How to Prepare For What's to Come in 2026 | Marc Faber and Jimmy Connor

Key Concepts

• Failed State vs. Reality: The disconnect between economic classifications of Thailand and the lived experience of its people.
• 2025 Market Performance: Exceptional gains in specific asset classes (precious metals, emerging markets) despite uneven broader market performance.
• Inflation & GDP Calculation: Concerns about the accuracy of government inflation metrics and their impact on real economic activity.
• Money Supply & Inflation: The significant increase in the US money supply (M2) and its correlation with rising inflation.
• Asset Bubbles & Monetary Policy: The role of central bank policies in creating asset bubbles and disproportionately benefiting the financial sector.
• Geopolitical Risks: Concerns about escalating global tensions and the potential for miscalculated interventions.
• Deflationary Risks: The possibility of a shift from inflationary to deflationary pressures, particularly in asset prices.
• Diversification: The importance of diversifying investments across geographies and asset classes to mitigate risk.

Economic Overview of Thailand & Global Context

The discussion began with a brief overview of Thailand’s current situation. While often categorized by economists as a “failed state,” the speaker, based in Northern Thailand, described a peaceful and laid-back society with a large landmass and relatively low population density, ensuring food security. He highlighted the country’s low crime rates (excluding traffic accidents) and friendly population, making it a popular destination for foreigners. He noted that Thailand, along with Indonesia and Malaysia, underperformed in 2025 compared to other emerging markets.

2025 Market Review & Emerging Trends

2025 was characterized by surprisingly strong performance in specific sectors. The S&P 500 rose 16%, Nasdaq 20%, gold 60%, silver 140%, and the Canadian stock market 30%. However, the speaker emphasized that the broad US market (equal-weighted S&P) didn’t experience the same gains, and foreign markets significantly outperformed the US. Specifically, European and emerging markets saw substantial growth, with the emerging market ETF (EM) up nearly 40%, and some markets rising by 50%. He anticipates this trend continuing in 2026, with lagging emerging markets poised for growth.

US Economic Concerns & Inflationary Pressures

Despite reported US economic growth of 3% (with projections of 4-5% for 2026) and a falling unemployment rate (4.4% in December), the speaker expressed significant concerns about the accuracy of official economic figures. He argued that the government underestimates the cost of living increases, leading to a distorted view of GDP growth. He stated, “I think that the figures are fudged…the way the government calculates GDP does not really reflect what is happening to the ordinary household.”

He explained that money printing primarily benefits the financial sector (Wall Street, private equity, fund management companies) before trickling down to the middle class, resulting in declining real incomes for workers. He referenced John Williams’ alternative GDP calculations based on 1970s CPI methodology, which suggest the US economy is actually contracting. He pointed to the increase in the US money supply (M2) from $15.4 trillion in January 2020 to over $22 trillion currently – a 42% increase – as a key driver of inflationary pressures. Examples of rising prices were cited: coffee (up 30% year-over-year), ground beef (up 20%), and even bananas (up 10%).

The Nature of Inflation & Asset Price Dynamics

The speaker differentiated between general price increases and true inflation, noting that if all prices rose at the same rate, inflation wouldn’t be damaging. However, uneven price increases disrupt the economy. He observed that while wages may sometimes keep pace with inflation, currently, they are lagging, leading to a decline in real incomes. He stated, “Inflation would not cause any damage if all prices everywhere would go up at the same rate.” He also highlighted that rising asset prices (homes, stocks, commodities) are symptoms of inflation.

He criticized the lack of public criticism of the Federal Reserve, suggesting that those benefiting from money printing (Wall Street) have a vested interest in maintaining the status quo. He argued that the 19th century saw stronger economic growth without a Federal Reserve, and the price level remained stable between 1800 and 1900 despite a significant population increase.

Geopolitical Risks & US Foreign Policy

The discussion then turned to geopolitical risks, including the war in Ukraine, tensions in the Middle East, and the situation in Venezuela. The speaker expressed concern about the inconsistency and interventionist tendencies of US foreign policy, particularly under President Trump. He argued that the US often creates enemies and is prone to unnecessary interventions, citing the potential military intervention in Mexico as an example. He stated, “America is very good at creating enemies.”

He contrasted the US’s post-WWII prestige with its current standing, noting that other global powers (BRICS nations) are gaining influence. He warned that US interventions can backfire and exacerbate conflicts, potentially hindering progress towards peace in Ukraine.

Deflationary Risks & Investment Strategy

The speaker predicted a potential shift from inflationary to deflationary pressures, particularly in asset prices. He advised investors to consider strategies focused on minimizing losses in a declining market. He noted that traditionally, real estate was considered a safe investment, but recent declines in commercial property values demonstrate its vulnerability. He suggested that assets like gold, silver, platinum, and even food might offer better protection in a deflationary environment. He stated, “The best strategy would be to sell short any politician in the western world.”

He emphasized the importance of diversification, advising investors not to concentrate their holdings in a single country or asset class. He warned against the assumption that prices will always rise, drawing on historical examples of asset price collapses after World War I and the fall of the Soviet Union. He concluded by stating, “The notion that everything always goes up or goes up in the long term is wrong.”

Notable Quotes

• “I think that the figures are fudged. I think the figures do not reflect the reality for most people.” – Regarding US economic data.
• “If prices don’t go up but go down…the best strategy would be to lose the least money when things go bad.” – On preparing for a potential market downturn.
• “The pioneers have become socialists.” – A commentary on the changing political landscape in Canada.
• “America is very good at creating enemies.” – On US foreign policy.

Technical Terms & Concepts

• M2: A measure of the money supply that includes cash, checking deposits, and savings deposits.
• GDP (Gross Domestic Product): The total value of goods and services produced within a country's borders.
• CPI (Consumer Price Index): A measure of the average change over time in the prices paid by urban consumers for a basket of consumer goods and services.
• BRICS: An acronym for Brazil, Russia, India, China, and South Africa, representing a group of emerging economies.
• Equal-Weighted S&P: An index that gives equal weight to each stock in the S&P 500, rather than weighting by market capitalization.
• Deflation: A decrease in the general price level of goods and services.
• Keynesian Economics: An economic theory advocating for government intervention to stabilize the economy.

Logical Connections

The conversation flowed logically from a general assessment of the global economic climate (starting with Thailand) to a detailed analysis of the US economy and its potential vulnerabilities. The discussion of inflation and monetary policy naturally led to concerns about geopolitical risks and the need for diversification. The final segment focused on preparing for a potential shift in market dynamics, emphasizing the importance of a defensive investment strategy.

Conclusion

The interview presented a critical perspective on the current economic landscape, challenging conventional wisdom and highlighting potential risks often overlooked in mainstream narratives. The speaker emphasized the importance of questioning official data, recognizing the limitations of government policies, and diversifying investments to protect against unforeseen economic shocks. His core message was a call for caution and preparedness in a world facing increasing uncertainty.