Investment Nuggets

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One of the savviest observers of trends across different asset classes in the global markets,

Marc Faber

is an interviewer's delight. In June 1990, after serving as Managing Director of Drexel Burnham Lambert (HK), he set up his own business, Marc Faber Ltd, which acts as an investment advisor and fund manager. Dr Faber publishes a widely read monthly investment newsletter

The Gloom Boom & Doom Report

report, which highlights unusual investment opportunities. He is also the author of several books including the highly acclaimed

Tomorrow's Gold Asia's Age of Discovery

, first published in 2002. This book highlighted the future investment opportunities around the world. Apart from being a prolific contributor to financial publications, he is also a regular speaker at various investment seminars across the globe, articulating his `contrarian' investment approach. In the past, he has been a scathing critic of the monetary policy of the US.

"In the next few months, we could get a severe correction in all asset markets. In a selling panic you should buy, but in the buying mania that we have now the wisest course of action is to liquidate. I am not a great buyer of assets now. We may be in a situation where consumer-price inflation comes back and will have a negative impact on the valuation of assets."

"First of all, I think it is unfortunate that in the last 10-20 years, the world has kind of moved to the American soul. That is if you ease monetary conditions, if you print money, you can solve all the problems of the world. If that was mainly true, Latin America would have become the richest continent on earth simply because they have been masters at printing money and at creating at the result of that hyperinflation. By printing money, you don't generate economic growth. Temporarily, you can generate continuation of spending patterns."

"In the American school, the downturn is postponed through monetary measure. In other words, the capacity that never gets cut back, because if you ease massively, you don't create an environment of the survival of the fittest, but you create an environment of the survival of the weakest. Even the weak market participants, continue to produce, especially if they go into Chapter 11, because then they don't have to pay any debt payments, and therefore, they can undercut the other. That is why the American school, in my opinion, in the current situation, has policies that will then lead to a prolonged recession at the later stage."

"As an investor, you need to buy a post office scale. When all the reports on a stock or sector are light, it means 'buy'. Conversely, when the weekly reports you receive on an industry add to several kilos then 'sell'! So, after all, brokerage research does have a very useful function but not through its content but weight."

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(This article was published in the Business Line print edition dated March 4, 2007)
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