1. Dr Marc Faber 2009 Presentation for Agora Financial Investment Symposium Tuesday 21 July 2009 The Fairmont Hotel, Vancouver Canada YES, THERE IS A LIGHT AT THE END OF THIS TUNNEL! Marc Faber Limited Suite 3311-3313 Two International Finance Centre 8 Finance Street Central Hong Kong Tel:(852) 2801-5411 Fax:(852) 2845-9192 Email: faberdoom@yahoo.com www.gloomboomdoom.com “Give me control of a nation’s money and I care not who makes the laws" - Amschel Rothschild

2. www.gloomboomdoom.com TOPICS FOR DISCUSSION Credit crisis is very serious. Fed can keep Fed fund rates at zero percent and pursue even more expansionary monetary policies. Also, fiscal measures can be expanded further. However, in the current conditions such policy measures may actually aggravate and prolong the problem. Non-financial credit growth has declined from an annual rate of 16% in late 2006 to currently between 1% and 2%. Also, deleveraging is occurring among financial intermediaries. This is extremely negative for an economy addicted to credit growth. Regardless of policies followed by the U.S. Government and its Agencies the consumer is in recession, and the recession will deepen. U.S. trade and current account deficits will shrink further and diminish international liquidity. The shrinkage of global liquidity is bad for all asset prices. We had an unprecedented global economic boom between 2002 and 2007. A colossal global economic bust has followed. In 2008, almost all asset prices collapsed. 1

3. HOW ARTIFICIALLY LOW INTEREST RATES CAUSED THE CRISIS! Fed Fund Rate remained at 1% until June 2004 www.gloomboomdoom.com Source: Ed Yardeni, www.yardeni.com 2

4. EASY MONEY EXACERBATES VOLATILITY Source: Ed Yardeni, www.yardeni.com www.gloomboomdoom.com 3

5. WEST TEXAS INTERMEDIATE CRUDE OIL PRICE 4 www.gloomboomdoom.com Source: Ed Yardeni, www.yardeni.com

6. U.S. DEBT RATIOS HAVE BEEN PUSHED HIGHER BY REFLATION Source: Bridgewater Associates and The Bank Credit Analyst www.gloomboomdoom.com 5

7. 2001-2007: NO MONETARY TIGHTENING! 6 Source: Ed Yardeni; www.yardeni.com www.gloomboomdoom.com Bond Yield & GDP

8. EACH CRISIS PRODUCED MORE MONETARY EASING AND HIGHER STOCK PRICES! BUT WILL IT WORK THIS AND NEXT TIME? Source: Ed Yardeni, www.yardeni.com www.gloomboomdoom.com 7

9. FROM THE ILLUSION OF WEALTH TO TOTAL WEALTH DESTRUCTION, 1997 - 2009 www.gloomboomdoom.com Source: Robert Prechter, www.elliottwave.com 8

10. WORLD STOCK MARKET CAPITALISATION: FROM $63 TRILLION TO $28 TRILLION! www.gloomboomdoom.com Source: Ron Griess, www.thechartstore.com 9

11. GLOBAL COLLAPSE IN HOME PRICES – NEXT SHOE TO DROP: COMMERCIAL REAL ESTATE Source: Ed Yardeni, www.yardeni.com www.gloomboomdoom.com 10

12. SHADOW SUPPLY: 14.5% OF HOUSING STOCK IS VACANT, TOTALLING 19.0 MILLION UNITS Source: Census Bureau, Zelman & Associates estimates 11 www.gloomboomdoom.com

13. CREDIT GROWTH COLLAPSES AS LENDING STANDARDS TIGHTEN Source: Bridgewater Associates, Goldman Sachs www.gloomboomdoom.com 12 Total New Borrowing by Households and Non-Financial Business % PGDP Lending Standards Tighten

14. 13 THE U.S. TREASURY’S ATTEMPT TO STIMULATE CREDIT GROWTH IS LIKELY TO FAIL Source: Ed Yardeni; www.yardeni.com www.gloomboomdoom.com

15. CORPORATE BOND SPREADS HAVE WIDENED www.gloomboomdoom.com 14 Source: Ed Yardeni; www.yardeni.com

16. Source: Ed yardeni, www.yardeni.com www.gloomboomdoom.com 15 OVER-LEVERAGED CONSUMER IS RETRENCHING

17. U.S. Current Account Deficit as % of GDP Source: Estudio Broda; Bridgewater Associates www.gloomboomdoom.com 16 EXCESSIVE CONSUMPTION LEADING TO A SOARING U.S. TRADE AND CURRENT ACCOUNT DEFICIT

18. U.S. OVERCONSUMPTION STIMULATED THE CHINESE ECONOMY, LIFTED COMMODITY PRICES, AND ENRICHED RESOURCE PRODUCERS Source: Ed Yardeni; www.yardeni.com World Crude Oil Outlays, 1996-2009 www.gloomboomdoom.com 17

19. FIRST SYNCHRONIZED GLOBAL BOOM AND BUST IN 200 YEARS OF CAPITALISM BUT… In 2006/2007: only one country in recession – money-printing Zimbabwe! Source: ABN Amro www.gloomboomdoom.com Global economy has become more synchronized Risk Premiums remained low for too long! Source: Morgan Stanley 18

20. … A NEW WORLD HAS EMERGED Monthly Motor Vehicles Sold (million units) Source: Jonathan Anderson, UBS 19 www.gloomboomdoom.com

21. 20 GROWTH IN U.S. TRADE AND CURRENT ACCOUNT DEFICIT LED TO INCREASING INTERNATIONAL RESERVES AND A WEAK U.S. DOLLAR Strong inverse correlation between the growth rate in International Reserves and the U.S. dollar! www.gloomboomdoom.com Source: Ed Yardeni, www.yardeni.com

22. FROM NOW ON FASTER GROWTH IN EMERGING ECONOMIES Source: Barry Bannister, Stifel Nicolaus & Co; Goldman Sachs www.gloomboomdoom.com 21

23. PER CAPITA GDP (IN 1960 U.S. DOLLARS) Rising wealth inequality between the MDCs and the LDCs over the last 250 years has reversed for good! Source: Paul Bairoch, Victoires et déboires www.gloomboomdoom.com 22

24. CHINESE YUAN, 1982-2009 23 Source: Ed Yardeni; www.yardeni.com www.gloomboomdoom.com

25. AUSTRALIAN DOLLAR, 1980-2009 24 Source: Ed Yardeni; www.yardeni.com www.gloomboomdoom.com

26. KOREAN WON / U.S. DOLLAR, 1982-2009 25 Source: Ed Yardeni; www.yardeni.com www.gloomboomdoom.com

27. 26 NO PROPERTY BUBBLE IN CHINA! Source: The Bank Credit Analyst www.gloomboomdoom.com

28. URBANIZATION IN ASIA 27 Source: The Bank Credit Analyst, UNDP www.gloomboomdoom.com

29. FOR WHICH COMMODITIES WILL DEMAND NOT COLLAPSE? Source: Bank Credit Analyst www.gloomboomdoom.com 28

30. OIL CONSUMPTION DURING PHASES OF INDUSTRIALISATION Source: Barry Bannister, Stifel, Nicolaus & Company, Inc www.gloomboomdoom.com 29

31. CRUDE OIL DEMAND IN CHINA AND INDIA AND ANNUAL CHANGE, 1987-2009 30 Source: Ed Yardeni; www.yardeni.com www.gloomboomdoom.com

32. THE GEOPOLITICS OF OIL Source: Perry-Castaneda Library Map Collection Source: The Bank Credit Analyst Map of Iran Chinese Share of World Oil Demand and Production www.gloomboomdoom.com 31

33. THE GEOPOLITICS OF OIL IN ASIA: THE CONTROL OF SEA LANES www.gloomboomdoom.com 32

34. THE SCO INCLUDES CHINA, RUSSIA, KAZAKHSTAN, KYRGYZSTAN, TAJIKISTAN AND UZBEKISTAN Source: 1999 MAGELLAN Geographix SM, (805) 685-3100: www.maps.com www.gloomboomdoom.com 33

35. RISING COMMODITY PRICES LEAD TO INTERNATIONAL TENSIONS – WARS LEAD TO SOARING PRICES Source: US Bureau of the Census, Historical Statistics of the United States, Colonial Times to 1970, Legg Mason Format www.gloomboomdoom.com 34

36. COMMODITY PRICES IN REAL TERMS, 1800 - 2009 Source: Barry Bannister; Nicolaus & Co. www.gloomboomdoom.com 35

37. M3 MONEY SUPPLY Y/Y GROWTH VERSUS OIL PRICE PER BARREL Y/Y GROWTH (10-yr moving average of yearly percent change), since the Fed’s creation in 1913 Source: Barry Bannister, Nicolaus Stifel www.gloomboomdoom.com 36

38. ZERO HOUR! 1954-2009 37 2000-2007: Nominal GDP Growth: + $4.2. trillion Total Credit Market Debt: +$21.4 trillion Source: Barry Bannister, Stifel Nicolaus www.gloomboomdoom.com

39. AN EARNINGS BUBBLE? S & P EARNINGS PER SHARE, 1871-2007 38 From 1990-2007, financial sector earnings up 5 times. Non-financial sector earnings up 100%. Source: UBS, The Bank Credit Analyst www.gloomboomdoom.com

40. DECLINING PERSONAL SAVING RATE TURBOCHARGED THE ECONOMY AND CORPORATE PROFITS 39 Source: Bureau of Economic Analysis, Merrill Lynch www.gloomboomdoom.com Personal Saving Rate, 1960-2009

41. THE COMING COLLAPSE IN CAPITAL SPENDING Source: Ed Yardeni; www.yardeni.com www.gloomboomdoom.com 40

42. Source: www.thechartstore.com DOW JONES INDUSTRIAL AVERAGE MONTHLY – ADJUSTED FOR INFLATION BY THE CPI, 1885-2009 41 www.gloomboomdoom.com

43. 42 MARKET CAPITALIZATION AS A PERCENTAGE OF NOMINAL GDP, 1924-2009 Source: Ron Griess, www.thechartstore.com www.gloomboomdoom.com

44. U.S. STOCK MARKET 10-YEAR COMPOUND ANNUAL TOTAL RETURN Source: Barry Bannister, Stifel Nicolaus www.gloomboomdoom.com 43

45. S & P 500 TOTAL RETURN INDEX, 1945-2009 44 Source: Ron Griess, www.the chartstore.com www.gloomboomdoom.com 20 year rate of return

46. TOO MUCH SPECULATION Source: Alan Newman, www.cross-current.net www.gloomboomdoom.com 45

47. LONG-TERM U.S. TREASURY CONSTANT MATURITY, 1941-2009 Source: Ron Griess, www.thechartstore.com 46 (Monthly) www.gloomboomdoom.com

48. 47 Source: www.sharelynx.com DOW TO GOLD RATIO, 1800-2009 www.gloomboomdoom.com

49. ASIA: HIGHER DIVIDEND YIELDS THAN BOND YIELDS Source: Christopher Wood, CLSA www.gloomboomdoom.com 48

50. NIKKEI 225, 1970-2009 49 Source: Ron Griess, www.thechartstore.com (Monthly) NIKKEI 225 1970-2009 www.gloomboomdoom.com

51. HANG SANG INDEX 1969-2009 50 Source: Ron Griess, www.thechartstore.com www.gloomboomdoom.com

52. INVESTMENT THEMES Real Estate in Emerging Avoid real estate in financial sectors Economies: Equities in Asia:Many markets are near 20-year lows. Major lows occurred in October/November 2008 Healthcare in Asia:Pharmaceutical, hospital management companies Local Brands:May displace some international brands Commodities:Volatile, but uptrend intact. Corrections of 50% are common. Caution about industrial commodities is warranted Tourism:Hotels, casinos, airports, beach resorts. Potential problem is oversupply Financial Services:Banks, insurance companies, brokers, REITs in emerging economies Infrastructure:Bottlenecks everywhere. Potential problem could be cancellation www.gloomboomdoom.com 51

53. Investment Themes cont’d. Plantations & Farmland:Indonesia, Malaysia, Latin America, Ukraine Japan:Very depressed, banks look interesting New Regions:Cambodia, Laos, Myanmar, Mongolia Africa as a play on Asia Gold and Silver: Long U.S. Government Bonds:Short Corporate Bonds:Long www.gloomboomdoom.com 52

54. CONCLUSIONS The current synchronized global economic boom and the universal asset bubble, which lasted between 2002 and 2007, has led to a colossal bust. The wealth destruction arising from falling asset prices is unprecedented post Second World War. Expansionary Monetary, which caused the current credit crisis in the first place are the wrong medicine to solve the current problems. But, what options does the Fed have with a total credit market debt to GDP of almost 370%? Have central bankers become hostage to inflated asset markets? Will tight money - whenever necessary - be implemented again? In 2008 money became extremely tight even though central banks aggressively cut interest rates. It is not central banks that tightened monetary policies but the market participants. By curtailing the availability of credit through tightening credit standards by lenders and because of rising risk aversion by investors, credit growth collapsed. Ludwig von Mises: “the dearth of credit which marks the crisis is caused not by a contraction but by the abstention of further credit expansion”. www.gloomboomdoom.com 53