Wednesday, September 17, 2008

Marc Faber Latest Views On Commodities, US Dollar And Emerging Markets

Still keeping faith, like Jim Rogers ( see Crude Oil Bubble Burst? Commodities Guru Jim Rogers Is Still Keeping The Faith! ), that the commodities will bounce back?

Here's an interesting article on what Dr. Marc Faber has to say.
New highs in commodities won't happen anytime soon, says Marc Faber

  • INTERNATIONAL. Marc Faber, Editor and Publisher of 'The Gloom, Boom & Doom Report’ feels that commodities may not see a new high for many years.

    In an exclusive interview for India's CNBC-TV18, Faber said: "We had a contraction of global liquidity ongoing for over a year and not everything falls at the same time. So as equities began to decline last November, commodities still continued to rise and dollar continued to fall. Now commodities and material stocks like steel companies have started to come down. It is like a domino where one asset class tumbles after the other.

    Over the last six weeks or so, the dollar has been very strong and commodities have been weakening including gold. Some foreign currencies have been very weak like the New Zealand dollar, Australian dollar, euro, pound sterling. Now the dollar is overbought, the S&P 500 and commodities are oversold and we can have a counter trend rally. In other words, the S&P 500 can recover 100-points or so and the dollar could correct here from 1.40 against the euro to 1.50. The pound could rebound the Australian dollar, New Zealand dollar. At the same time, we can have rally in commodities but new highs in commodities won’t happen anytime soon.

    The contraction of liquidity in the world will continue. We will need a base building period around this level before we start recovering in asset markets or at worst we will have another major slide in 2009, 2010."

    "The S&P 500 could recover 100 points," Faber said. The dollar may correct from here, he feels. It could correct from 1.40 to 1.50 against the euro, he said.

    According to Faber, new highs in commodities are unlikely anytime soon.

    One needs to see base building before asset markets recover. The market seems to have discounted recession, Faber added.
    Reflecting on the link between the dollar and commodities, Faber said: "It is not the dollar that moves commodities but commodity prices move the dollar. I am not saying that the dollar isn’t going to move higher over the next six-nine months. That could be the case if global liquidity tightens and if US trade and current account deficit contract then you will have dollar strengths for the next six-nine months. For the next ten days, US dollar will weaken."

    Asked about his opinion of India's future, Faber said: "When index in India went to over 20,000, we clearly had a bubble and strong earnings. That is de-accelerating but this is not the view of the managers who manage India funds, they are all very bullish. So, this is my view but prices are quite vulnerable on the downside in all emerging markets."