What Marc Faber Said, and It Wasn’t Pretty…

For those of you who could not listen to the entire conference call, or for those of you who felt it was all economic blabber or difficult to follow, let me summarize what he said in somewhat of a random manner, if you don’t mind.

With every asset class in the world (asset class = type of investment – e.g. stocks, bonds, real estate, commodities) up and inflated from low interest rates, Marc expects a worldwide drop in asset prices as interest rates rise and prices “deflate.” He referred to FARMLAND as the only truly uncorrelated investment out there.

He also pointed out humorously, how Western countries tend to be arrogant about the level of education in Asian and other non-Western countries. Interestingly, he makes an analogy – let’s say, that purely statistically, let’s say there are 3 geniuses per 1,000 people in the population. The USA with 300M people, the USA would have 3,000 geniuses. China, with 1.4B people would have 14,000 geniuses – it’s purely numbers so our arrogance is foolish.

Asia, Mr Faber noted, will not be manufacturers forever. But if we keep outsourcing all of our manufacturing, then we will outsource our innovation and creativity too. Perhaps someday, American workers will be manufacturers and the work will be engineered and financed in Asia?? Wouldn’t that be odd…

Growth in Asia and the developing world in everyday items usage is enormous. As incomes rise, people want life insurance, a new home, a scooter/car, then they want a NICE car :). Singapore will be a financial center along with Shanghai (interesting, he didn’t think Hong Kong would be in the future). Asian travel “arrivals” are 3-4 times the amount of USA arrivals. And the first trip that the Chinese tend to take is to Macau, which is stealing visitors from Las Vegas (“Macau is blowing past Vegas” according to Faber).

Faber prefers gold to oil saying that the widely watched gold/oil ratio is very cheap.

As far as Asians traveling outside of Asia, he feels that European cities, which he calls “outdoor museums” will attract many visitors from travelers (See this article here).

Copper: Faber thought prices would fall, but with the cost to bring new production on line so expensive, and with the time it takes so long, he feels copper will go up or at least hold up under current infrastructure demand (electricity). Uranium, which has experienced a 50% correction, will probably also travel higher. Overall, a LACK of investment in commodities will keep prices up “forever.”

Over the next 50 years, developing growth will out pace developed country growth but geopolitical risks remain. And when it comes down to it, he trusts the assets on Exxon’s balance sheet more than what’s on Citigroups balance sheet.


So there you have it – a random thought summary of Marc Faber’s latest thinking. Looking at today’s market, I would say he’s right. It’s getting uglier by the day out there. Be careful…buy a farm maybe?? 🙂 (just kidding)

7.8.08 Editor’s addition – I just found this video discussion HERE on Bloomberg with Jim Rogers, Marc Faber, and Ken “direct mail” Fisher. Since this video is from last July, we can see who was most prescient… (click the video link on this page) Faber: “The dollar will weaken and commodities will rise”

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