Faber: In his own words

EB: Are you buying banks?

MF: I’m not interested in banks at this stage. It may be a mistake but I just don’t think that it’s the time to invest in banks because they still need a lot of capital and they will have to increase the equity capital. But maybe they will also have a rebound – who knows – it’s possible. I just don’t do it but I’m not saying it’s a mistake to buy it, I just don’t know. I just don’t have any transparency in banks. I only know that they are over-leveraged and basically bankrupt.

FABER ON HOLDING CASH

EB: How much cash do you actually hold?

MF: Because I didn’t buy a lot of equities and I liquiditated quite a bit in Asian equity in recent weeks, I think the cash is around 30%. Then I have a lot of bonds. I have some which are more cash-like and some with a more equity-like character.

EB: Are these bonds high yield bonds?

MF: Most of my bonds are what the rating agencies would consider lower quality, I don’t consider them as lower quality because they are corporate bonds and I think that a lot of corporations will rather survive than the governments. Some of these are Asian, Russian, some European. I own some Gazprom, ICICI bank in India – the big names.

ON THREATS OF A CHINESE SLOWDOWN

EB: Is slowing Chinese growth more of a concern than the European crisis?

MF: When the Chinese economy was strong 2000-2008, it drove up commodity prices and that boosted growth rates in emerging economies such as Brazil, Argentina, and the oil-producing countries in the Middle East, and central Asia, Russia and of course also Africa and Australasia.

When the Chinese economy slumps, then obviously the demand for commodities goes down and these countries have less money and so they buy less and so it has a very strong multiplier effect on the global economy.

Whether the US contracts or grows at 2% has no impact on commodity demand or the service industry.  If China grows at 12% or only at 3%, that will have a huge impact on commodity prices.