I Kinda Like Marc Faber
Even though he is know as Dr. Doom, usually bearish, he does talk sense most of the time. He is best known for the Gloom Boom Doom newsletter. He was a managing director at Drexel Burnham Lambert Hong Kong from the beginning of 1978 until the firm's collapse in 1990. In 1990, he set up his own business, Marc Faber Limited. Faber now resides in Thailand, though he keeps a small office in Hong Kong. Faber's company, Marc Faber Limited, acts as an investment advisor company concentrating on value investments with tremendous upside often based on contrarian investment philosophies. Faber also invests and acts as a fund manager to private wealthy clients. Faber is a regular speaker on the investment circuit, often quoted in the financial press for his non-conformist viewpoint and alternative investment philosophies.
By WSJ StaffEconomic provocateur Marc Faber joined a chorus of commentators picking on Paul Krugman’s recent state-of-economics magazine article. Krugman “thinks it would be very good to have another bubble in the world and deal with it later on". Krugman, the columnist and Nobel prize winner, has advocated a strong government stimulus and big deficits to jumpstart the economy.
Faber, a Hong Kong-based investor and author of the Gloom, Doom & Boom report, suggested Krugman’s piece, entitled “How Did Economists Get it So Wrong,” missed the mark. There wasn’t “a single word about excessive credit growth” in Krugman’s article, he said. “He should have written ‘How did I get it so wrong?’”
Faber’s view is that the collapse was due to the massive increase in credit stoked by the Federal Reserve. The Fed and academic economists such as Krugman failed to acknowledge that the borrowing boom would create economic chaos, he said.
Faber was speaking at the CLSA Asia Pacific Markets investor conference in Hong Kong. (Probably as the counterbalance after listening to Sarah Palin speak at the same conference).
Faber, is, to put it mildly, a pessimist. “You can’t find anyone more negative about the world than I am,” he said. “But stocks can still go up,” thanks to continued printing of money. He actually expects stocks overall to rise around 7% a year over the next decade, though in places like the U.S., much of that return will be eroded by inflation, brought on by the increase in the money supply.
The last few years saw the world economy in a synchronized boom, and then bust, a rare thing in economic history. Going back 200 years, capital flowed to some sectors or geographic areas, stoking bubbles, yet other places saw deflation as capital fled.
This latest bubble was different. “You have to give credit to Bernanke and Greenspan. They have achieved something no central bankers have achieved in history. They created a bubble in everything…The only asset that went down from 2002 to 2007 was the U.S. dollar.”
There was one place he said that didn’t grow in the final years of the latest bubble. That was Zimbabwe, which suffered hyperinflation and economic collapse at the hands of dictator Robert Mugabe. The African country was “run by a money printer, Mugabe, a mentor of Bernanke,” Faber said. (That's a bit harsh, I think Bernanke did well, maybe he could have just lashed at Greenspan alone). The crowd chuckled.
Faber told the audience to put money in Asian equities and commodities. He said gold is important, but buy real gold, not derivatives, and keep the gold outside the U.S. The U.S. confiscated gold during the Great Depression, he noted. He, like Warren Buffett, Nouriel Roubini and others, thinks the dollar is destined to erode, though Faber said it could rebound over the next few months as signs of deflation stick around. “The dollar in the long run is a doomed currency,” he said. “This is the short of the century…The government’s policy is to make it worthless.”
p/s photo: Misha Omar