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Faber

Dr Doom upbeat on properties and commodities

Marc Faber, who told investors to bail out of US stocks a week before the 1987 Black Monday crash and began recommending commodities at the end of 2001, forecasts property prices in Asia will rise.

Thursday, January 12, 2006

Marc Faber, who told investors to bail out of US stocks a week before the 1987 Black Monday crash and began recommending commodities at the end of 2001, forecasts property prices in Asia will rise.
Faber, author of a monthly newsletter called The Gloom, Boom & Doom Report, said that migration of people will boost the value of land and homes in cities.

"When you look at asset classes, given the demographics in Asia and urbanization in the long run, I'm quite sure property prices will rise," said Faber, the founder of Hong Kong- based Marc Faber, which manages about US$150 million (HK$1.1 billion).

The Bloomberg Asia Pacific Real Estate Index, which includes stocks of homebuilders from Japan to Singapore, rose 26 percent in 2005. That compared with a 35 percent gain in the Bloomberg US Real Estate Index.

In the United States, some investors and analysts are concerned a decline in housing prices might lead to a collapse in the stock market. Chief equity strategist Barry James of Xenia, Ohio-based James Investment Research forecast that major equity indexes will plunge up to 20 percent in the following 12 months as home prices decline and erode the wealth of homeowners.

Faber is also focusing on Asian stock markets and on commodity- related stocks that are likely to rise on demand for materials and energy from China, which is building up Beijing for the 2008 Summer Olympics.

"The stocks I recommend usually I also take a position in, whether it's long or short," said Faber. "There is a speculative element to everything in the present time. We live in a world of inflated assets."

Companies in Thailand that provided a high dividend yield, or the ratio of dividend payout for the most-recent 12 months to the current stock price, included Thai Reinsurance and Thai Union Frozen Products. Thai Reinsurance had a 7 percent yield as of January 6 and Thai Union Frozen Products yielded 4.7 percent. Both companies are based in Bangkok. "I happen to like to buy high-dividend- yielding stocks," Faber said. "There are not many left."

Gold has risen 97 percent to US$545.47 an ounce and crude oil futures in New York more than tripled since the end of 2001, when Faber began recommending investment in commodities. By comparison, the S&P Index rose 12 percent.

US stocks are overvalued, Faber said, while prices for gold and oil are set to jump due to soaring demand for these commodities in China and India. "I'm not saying that everything I've done in my life was right - quite on the contrary," Faber said.

He remained bearish following the 1987 crash as investors raked in winnings. "Having said that, I think there were frequent opportunities outside the United States," he said.

Faber has worked in Asia for more than 30 years.

He makes his prognostications on investments based partly on his view of economic cycles.

Dramatic commodity bull markets all originated after extended bear markets, Faber said. Gold prices soared more than 20-fold and oil rose eightfold from 1970 to 1980, a decade followed by a more-than-20-year bear market. In the current bull run, major indexes such as the Reuters/Jefferies CRB Futures Price Index may be driven higher by commodities such as grains that have not risen, he said.

"I would argue the CRB index will outperform the Dow over the next 10 years," said Faber, who sits on the advisory board of Credit Suisse Asset Management.

The CRB index rose to a record 340.65 on January 6. The index, which tracks 19 commodities including gold, oil and sugar, gained 17 percent last year.

Commodity investments may increase by 38 percent this year to US$110 billion as pension funds and other money managers diversify from stocks and bonds, according to London- based Barclays Capital.

"There's a better understanding among investors that by having exposure to commodities they can offset losses of other assets in their portfolios," Kevin Norrish, a director of commodities research for Barclays Capital, said. Fund managers are still "underexposed" to commodities, he said.

The amount of money in funds tracking commodity indexes increased last year by between US$25 billion and US$30 billion to as much as US$80 billion, Barclays Capital said. BLOOMBERG