Marc Faber is the editor and publisher of "The Gloom, Boom & Doom Report" and founder of Marc Faber Limited, an investment advisory and portfolio management firm, based in Hong Kong. He is also a keynote speaker at the upcoming Inside ETFs conference in January. ETF.com recently sat down with Faber to hear his thoughts on key macroeconomic and market themes.
ETF.com: I want to get your take on oil prices. They're tanking, seemingly every day, with WTI hitting less than $35 earlier this week. Is this something you see continuing?
Marc Faber: It can go down to lower levels for a brief period of time. We were at $147 in July 2008, and by December 2008, we dropped to $32. And then we rebounded from it. Markets are volatile; anything can happen. But from a demand/supply point of view, the equilibrium price is probably between $40 and $60.
ETF.com: You've been a critic of the Fed and its policies. Do you think the latest interest-rate hike was the right thing to do?
Faber: The best would be to have no monetary interventions. In other words, as Milton Friedman pointed out, to have a steady growth in money supply, fixed by the constitution at 2% or 3% per annum. We don't need a central planning authority to intervene and buy assets and boost the money supply or slow down the growth of money supply.
I'm against these constant interventions in the price of credit with monetary policies, but if they're going to do them, they should have raised rates in 2011 and 2012 when economic growth was much stronger than it is now. Right now, the global economy is slowing down meaningfully, so they should not have increased interest rates. But they did so to maintain some credibility.
The global economy is probably already in recession now. It will be more obvious in the U.S. in March or June of next year. At that time, the Fed will say, "Well, we didn't want to increase interest rates, but there was pressure on us to do so. So we increased them, and now we have a recession, and now we have to cut them again and flood the market with QE4."
They'll use whatever happens as an excuse to cut rates again and engage, as [ECB President] Draghi is currently doing, in unlimited purchases of assets.
ETF.com: So you see this interest-rate hike backfiring, and eventually the Fed is going to have initiate quantitative easing again down the line?
Faber: The global economy isn't really affected by a 25 basis point increase in interest rates. But I believe the Fed will point to that as the reason for the coming recession.
They basically view money printing as good and tightening as bad. The economy is slowing down meaningfully. When the Fed realizes the economy is in recession, they will cut again.
ETF.com: If the Fed is forced to backtrack on interest rates, that can't be good for stocks, right?
Faber: It's not good for the stock market. If you look at valuations of U.S. stocks relative to valuations in other markets, the U.S. stock market has big downside risk.
ETF.com: Do you see value in the emerging market stock market after they've come down so much?
Faber: There is value here and there. But in general, considering the slowdown I'm expecting, there's no hurry to buy these emerging markets. You can wait for another six months or so.
If you said, "Marc, here's $1 million. You have to choose, and you can only choose one thing: You can buy the U.S. stock market or you can buy emerging market stocks." If this was an investment for the next five to 10 years, I would say to buy emerging market stocks.