indicates a bull market for commodities that should last at least 10 years
(*) Faber: expect a time in a few years for $100 crude oil, gold at a multiple of $350
Even more everyday items like coffee will see sharp rise in price within 5 years
Stocks could rise, but a falling US$ means stocks will fall in real value
Commodities require time to develop, find a mine, find oil pool, find land
Mine properties are delayed by environmental regulations and obstacles
Takes time to drill, foster budgets, capitalize equipment
Great difficulty to develop non-ferrous and precious metal mining
The last 20 years brought about a lack of productive capacity for commodities
Commodity inventories have been systematically whittled down
Russia is stripping and dumping materials on the markets, widespread theft
Russia’s get-rich quick mentality has built no new productive capacity
With monetary expansion, lack of capacity, commodities will go thru roof in price
(*) Mining industry operating at 95% capacity utilization
A struggle is underway with oil, with depletion peak somewhere around 2006-2008
(*) Saudi Arabia has the potential to blow up as a regime, threatening oil supply
Ride the longterm bull market in commodities for many years
Avoid the herd where high price premiums are paid
Avoid publicity and promotions, which now are mainstream stocks
There will be upcoming commodity mutual funds, but none yet
Rogers Index fund, mining stocks, oil & gas stocks are good ideas
Promising nations are Russia, Brazil, Indonesia, Thailand, Canada, Australia
Rising commodity prices mean rising production costs, very bad for stocks
Own gold in a deposit bank box outside the USA, which will execute seizures |
