The Illusion of Progress by Anthony Deden is the best economic essay that I have read in recent times.
Discussing the early phase of the capitalistic system during the Industrial Revolution, Deden writes that, “Behind these visible achievements lay an invisible order. Enterprise rested on saving; saving depended on restraint. Honest money was scarce, redeemable, and real. It connected effort to reward and production to value. The world was built by those who produced before they consumed. Yet, by the early twentieth century, this older meaning of progress - rooted in work, discipline, and the tangible improvement of life - was already beginning to fade. The moral foundations that once joined virtue to growth began to erode.
In the early industrial order, money and goods moved together. The banker was the steward of accumulated savings, and the stock exchange was a meeting place between the thrifty and the enterprising. Investment was a form of partnership between labor, invention, and capital. But as the century advanced, finance detached itself from its material foundations. Paper claims multiplied far beyond the stock of tangible goods. The abstraction that had once facilitated trade began to define it.
Thus, the illusion took form. Finance, which had begun as the servant of production, became its master.”
MF: If we look at the US stock market capitalization as a percent of GDP, we can clearly see that from 1925 onwards, until 1998, the US stock market capitalization never exceeded 100% of GDP. But since 2021, the US market cap has regularly exceeded 200%. It should be clear that a market decline of 20% would have less of an impact on the real economy when the market cap as a percentage of GDP is less than 30% as was the case for most of the 1970s, than when the market cap is more than 200% of the economy as is the case now.
Another pertinent yet barely discussed feature of the ongoing financialization is that assets including financial assets become expensive relative to wages. In the sixties and seventies, workers could buy an S&P 500 Index with less than 30 hours of work. Nowadays, US workers would have to work for more than 200 hours to buy an S&P 500 Index. Under these circumstances I would argue that assets such as the S&P 500 are grossly inflated relative to workers’ wages, which have declined in real terms (inflation-adjusted) through the colossal monetary inflation and expanding fiscal deficits we had.
As an investor I am constantly looking for profit opportunities, and for 2026, I expect the following.
Outperformance of European and emerging markets versus the US (as was the case in 2025).
My preferred markets are:
Indochina: Thailand, Indonesia, Malaysia, Vietnam.
Latin America: Brazil, Chile, Colombia.
Preferred Sectors: Food, Real Estate, Banking.
Preferred Asset Class: Precious Metals (especially platinum), Cash, Government Bonds.
I still maintain my property exposure in Hong Kong, and my substantial REITs portfolio, which I like for its yield and for an expected recovery in real estate prices and rents.
Thailand, property and related stocks are depressed and offer investors a favorable investment opportunity. My favorites include Land and House, Quality Houses Public Company, Home Product Center, and TOA Paint.
In Thailand I also like the banks including: TMBThanachart (TTB TB), Krung Thai (KTB TB), Kiatnakin (KKP TB), Kasikornbank (KBANK TB), Bangkok Bank (BBL TB), SCB X (SCB TB – former Siam Commercial Bank), Thanachart (TCAP TB), and TISCO Financial (TISCO TB).
I like my investments in Thailand because the country is regarded as a failed state, and therefore, foreign investors are largely absent from its stock market. The high dividends Thai companies are paying is advantageous for a portfolio’s total returns.
Precious metals remain my favorite asset class (especially platinum) under current conditions. The allocation of investors to precious metals is small and is likely to increase over the next few years As I explained in earlier reports, I hold gold as an insurance against a collapse of financial and other assets.
This month, I had the pleasure of hosting Jan Baltensweiler, of VON GREYERZ AG, Zurich, at my home. During our discussion, Jan described various ongoing gold-related developments across Asia, which drew my attention. His contribution is enclosed with this report.
Like every year, my readers and I support various charities. My friend Barry Hoffner, the founder of Caravan to Classes was kind enough to send me the enclosed letter, which I am enclosing.
The charity, which I like the most is here in Chiang Mai, is run by my friend Paul Daniels (paul-daniels@hotmail.com). Our contributions allow the children of an orphanage to eat decent food.
We wish our readers Merry Christmas and a Happy New Year.
Yours sincerely
Marc Faber
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