Thursday, March 16, 2006

Gloom, Boom and Doom from Marc Faber

What's the worst possible investment you could make today?

It's to buy and hold a 30-year U.S. Treasury bond, according to economist Dr. Marc Faber of the Gloom, Boom & Doom Report in his Mar. 16 presentation to the Boston Security Analysts Society on "Investing in a world of rapidly changing global and economic trends."

Many of the best investment opportunities lie in Asia or will be driven by Asian -- especially Chinese and Indian -- economic growth, said Faber. These include:
  • Real estate in India, Vietnam and eventually China; "one day a Shanghai luxury condominium could be worth more than one in New York City or Boston"
  • Asian airports
  • Emerging and Asian (ex-Japan) stock markets, especially India, which is "becoming an asset class"
  • Equities in general vs. bonds
  • Commodities, especially farm products (because their prices are at 200-year lows relative to energy prices) and gold, which is relatively cheap vs. inflation
  • Equities in Europe, where valuations are attractive and wages are under pressure from central and eastern Europe
Some other interesting comments by Faber:
  • If Russia's president, Putin, were a hedge fund manager, he'd cut oil production in half and prices would double
  • Emerging market countries that produce commodities are in a sweet spot
  • When commodity prices rise, international tensions rise and eventually lead to war in a cycle that has historically run 25-60 years
  • U.S. GDP growth is of poor quality because it has been driven by credit expansion more than capital spending; this contrasts with China where capital spending is strong
Want to get more of Dr. Faber's flavor? Check out "Much Noise in the US--But Little Action."



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