Marc Faber Bullish on Agriculture, Natural Gas, Indian Banks & Real Estate

Monday, December 21st, 2009

The following are highlights from part two of the three-part interview Dr. Marc Faber did on Indian television channel, December 19, 2009.

Dollar & Gold

The dollar has been weak, but in Europe, the ECB is also a money printer.  The euro has many problems as well as other currencies that have strenthened against the dollar.  This is one factor supporting the price of gold even though dollar has rallied.

Globally, we have about $7 trillion in foreign exchange reserves, up from one trillion in 1996, but the price of gold has not gone up seven times over that period of time.

Asian central banks, including Japan, hold 70% of the world’s foreign exchange reserve with less than 2% of their reserves in gold.  So, a lot of central banks will likely follow the Reserve Bank of India shifting some money into gold further supporting gold.

Key Bullish Commodities

Faber remains “very positive” about sugar, but believes there are two commodities right now that stand out in terms of being “incredibly depressed”:

1. Wheat - at its 200 years low, real inflation adjusted
2. Natural gas - “very cheap” right now

Though it is not very easy for individual investors to play in these commodities, Faber recommends essentially looking at all agriculture commodities. which have all come down, but not rallied as much as industrial commodities, such as copper and oil.

Best Way to Invest in India

The banks in the West are mostly over-leveraged with huge exposure in the residential and commercial real estate sectors.  In contrast, the Indian banks are “relatively sound”, as they did not play in the speculative CDO or the mortgage backed securities markets. With 700 million population and growing, India represents a hugh opportunity for the well-run banks.

Faber likes real estate in emerging economies, Asia and particularly, India. With an accelerated nation urbanization, and far less leverage, Faber sees a big opportunity in Indian real estate sector in the long run.

Note: Bloomberg reported that in a separate interview, Faber indicated Indian stocks could have a correction of 20% to 30% due to valuation.  Nevertheless, he remains upbeat about the long-term potential for India “because of the domestic consumption play.”  Banks, infrastructure and mining stocks are among sectors he favors.

Part 1:

Part 2:

Part 3:

Source: Indian TV via YouTube (here, here and here), December 19, 2009.

Tags: Agriculture Commodities, Asian Central Banks, Bank Of India, Cdo, Commercial Real Estate, Commodities, Dr Marc Faber, Emerging Economies, Emerging Markets, Exchange Reserve, Foreign Exchange Reserves, Gold, Gold Commodities, India, Indian Banks, Indian Television, Individual Investors, Industrial Commodities, Mortgage Backed Securities, oil, Price Of Gold, Real Estate Sectors, Reserve Bank Of India, Securities Markets, Television Channel, Well Run
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Hugh Hendry: Commodities Stocks to Remain Weak?

Tuesday, December 16th, 2008

Hugh Hendry, the eloquent and outspoken CIO, Eclectica Asset Management, in an appearance on CNBC’s PowerLunch (Dec. 10) shares his thoughts on agriculture commodities stocks such as Potash, and Syngenta.

Among other things, Hendry makes a forthright confession that he was wrong earlier this year to make the call to be long commodities stocks. He continues on to say that when he realized he was wrong, he promptly sold them too. Hendry runs a long-only Agriculture fund, as well as his primary hedge fund, and has been controversial in some of his choices to oppose his funds’  mandates at times in favour of cash or government securities.

His main quid pro quo is his caution that although commodity stocks  could revisit highs, we could be waiting as many as 10 years for it. Its a must watch.

In a 7-minute segment earlier the same day, Hendry discussed the idea that as the financial crisis deepens, civil liberties are curtailed by governments eager to put an end to falls in share prices and economies. This is an insightful discussion, a must-watch.

“The government has gone to war, it is an economic war. And in a war the government takes a larger and larger role in the society. That’s fine, you have to accept that,” Hendry said. “What is concerning is the erosion of civil liberties.”

The ban on short-selling financial securities in the UK is one example of erosion of civil liberties, another is a statement made in parliament last week which opens the way to silencing the press during financial crises.

The Treasury Select Committee said that it will look at the role of the media in financial stability and whether financial journalists “should operate under any form of reporting restrictions during banking crises”.

“We’re only a year into this and suddenly, already, our liberties are being brought back, brought in,” Hendry said.

Tags: 10 Years, Agriculture Commodities, Array, Asset Management, Caution, Choices, Civil Liberties, Cnbc, Commodity Stocks, Confession, Economic War, Erosion, Favour, Financial Crises, Financial Crisis, Financial Journalists, Financial Securities, Financial Stability, government securities, Hedge Fund, Hugh Hendry, Mandates, Minute Segment, Potash, Powerlunch, Role Of The Media, Share Prices, Syngenta, Treasury Select Committee
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How Solid are the BRICs? (Part 1)

Tuesday, January 15th, 2008

According to IMF research, about 50% of global GDP growth now originates from BRIC countries. Incremental growth in demand for oil by India and China is driving the price of crude higher. Same for food prices. This is great for oil producers and agriculture commodities and stocks.

It may also prove to be beneficial as a needed and market driven cooling mechanism for higher-than-expected growth in the BRIC (Brazil, Russia, India, China) and other emerging markets, which are driving the average higher for world economic growth. Just how solid are the BRICs?

As BCA points out in The Oil Tax, higher oil prices have the same effect as rising “taxes” (globally), an organic form of economic tightening and will dampen the hopes of central banks as they move to stimulate the world economy with interest rate cuts. If oil prices continue higher, central banks will have to become more aggressive in order to stimulate economic growth. This is the problem in industrialized countries, but NOT in emerging markets.

As we pointed out in Rx for China, a US recession may be just what the doctor ordered, in the form of an “imported soft landing”. China, for example, has been trying to tame growth for years with their own monetary tightening. Rising oil prices, which are an economic dampener for industrialized net oil-consuming countries, may provide the cooling of growth that emerging countries have been wanting to achieve.

As the central banks of the industrialized world (Fed, ECB, BOJ) move to provide economic stimulus in the form of more interest rate cuts, the ensuing monetary liquidity spillover makes for an abundance of cheaper capital, flooding emerging markets with investment, as investors look for growth offshore.

According to BCA, the decoupling of emerging markets is expected to persist into 2008 as a result of these factors in tandem with robust domestic fundamentals. For the BRIC economies, and other emerging markets, this is potentially very promising. In part 2 (to follow) we will take a look at some of the economic and market fundamentals for the BRIC bloc, so stay tuned.

Read on: The following 4 articles highlights growth and inflationary concern in BRIC countries.

Brazil Economists See Faster Inflation, Higher Rates

http://www.bloomberg.com/apps/news?pid=20601086&sid=ag_GSEXHPVhQ&refer=news

Russian inflation 11.9 pct in 2007 - official data

http://www.forbes.com/markets/feeds/afx/2008/01/09/afx4510431.html

RBI’s rate hiking spree may halt http://economictimes.indiatimes.com/News/News_By_Industry/Banking_Finance_/RBIs_rate_hiking_spree_may_halt/articleshow/2703424.cms

China’s nerves on edge over inflation

http://uk.reuters.com/article/businessNews/idUKPEK22115220080113

Tags: Agriculture, Agriculture Commodities, Banks, Blog, Bloomberg, Brazil, BRIC, Bric Countries, BRICs, Central Banks, China, Commodities, Dampener, ECB, Economic Stimulus, Economists, Economy, Emerging Market, Emerging Markets, Fed, Food prices, GDP, GDP Growth, Global Gdp, GSE, Imf, Incremental Growth, India, India China, Industrialized Countries, inflation, Interest Rate Cuts, Investment, liquidity, Markets, Miscellaneous, oil, Oil Prices, Oil Producers, Oil Tax, Recession, Rising Oil Prices, risk, Russia, Spillover, UK, World Economy
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