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[Frank Pembleton]

"Dr Doom" urges invest in China, commods boom
Reuters, 10.09.02, 1:54 PM ET

By Alden Bentley

LONDON, Oct 9 (Reuters) - If you are gloomy about the planet's long-term economic outlook and are seeking the most profitable place to hide for the next decade, your safest bet is probably a condo in China, according to the contrarian investment advisor Marc Faber.

Speaking at a seminar of metals industry professionals sponsored by commodities house Man Financial Ltd, Hong Kong-based Faber, who is also known as Dr Doom, also said commodities from agricultural goods to metals were poised for long bull market, along with other real assets like property.

The persuasive and pony-tailed Swiss-born economist, who writes the Gloom, Doom and Boom report, made the perhaps counterintuitive argument that commodity prices could soar over the next decade even if the overall economy remains weak, citing the rally in cocoa prices this year to 16-year highs after bottoming at multi-decade lows about two years ago.

"I would try to avoid financial assets and focus on commodities which have been in a bear market for more than 20 years," Faber told traders and industry executives from around the world gathered for the London Metal Exchange's annual LME Dinner Week.

He predicted "huge" appreciation in precious metals, suggesting buying gold and gold company shares, along with other commodities.

The economic slump in place since the runaway bull market collapsed in 2000 is just an appetizer for the real recession, which comes next year, Faber predicted.

A credit bubble in the United States and Europe will probably end badly, with a loss of confidence in real money. This will make assets you can physically hold and touch among the only outlets for investors.

"Whenever you have a bubble -- gold, oil and commodities in 1980, the Japanese market in 1990 and the NASDAQ in 2000 -- and the bubble bursts, there is always afterward a change in leadership," Faber said of sector performance.

Europe's banks look terrible and Asian economies are still staggering from competition from China.

The dollar looks weak but a vulnerable euro and Japanese yen may keep it from depreciating too much, he said.

China, with its 1.3 billion population is just beginning to climb the development curve, although it is apparent when looking at its newly-booming modern cities that its economic development over the last 10 years as been dramatic.

Faber said the window of opportunity is relatively short because global trends toward instant communication and rapid transportation have accelerated the speed of change.

"I think it is quite likely that China will be the workshop of the world," Faber said.

As a result China will become one of the major users of raw materials.

By contrast, in India, the world's second most populous nation, bureaucracy is so "horrible" that it is an impediment to economic development, he said.

http://www.forbes.com/newswire/2002/10/09/rtr745814.html