Americans are short-sighted if they invest only in U.S. companies, internationally known investment adviser Marc Faber told a Madison audience Thursday.
The balance of power in the global economy has changed dramatically in recent years, Faber said. He recommends a long-term investment target of at least 50 percent in emerging economies, such as those in much of Asia and Latin America, saying they now represent a significant share of the world economy.
“Emerging economies are no longer the poor cousins of developed (countries). There has been a huge transfer of wealth … to emerging economies,” Faber said in an interview.
“If you just focus on the U.S., it’s a huge mistake because the U.S. is no longer that relevant to the global economy,” he said.
Faber was the main speaker at the annual dinner Thursday night of the CFA (Chartered Financial Analyst) Society of Madison, at the Sheraton Madison Hotel. About 200 people attended.
Faber suggested investing in land, in commodities such as gold and agricultural products — though their prices can be volatile — and in businesses providing tourism, financial services and infrastructure in emerging countries. In those countries, the standard of living is improving, hiring is up and infrastructure is being upgraded, such as roads, bridges and utilities.
“In the U.S., standards of living have certainly not improved over the last 20 years and, in my opinion, have rather gone down for the middle class and for the working class. In inflation-adjusted terms, their incomes haven’t gone up at all,” Faber said.
Emerging markets “can rise very quickly but they can also come down very quickly,” said Al Rauch, managing analyst for the health care sector for the State of Wisconsin Investment Board.
Rauch said Faber’s comments should be viewed as more long term than short term.
“If you didn’t invest in the U.S. equity market this past year, you would have missed out on some really big gains. Whereas land prices haven’t really recovered,” Rauch said.
Faber is “known as a contrarian but has been more right than wrong,” said Matthew Goetzke, managing director of Mendota Financial Group, Madison. “It’s tough to refute the arguments that he’s making.”
A native of Zurich, Switzerland, Faber, 64, now lives in Thailand. A former managing director of Drexel Burnham Lambert, he has had his own business, Marc Faber Limited, since 1990 and is known for his monthly newsletter, the Gloom Boom & Doom Report.