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Mix-Ansicht- Marc Faber foresees commodity price inflation (Artikel + Interview) - Cosa, 28.05.2002, 10:17
Marc Faber foresees commodity price inflation (Artikel + Interview)
The world's attention was focused on South Asia all through the week as India and Pakistan exchanged fire across the Line of Control. Several world leaders tried to use diplomacy to calm the increasingly tense situation. During such times, the theory of gloom usually comes back into focus and the question arises whether India is a good place to invest any more?
Looking at the recovery signs in the United States, analysts say maybe money will not flow into this region anymore. So it is the best time to analyse the theory of the master of gloom and doom Dr Marc Faber, who had made some strong projections six months ago.
"The valuations in India, in Southeast Asia including South Korea, Taiwan and in even in some cases in Japan are relatively low. In the US the valuations are still very high so I would say relatively speaking the markets of Asia do look attractive. The US market may still continue to rally after the present time but it is not an attractive market from a fundamental point of view," Dr Marc Faber told NDTV in November 2001.
Dr Faber had advised investors to stay away from the US equity markets and instead turn their attention to commodities and emerging markets like Korea. Today, his projections look more than real as far as commodities are concerned.
Oil has gained more then 8 dollars in the current year. Gold has moved up by 43 dollars an ounce while copper has gained more then 15 per cent in the past six months.
The flight of capital to emerging markets is under way. In South Korea, the markets have gone up by 33 per cent according to the MSCI index.
Russia is up 32 per cent on the new finds of oil and entry of global players into the markets while commodity prices have helped South Africa gain 31 per cent.
India, however, seems to have received much less money than these markets - equities have moved up by only 4 per cent.
The US economy is showing some strong signs of a recovery. Growth in retail sales, which is a crucial indicator of consumer spending, is now in the positive. It touched a whopping $300 billion in April.
Manufacturing output, a benchmark of production activity, which had dipped to half is now up to a three-month high.
But over the past six months in the American stock markets, the Dow Jones has grown by about 3 per cent while the tech bellwether NASDAQ has actually dipped by nearly 15 per cent.
Almost each of Dr Faber's projections which looked unreal six months ago are beginning to look real now. But will the gloom theory of Dr Faber sustain at a time when South Asia is witnessing one of the worst political situations ever? Will the recovery in the United States falter and help divert money to other areas?
<FONT color=navy><A name="interview">NDTV</a> spoke to Dr Marc Faber, an investment expert, to know why the projections he made in November last year are coming true.</FONT>
</DIV><DIV align=justify> Do you think the signs of recovery being seen in the US economy would translate into a period of sustained boom?
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</DIV><DIV align=justify>Marc Faber: I think we have an artificial recovery where consumption has been holding up due to very aggressive monetary policies and very aggressive easing of interest rates in 2001. I think that by the end of this year consumption will slow down again, simply because interest rates will rise. It is only a matter of time before we have an aftershock in the global economy. What is now happening is that the marketplace, especially the international investors, are beginning to smell that the Fed will just print more money and therefore the dollar has begun to weaken. What we have also seen over the last couple of months is a flight of capital from financial assets into real assets. In other words, real estate has been firmly rising and also gold and silver prices have been rising. So I feel that actually commodity prices will outperform equities in the near future.
</DIV><DIV align=justify> Commodities seem to be the area of your choice especially gold. Do you think that the bull run that we have seen will continue in the coming months?
</DIV><DIV align=justify>Marc Faber: Gold and silver are extremely cheap by historical standards. But obviously after the current move, some profit taking will set in at some point. We have more and more paper money per unit of gold and therefore at some stage the gold price will be much higher than it is today. The only thing is that some profit-taking is likely to take place in about the next two to three weeks.
</DIV><DIV align=justify> Oil, another crucial commodity that everyone is looking at, is dependent on the political situation in various parts of the world. What's your outlook on that?
</DIV><DIV align=justify>Marc Faber: Well I think that there are two theories. First, many people believe that we are now in a global economic recovery - in other words the global healing phase where America grows, the European and Asian economies recover, Japan recovers. If we have synchronised growth around the world, then obviously commodity prices will go up especially industrial commodity prices - oil, cotton, rubber, lead, zinc and copper etc. If we don?t have the global economic recovery, as I suggested we have renewed weakness in the US economy, then I think the central bankers will print money and in result you will get inflation in commodity prices.
</DIV><DIV align=justify> Asia has seen some really strong growth in markets like Korea. But going ahead there are questions being raised. What is your outlook today?
</DIV><DIV align=justify>Marc Faber: I think that in the year 2001, a major shift in the investment scene occurred. Whereas in the 1990s the US markets outperformed the emerging markets by a wide margin, starting from here (2001) the emerging markets especially the resource rich countries like Russia, Brazil, Indonesia, Malaysia and to some extent the Philippines will outperform the US.
</DIV><DIV align=justify> In India, a lot of questions are being raised given the situation with our neighbour Pakistan. Despite some good triggers like privatisation, not every one is really confident of equity. Do your really see the situation as being bullish for India?
</DIV><DIV align=justify>Marc Faber: My feeling is that the government has woken up to the fact that privatisation would be good and that reforms in the real estate markets would be desirable. So I really feel that something is happening fundamentally which is very sound and attractive for the holders of equity.
</DIV><DIV align=justify> When do you really see that money which you mention is stuck in savings to really translate into equity and flow into the share markets?
</DIV><DIV align=justify>Marc Faber: I think this is correct that a lot of money is flowing into deposits. But at the same time it is the latent purchasing power for the stock markets and I think compared to the other markets in the world, India is inexpensive. Of course, we now have the potential threat of a war with Pakistan which will lead to some profit taking but in due course Indian stocks will be much higher than they are now.
</DIV><DIV align=justify> The big question after the growth of IT was whether India would be a growth story or a value story. Do you have any particular stand on that?
</DIV><DIV align=justify>Marc Faber: Yes, I think that this sector is probably more attractive than the hi-tech sector. I think now in India there is also the potential for consumer stocks to do well.
</DIV><DIV align=justify> What are the larger trends that you view for the world economy over the coming months?
</DIV><DIV align=justify>Marc Faber: Well the major thing in my opinion is that inflation has been declining in the world for the last 20 years (essentially since 1980). Now that the rate of inflation is bottoming out, we will get some commodity price inflation over the next 12 to 24 months. </DIV>
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