Saturday, August 9, 2008 2 comments ++[ CLICK TO COMMENT ]++

Marc Faber On the Present Markets

For those interested, Bloomberg has a short interview with Marc Faber. Like anyone making macro calls, it's so easy to be wrong (how many were saying $200 oil early this year?) but Marc Faber has been mostly right so far this year. He turned bearish on industrial commodities earlier in the year and that has proven correct. He also took a totally contrarian view that the US$ may rally this year and that is starting to unfold.

Here are some notes about his thoughts:

  • Global economy in recession... Decline in oil prices is signalling a global slowdown. I totally concur and this is one reason the stock market may sell off by the end of the year. The market is rallying on weak oil prices but is ignoring the looming decline in corporate profits.
  • In relative terms, US economy better than the rest of the world. Faber says Europe and emerging markets are weaker than perceived. He isn't investing in the US but if he was forced to pick, he likes the US better than other parts of the world.
  • Still long-term bullish on commodities... Thinks they can drop 50% by the end of this year but they will start rising in the future. I find it contradictory that he says this but later, before being cut off, says he would avoid all the hot stuff from the last few years (such as steel, iron ore, etc.) So would he just avoid them in the short term or is it the end of the bull market for some of them?
  • Bullish on US$
  • Bullish on Japan... Too bad the interviewer cut him off but I am curious where he is investing in Japan. Most value investors are looking at the companies that are trading at low valuations (say, below book value) but someone more into macro investing like Marc Faber may look at different things. The thing is, I don't know what bullish macro trend is worth hitching a ride on. A lot of the trends there are very negative right now.


2 Response to Marc Faber On the Present Markets

August 10, 2008 at 2:15 PM

There's a good VIC write-up on RHJI, a holding company invested in Japan and cash, currently trading at about 50% of NAV.

August 13, 2008 at 4:26 PM

Thanks for the suggestion Dennis. I took a quick look and am going to stay away from it for the time being. It's not my game.

RHJI is a holding company that takes controlling positions. This basically means you are betting on the management/portfolio managers of the company. That's really not my style; I would rather bet on something where I don't have to trust management. This would be sort of like investing in Berkshire Hathaway.

Perhaps if the discount is 50% (I haven't confirmed that) it may be attractive but, again, you need to be sure that the portfolio managers aren't going to squander that away.

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