Tomorrow's Gold: Asia's Age of Discovery

This book gives an excellent "big picture" overview of market dynamics. I strongly recommend this book as one of about three key books to any person interested in markets and trading. It contains a succinct historical review of boom and bust cycles, in general, and emerging markets, in particular. As Faber points out near the beginning of the book, the information that he draws upon is readily available from other sources, but those sources tend to be obscure or relatively unavailable to modern readers. Faber's analysis of nineteenth century U.S. railroad stocks ought to be studied by every investor. Though it sounds pretty obscure, he makes it interesting. These most significant of infrastructure investments in history's greatest ever emerging market failed on balance to make money for investors. Why? The answers are incisively pertinent to today's investors. Faber makes a number of observations that appear obvious when you see them, but that still fly in the face of conventional media-based market wisdom. For instance, even a five percent return on investment over a really long period (1000 yrs.) of time is unheard of. Busts happen! Most significantly, we are still in the throes of a central bank manipulated bust that is going to have profound implications for today's investors. Marc Faber has useful advice for how to avoid losing your shirt (and maybe even prosper) through these unfolding events.

What Faber puts together here is nothing short of what should be required reading for every investor who got caught up in the 90's bull market only to be disheartened, confused, and bewildered by the aftermath. Most of them won't read this book because they'll assume it's another whacko goldbug treatise. That's a real shame because this is a great intellectual piece on the history of markets, economies,manias, currencies, and the behavior of man through it all. Anyone who reads this and gets caught in another bubble has only himself to blame.

Finally an author who can tie economic theory to investment ideas. Faber draws upon thousands of years of socio-economic history to explain how regions, sectors, industries, and countries repeat the endless cycles of gloom, boom and doom. Known as Dr. Doom for his uncanny ability to identify (the end of) bubbles and manias (Dow 87, Nikkei, Asian Tigers, Nasdaq recent), Faber is also great at identifying new opportunities. He is excellent at developing big and compelling pictures for all of us myopically basing our expectations on recent events ... and shakes some strongly held beliefs about how economies work. A must read for people trying to make sense of the recent global malaise. As the title suggests, he is bullish on Asia, though he does also cover and support other sectors and regions of the world.He has a web-site with recent articles that he has written, easily found via a google search.

Two weeks ago I was sitting in the dentists chair. When he finished sticking his instruments in his mouth, we talked for a few minutes about the stock market. He expressed the common hope of the moment that the war in Iraq will make everything good again. When I told him why that wasn't likely to happen, he made the remark that there is so much "money on the sidelines" that it will have to go back into stocks eventually. He probably heard that from CNBC. "There is a whole world out there," I told him. Money can to go to China or Russia. It doesn't have to go into Cisco. I then told him to read this book.American investors who were conditioned by the 1990's to buy and hold forever need a new way of thinking. They need to understand that financial markets move in cycles of boom and bust that provide real opportunities to make money. Faber teaches the reader to follow the money and to understand that we now live in a global economy. With a secular bear market in the United States, over the course of the next decade the best investment opportunities will likely be elsewhere in the world and in commodities such as gold and silver. This book will open their minds and in time will help them fatten their wallets.Faber's book contains all kinds of little gems that are worth remembering. It also has several chapters that I found especially thought provoking and unique to investment literature. First is a valuable chapter on the cycle of emerging markets. Second is a discussion of the United States as an emerging market in the 19th century. His comparison of the US to emerging markets such as China, Russia, and Asia is thought provoking - a process of wild boom and busts swings is not unique to them, but was a large part of the history of the US in the 19th century. It seems to go hand in hand with rapid modernization.His discussion of history and financial bubbles is a good introduction to the subject and one that will help US investors understand the last few years.Read this book. It is worth your time and effort. A lot of meat in it. Will make you think. Investment professionals will benefit from it too. If you are a stock broker, this book is worth a whole year of sales promotion literature and analyst recos coming from upstairs. Learn something to actually help your customers. If you are fund manager learn to think big and follow the money.

I read this over the Christmas holiday and came around to Marc Faber's way of thinking. In a nutshell, here is what I took away from the book: the fiscal/monetary authorities control how much money sloshes around the world but cannot control where it ends up. In the 1980's and 1990's, excess liquidity found its way into stock and bond markets, asset classes which began the bull market much out of favor (remember in 1980, oil & gas partnerships and gold bars were hot, stocks were 8x earnings and bonds yielded 14%?). As we sit in early 2003, we still have lots of money sloshing around in global markets but he argues we are in a mirror-image situation to 1981: commodities are very cheap and stocks and bonds are expensive. The recent rally in the CRB, in gold, and possibly in real estate, are the "shots across the bow" for a long-term investor shift back to hard assets and commodities in general. Deflation is the fear du-jour but Faber argues that all three major economic blocks (US, Europe and Asia) are debasing their currencies for stimulative reasons, meaning that all currencies are likely to devalue against hard assets -- ie the price of gold, real estate, etc. will rise. The coming inflation (still maybe a year or more away due to weak economic growth) will be bad new for bonds. He does favor emerging market stocks based on their strong correlation with commodity prices. I found the chapter on Kondratieff to be less-convincing and more muddled. However, Faber backs up his arguments with lots of interesting charts and facts and all-in-all makes a coherent and persuasive argument for an emerging markets/commodities long-term bull market.