Customer Reviews

Tomorrow's Gold: Asia's Age of Discovery

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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.

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.

faber and his "i know best" attitude (which you'll either appreciate, as i did, or grow weary of) decidedly spell out his vision of what will happen in the time to come re: asian development and capital flows; he tells you what to do (in so many words) and why the herd will be wrong. his historical analyses are quite useful (except the chapters on business cycles and kondratieff cycles, which i agree are muddy) and he lays out plenty of evidence to support his positions. i must say that while i'm not quite bought into the doom and gloom that he is known for, his cases are compelling, and if this leads the reader to take offsetting positions in investing to better hedge their portfolio, then it is well worth its weight in gold.

his style is quite casual, making an economics book (as this is precisely that) rather easy to digest.

to succinctly summarize, global capital flows (and their ever increasing supply) will eventually flow to china and asia proper to support their ever-increasing per capita income. resource plays are the best bet. also, in a more general sense, he states how $$ can be made by spotting how market inefficiencies result from misallocation of foreign direct investment.

a worthy read? definitely. but i refuse to support it fully when i know faber sits on the boards of select mining companies that are primarily engaged in asian development (ivanhoe mines); a conflict of interest? it certainly seems that way...but that doesn't make him wrong.

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.

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.

I have followed macroeconomics and markets for some time, and I try to apply my interest on the floor every day. I have always believed that one of the most promising areas of asset returns, cultural dynamism, and solid underpinnings has been Asia. In particular, China, Singapore, and India all have the necessary ingredients to constitute the next great economic powerhouse. And for all of the reasons Faber says, as well as the soft/anectodal evidence that I have witnessed and he has surely witnessed for decades living there. The Asian economies have robust trade balances that give them outstanding investment capital to deploy where they deem the best opportunity for BOTH investment domestically and abroad. This is what has dominated the market during the USD weakness of 2002-2003. I would like to have lunch with the author and pick his brain about the USD break since he published the book in mid-2002 (even though the decline began roughly about the time he wrote the book, a great call on his part and for those who followed his prognosis.) The Asian economies enjoy these capital surpluses, in spite of overborrowing during the Tiger days of the early and mid-90's, which I believe was a recklessly-driven growing pain of an emerging economy as the US had panics in the 19th century. Lately, they have been buying USD debt with trade surpluses, therefore holding down USD rates and supporting USD, a boon to America and the consumer Faber and I believe to be overborrowed, overconsuming, and saving-short Americans. And why not, the policymakers ask themselves? We can grow our economies through exports of cheaply-produced, and knowledge/capital-intensive products. That's a better asset and superior return on investment through growth than any domestic investment or spending opportunity presents.

This dynamic WILL change at some point, but Asia needs at least one more growing pain: their reliance on currency inflexibility to promote their export-driven economies. And I am not saying this for the obvious reasons. I know many think that speculators distort values of currencies, but the reality is that they generally hasten and facilitate the transmission of different global trends that inevitably come as the world grows and changes. And the bottom line is that the currency is just another lever, tool, and/or method to ease the fluctuations of the business cycle. Asia cannot continue to rely on currency pegs and bands as a growth driver; just as Faber says the US cannot continue to relying on debt, assets, and government spending to drive growth. The US deficit would not be as bad if Asian currencies were allowed to appreciate like the Euro and other currencies have. It's a we'll buy-your-Honda's, we'll-buy-your-bonds growth dynamic that can have some potentially disastrous (or easy) outcomes. This is where I disagree with Faber about the promise of Asia. It is a huge risk to their economies, and the longer they rely on it (like US with debt), the more likely the disaster to their economies and societies. It's served them well as precariously emerging markets, but as they mature it will become increasingly difficult to maintain the status quo. I don't want to sound preachy, but you should probably have your eye on your portfolio when the time comes.

How that plays out, I hope the author explores in the future, since it's obvious he has an insightful view on Asian economies as well as market sophistication. I agree with him, buy Asian bonds, real estate, and some equities to diversify your portfolio. Look at ETF's, well-managed funds, and even hedge fund fund of funds to get in this. The US no doubt has the most dynamic, flexible, and solid economic support; but the US has a lot of debt, a dangerously hot real estate market, and energy addiction...Asia is financing much of this. And this money has to come back at some point to finance social investment, entitlements, and domestic ventures in their own countries. Faber believes a globalized economy and investing are now all about identifying social, economic, and political trends and not relying on the buy-and-hold strategy of the 1982-2000 bullmarket across asset classes. And I agree 100% with him that Asia presents the best opportunity to do this. Diversification across asset markets in a couple of countries will no longer do for a good investor; it will be Faber's trends. Though the US will always be an attractive investment and growing economy (remember the US still has the lead in technology and dynamism), Asia is on the horizon. Tomorrow's Gold encourages you to get in while there's value, along with the secondary benefits like commodities, especially in the next decade. Great book, great read, professional outlook, and worth your time. Enjoy it

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.

"Buy a basket of commodities and hold them". This is Marc Faber's investment advice for the future, distilled. He makes a case for the ascension of Asia, the relative decline of the U.S. and the debasement of common asset classes such as equities and bonds as stores of value. Why? In the case of the US, Faber believes the Fed will do anything it can to avoid deflation, and a managed devaluation of the dollar will be the way it achieves this. The argument for Asia (and particularly China) as an economic powerhouse is well made. Most of his theories are well supported, however I'm not a fan of cycle/wave economics which smacks a bit of astrology. Faber supports his theories on bubbles, business cycles and prices with quite long winded lessons in economic history. Depending on your fondness for this sort of writing, you might find it pretty dry. Style aside, the author is extremely well informed and since this issue went to print, has already been proved correct in respect of his calls on the dollar and metals. I think the future will continue to be validate his predictions.

This is the best investment book that I have ever read. Faber's only fault is sometimes being early in his predictions. Reading this book enables one to see a viewpoint that is drastically different from jingoistic American cheerleaders entirely focused on the U.S. economy.

I first got to know Marc Faber on reading articles of financialsense.com. I then researched his book along with Jim Rogers' on Amazon.com. I bought both and more.

This is a great book for some one has just a little economic knoledge but wants to learn more. And it is great that he has explained the economic cycles, moving money centers, etc.

So for any one needs reasons to invest globally, for any one needs understand the history of economics, get this book and keep it with you to review from time to time. I guarantee you this book is better than any Wall Street financial adviser can ever give to you (do those people really understand the economics or investing? I personally believe the Wall Street just wants to suck up your money and make a profit for themselves).