Marc Faber is the guru of modern day investing if you might call it and his opinion on markets, currencies and economies are meticulously heard, analyzed and implemented all over the globe. In 1987 he warned his clients to cash out before Black Monday on Wall Street. He piquantly forecasted the burst in the Japanese Bubble in 1990.This was before the Nikkei from 40,000 odd lost 75% in value plummeting to 10,000 in about a decade and a half. He correctly predicted the collapse in US gaming stocks in 1993; foresaw the Asia-Pacific financial crisis of 1997/98 and the resulting global volatility. Currently Marc is bullish on Gold, Silver, Metals, Coffee, Orange juice, Sugar. His greatest bet in recent times has been on crude. When crude was in an over supply zone hovering around US $ 12 he ventured out to be a bull. Now well over US $70 per barrel Marc feels crude is still far away from the top.

Born in Switzerland and educated in Geneva and Zurich , Dr. Marc Faber received his PhD in Economics from the University of Zurich at age 24. The former managing director at Drexel Burnham Lambert from 1978-1990 has been living in Hong Kong for the past two decades. Essentially a contrarian Investor Faber is known more for his broad macro calls rather then his individual stock picking skills. Faber's Investing logic is based on the premise that everything that goes up must come down and vice versa.

Faber opines that >when ever an economy has high dependence on a single commodity the business cycle will correlate very closely to the movement of that commodity. He pioneered the “ Life Cycle theory of Emerging markets” The theory provides an intellectual framework for emerging markets with symptoms and characteristics for each phase. Investors following this theory can develop entry and exit points from emerging markets.

Faber states that it is much easier to pick bottoms then to judge market tops. Tops are usually formed with spikes and no one knows when the bubble will  burst but the bottom is a long extended period of side ways movement. Foreigners do not buy at the bottom or during times of economic depression. They usually buy when things appear bright and robust. A classic case in point is Argentina . He writes “ When I visited Argentina in 1988, I was truly amazed: total market capitalization was only around US$750 million and daily volume on the Buenos Aires stock exchange averaged less than US$ 1 million. A high quality baby-feed steak cost US$5, a luxury apartment US$70,000 and an entire office block in a prime location US$1million! That was when inflation stood at about 600% per annum. But what was the situation a few years later, in 1994, when Argentina 's inflation had been curbed to less than 10%? Everything had become dear and Buenos Aires was once again as it had been in the 70s- one of the world's most expensive cities.

Faber talks of the buying opportunity in Germany during the early part of the last century. He narrates “The first great buying opportunity occurred in February 1920 when the US Dollar index of German shares sold for as a little as 8.47 (1913=100). Within five months, the index doubled in Dollar terms, largely because the Mark appreciated briefly but sharply”. Faber states that while the Index continued to maintain itself till the summer of 1922 it plunged rapidly as currency depreciation exceeded the rise in local currency stock prices by a wide margin. He continues to add “ The enormous relative drop in share prices (down over 97% in Dollar terms) created some odd situations. Daimler, one of Germany's largest and most profitable companies, had share capital of less than 980 million paper marks. Since one of its cars cost three million marks on average at that time, the stock market valued the entire Daimler Company at the equivalent of only 327 cars. Similarly, the market capitalization of the sixteen great Tietz shops equaled the price of just 16,000 suits.

The incredible under valuation of Russian assets in 1993/94 also becomes evident if one looked at the market caps of individual companies in 1994: Surgutneftegaz (the largest oil company in Russia ), which produces about 2% of world oil output, was privatized in 1993 had a market cap of only US$170 million in early 1994! Uralmash and Permsky Motors, each of which employed over 30,000 people, were valued at US$7 million and US$4 Million respectively. Gum Department Stores, a leading retailer in Moscow (Its main store, which it leases, is right next to the Kremlin, but it owns freehold another 15 stores in Moscow ), was valued at a meager US$24 Million.

Although he likes the technology and generic pharmaceutical industries in India he states that the Indian markets are over valued and may go up in the shorter term. His message to Indian investors is that “you will get a chance to pick up Indian Stocks for a lower price in 3 to 4 years then what you would have to today.

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