In the latest edition of his Gloom Boom Doom report, the ever-gloomy Marc Faber discusses the matter of former Goldman board member Rajat Gupta, who is alleged by the SEC to have passed on inside information to Galleon’s Raj Rajaratnam.
Whether he’s technically innocent or not, Faber is stunned that someone so powerful all around the world (ties to India, McKinsey, various boards) would take such a grand risk with such little benefit.
Between this and the failure of anyone to get prosecuted over the financial crisis (he hones in on Mozilo), Faber declares:
A level-headed, knowledgeable, and intelligent American friend of mine (she has been buying gold for years) recently observed that, “Only when the American people insist that sound business practices and moral standards be brought back will we be able to give the people of this country a future.” Unfortunately, I believe that the ongoing moral decay among US politicians and the business elite, the irresponsible fiscal and monetary policies, the decline in educational standards and infrastructure, the trade and current account deficit, the weak US dollar, and the heavy- handed and ambiguous meddling in foreign affairs by US officials, are all pieces in a puzzle, which when assembled reads: Failed State.
As for investing, he sees big implications from Japan:
However, all these conditions and catastrophes (in the case of Japan) are in general, I believe, conducive to more money printing. In particular, I believe that the Japanese government will need to massively monetise its debt. Therefore, following some near- term strength in the Japanese Yen (due to the repatriation of funds — probably already fully discounted by the market) and weakness in the Japanese stock market, Japanese shares should make a major low and enter a bull market (see Figure 3).
Furthermore, look for a lot more action in the resources world.
Moreover, as my friend Robert Mitchell (who is not on the board of Rajaratnam, Gupta, Kumar, Mozilo & Co., Inc.) argues,
[T]he ravenous need for clean electricity which prominently includes nuclear on the menu will reassert itself in countries like China, India, South Korea, and Russia (see below). Further, the cost of money will jump for companies trying to develop uranium production and the current and prospective demand will reassert itself in large demand and constrained supply that was in place prior to this isolated and anomalous event. Once again, the embrace of a non-consensus, unpopular posture will prove profitable [see Figure 4].
Moreover, I agree with Mitchell that “resource nationalism, politically motivated export curtailment, mine accidents, environmental crackdowns, civil conflict, power supply disruption, and national stockpiling are all conspiring for higher off exchange traded minor metal prices” (and energy prices, in my opinion). I also agree with his assessment that, in the resource space, “the lowest hanging fruit deposits were picked long ago, and now exploration teams are poring over drill results in places like Mali for the most attractive deposits remaining. Next generation technologies will not be birthed by copper or lead or zinc, but rather by some of the metals” that Mitchell’s fund has stored safely in warehouses in North America (see below).