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MW: 'Dr. Doom' has dollar on death watch, global farmland healthy

GLOBAL INVESTOR

'Doom and Gloom' has just begun
Bearish newsletter editor finds little cheer in most assets

By Barbara Kollmeyer, MarketWatch
Last update: 10:51 p.m. EST March 7, 2008

LOS ANGELES (MarketWatch) -- "Dr. Doom" sure is living up to his name these days.

Speaking to a packed room of financial planners here on Friday, the famed money manager and newsletter editor Mark Faber literally brought down the house with talk of a worthless dollar, a helpless U.S. central bank and a dire situation in which investors have just a few avenues left to turn to.

"We may now have a hostile environment for all asset classes, with the exception of some real estate and commodities," said the editor of The Gloom, Doom and Boom Report, pointing out that since 2002 all asset classes have been rising -- a phenomenon that hasn't been seen for 200 years.

"The current synchronized global economic boom and universal all-encompassing asset bubble will lead to a colossal bust," he said.

Financial markets, currently in the grips of a credit bubble that worsens by the day, will see a protracted period of high volatility, in which 20% movements either up or down become common and the chances of making a lot of money become very difficult, he said.

He heaps much of the blame for global troubles on years of expansionary U.S. monetary policy that had a flawed fixation on U.S. consumption rather than boosting capital infrastructure and spending. Federal Reserve Chairman Ben Bernanke and his colleagues are clearly backed into a corner now as they cannot tighten money policy without causing a collapse of the entire financial system, he said.

"Easy money and debt growth has had a diminishing aspect on U.S. economic growth -- 'zero hour' may have already arrived," Faber said, adding that he thinks the U.S. is in the throes of recession and has been there for the past four to five months.

Indeed gloomy nonfarm payroll data for February further routed U.S. financial markets Friday, convincing many that recession had arrived. See Economic Report.

From bearish to deep in the woods

Faber was spouting his gloomy philosophy a year ago when in an interview with Time magazine he predicted all assets were in danger owing to easy monetary policy in the U.S. and elsewhere, with investors getting too used to constantly rising asset prices across the board. "I believe we're in the midst of the greatest asset bubble ever," said Faber in the January 2007 article.

Fast-forward to the present and you can't blame some of that "I told you so" from Faber. Indeed, credit markets have been routed and financial markets have seesawed since late October, with some notable bubbles in Asia and elsewhere last year. And he said he's not seeing enough bears out there, with investors still too optimistic.

"Before October, everyone was bullish -- rushing into assets and out of cash. Then...over the last three to six months, people went to buy the rallies. Sentiment is not that bearish. The mood has stayed optimistic and asset markets are still vulnerable," he said.
Nowhere was he bleaker than when addressing the beaten-down dollar, another victim of Fed policy which he said has ensured cash returns below the rate of inflation. "In the long term, the dollar is a doomed currency. It will go to zero," he said, which produced some nervous laughter from the audience.

Bright spots in emerging markets, commodities
Where he does see some options for investors is in some corners of emerging markets, noting that he believes the Chinese yuan could double in value in the next five years or so, which will raise the value of many emerging Asian currencies at the same time.

The Asian property market is also favorable in the long run, given low levels of urbanization and low levels of mortgage debt. He said fears that a Chinese property bubble are on the horizon are overblown given that home prices have gone down as a percentage of gross domestic product and as a percentage of household income.

Among his other emerging Asian investment themes: real estate; health care, such as pharmaceuticals and hospital management; local brands, which could replace international brands; and commodities such as sugar and cotton. Tourism is another big theme that he likes for the Asian markets, including hotels, casinos and airports, along with financial services such as banks, insurances companies and brokers. Infrastructure is also a key theme, with "bottlenecks everywhere," he said.

He is also keen on Cambodia, which he describes as having a relatively open economy, with a regulatory framework and government commitment to attract foreign direct investment.

He said the country's young population, strategic location, abundant natural resources and exceptional access to trade privileges make it an attractive investment locale for light industry and agricultural businesses.

With the world population growing, especially in emerging markets, arable farmland will become an increasingly pricey commodity. He highlights First Farms, a Danish company founded by a group of farmers whose land was bought up by developers; Ukraine-based Landkom International and Astarta; and Black Earth Farming, a Swedish-run company that invests in Russian farmland and has an initial public offering forthcoming.

Other commodities worth a look: sugar cane in Brazil, palm oil in Indonesia or vegetables in China.
Barbara Kollmeyer is an editor for MarketWatch in Los Angeles.

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