Monday, May 5, 2008

Marc Faber in Dallas

A friend of mine heard Marc Faber give a presentation in Dallas today. I asked him to give me his main takeaway and he was kind enough to write some detail. Below is the email he sent and said I could reproduce. (As a side note it is important to note Marc is a bear. I think that is always important in sense of context by which to digest individuals opinions)

The email below:
His main takeaway is the global boom has been driven by U.S. consumption + resi construction driven by lax monetary policy. Thinks consumption goes from ~70% of GDP back to mid 60s like it was in the early 90s (it was low 60s in early 70s).

He thinks this is all beginning to reverse to the detriment of global growth. He really poo pooed the decoupling argument. He pointed out that all past boom cycles had been limited to specific sectors, where as this boom has been global and virtually all-encompassing. Also showed lots of charts/stats on growing trade interdependence.

However, longer-term he thinks we are in the very early stages of the commodity boom. Spent a lot of time discussing inflation, the lack of new capacity, emerging market consumption, etc. He opined that the U.S. has been in recession since late October if inflation is correctly measured.

Also spent a fair amount of time discussing the strategic implications of the boom. Discussions regarding the multi-century dominance of the Western/developed countries that is beginning to reverse. Also pointed to the increasing rise of global conflict from this and over commodities.

Real interesting stuff.

One interesting stat I thought I'd share with you as you mentioned it this week. He showed a long list of commodities and noted that China was #1 or #2 consumer of all. Only one item was not #1 or #2 and it was beef - #4.

Oh, he also echoed your comments on Japan. Said that at all the conferences he attends no one goes to the Japan presentations.

Also was bullish on rising consumption in emerging markets - noted healthcare and real estate as way to play.

Very bearish on anglo-saxon real estate, pointing out UK, Australia, and New Zealand.


Justin said...

Hmm...I'm always a bit dubious about Marc Faber. I remember reading a fair bit of his material about 5 years ago, maybe 6...and he was just as bearish then as he is now. Basically he is a perma-bear in my view.

He's been calling a global recession for ever it seems, so it is not surprising if he is occasionaly right.

It's a bit like what they say about economists - they've successfuly called the last 7 out of 5 recessions.

Market Seer said...

Well that is why I made it clear in the post that he was a bear. You always need to know where someone is coming from so you discount the opinion correctly.

As a sidenote I would argue 5 or 6 years ago does not make you a perma bear. That would put you in 2001 ish and what he has been saying is that the great bull market from 1982 is over. Just like you had a bear market from the late 1960s to 1982 I think he would argue that we are in another bear market for another 10 years or so. That doesn't mean the markets can't go up 20% in a year. What that means is that over a long period stocks are a sorry investment. You can see that over the last 10 years. Cash has outperformed equities. Inflation adjusted stocks are down. In the 1970s stocks lost like 80% of thier value adjusted for inflation though stocks were only down slightly in absolute dollar termns.

I do agree that you do need to discount what he says. But I would argue on US equities he really hasn't been wrong for the past 5 to 6 years. In general I like Marc Faber alot less than other well known bears such as Jeremy Grantham or even Jim Rogers.

Justin said...

True you did point out he was a bear and it's correct that you should always have an idea of where a point of view is coming from so that you have reference poiint with which to assess an opinion.

I only went as far back as 5/6 years as prior to that I was too interested in beer and girls to pay attention to anything Marc Faber had to say!

Still, if you had followed his advice, you would have missed a fairly substantial bull market from 2001 to 2007. I guess it depends on what your time frame is - you can be bearish within a bull market at times and vice versa, but I still think he is a bit too negative. Agree with you on Jeremy Grantham, his April newsletter was a great read.

Market Seer said...

Maybe. You can be bearish on the US markets and they go up and not be wrong. What I mean by that is that he has been very bullish on commodities and certain foreign equities (so not just a perma bear in everything) and has been very right relative to the U.S. market. So my take is if you would have followed his advice you would have pretty darn good returns. Like I said earlier I am not a huge Marc Faber fan but in general my opinion, which isn't worth much, is that he has been pretty right on in the last decade even if you would have lost money outright shorting the U.S. equity market. On an inflation adjusted basis the returns are just plain weak.

OIAWWP said...

I've studied everything Marc Faber and Jim Rogers has said, and they are very seldom wrong. Dr. Faber isn't wrong with the market if you use gold as a currency.