Money Manager Faber Predicts Commodities Drop
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Marc Faber, the money manager who told investors to bail out of American stocks a week before the 1987 Black Monday crash, said commodity prices may fall as much as 30% in three to six months.
“Asset markets, in particular commodities and the emerging stock markets, could correct quite substantially on the down side,” Mr. Faber, 60, said in an interview from New York. “As an investor, you may be better off taking some chips off the table right here.”
Mr. Faber, who has a doctorate in economics and publishes a newsletter called The Gloom, Boom & Doom Report, said he holds more than half his own assets in cash or two-year notes. He said he prefers gold over industrial metals including copper and zinc because bullion won’t be affected by an economic slowdown.
The Reuters/Jefferies CRB Futures Price Index of 19 commodities, including energy, metals, and agricultural products, fell 2.7% on Monday, the largest decline since July 1988, as prices fell for oil, copper, and zinc. Gold in London had its biggest drop since 1993.
The declines signal an end to the five-year rally in commodities that sent prices to record highs, Mr. Faber said. Copper almost tripled in the year be fore Monday’s decline, zinc had doubled, and gold was the highest in 26 years. Oil had risen 48% and reached a record high of $75.35 a barrel last month.
“A lot of people think it’s a buying opportunity because they are conditioned that when the markets go down, you buy, and then they go up and make new highs,” Mr. Faber said. “I think this is something more severe. Commodity markets and many stock markets could be down 20%, 30% over the next three to six months.”
Marc Faber, founder and managing director at Hong Kong-based Marc Faber Ltd., has been urging investors to buy commodities since 2001 and holds 10% of his personal assets in gold in a bank vault. The holding has earned 65% in the past year.
Gold’s 5.2% drop Monday below $700 an ounce for the first time in a week was a “tiny” decline, Mr. Faber said. Investors shouldn’t buy gold now because prices may fall further to $550 or $600 before resuming its rally, he said. Gold closed Monday at $677.40 an ounce.
The U.S. Federal Reserve can raise its benchmark interest rate further as inflation will accelerate. “I’m a believer that interest rates in the U.S. are far too low,” he said.
Mr. Faber said that that his other holdings include Asian real estate.