labels: investment - general
It pays to sell in a buyers'' market: Marc Fabernews
18 December 2006

Investment guru, Marc Faber, currently in India, shares his thoughts on what the markets hold for 2007. CNBC-TV18 shares with domain-b its exclusive interaction with Faber.

"I think as we move into 2007, I noticed globally the wave of optimism, the art dealers are bullish on art, and the commodity traders bullish on commodities, the real estate guys bullish on real estate, the stock traders bullish on stocks, everybody has something to buy," Marc Faber says.

He says this type of an environment is very dangerous and feels that this is a suitable time to liquidate some assets and just sit back and see what happens. He feels that there are no bargains — only some relative bargains like the price of sugar or the price of cotton.

"I do not think that gold is terribly expensive. I think we are very stretched in the asset markets and just looking at the rise we had in markets since July of this year after the correction, we have gone up almost vertically and all the markets are overbought. One reads in the paper about excess liquidity and soft landing and that is the accepted view.

"I will say that basically you should sell stocks and assets when there are no clouds in the sky and you should buy them when there is a thunder and storm and everything looks dismal. Today everything looks wonderful, I could see the global economy is expanding, we have synchronised growth, economically everything looks good, the problem is the inflated asset market, that is the bubble," adds Faber.

The long-term case for Indian property investments is compelling, according to Faber, as he feels that in India only about 4 or 5 per cent of the retail market is organised and the housing market is much less developed in a country like Malaysia, Thailand, Indonesia, Singapore and Hong Kong. He stresses that for the long-term there is no problem with real estate except when there might be an oversupply from time to time, which over a period of time would fill up. Faber favours real estate investment from a long-term perspective.

Faber also talks about his concerns on the liquidity situation. He says, "I think we are extended in asset markets, we had huge moves. In Europe, everybody talks about the excess liquidity; that is correct. But I would like to remind you that even though you can have huge liquidity, markets can go down."

He further adds, "In the Middle East, we still have lot of liquidity because oil prices have not collapsed and the production is still at very high levels, yet the Middle East, the markets have all declined by 50 per cent. So I think that we have to distinguish between markets and the fundamentals. Here in India, one of the problems I see is that unlike Japan in the 80s, when the Nikkei went up more than five times. Here in India, we do not have the same amount of liquidity. In the '80s and '90s, interest rates were declining whereas now it would seem to me that globally interest rates are at artificially low levels."

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It pays to sell in a buyers'' market: Marc Faber