I have mentioned several times on this site that it may be wise to pay close attention to Dr. Marc Faber’s commentary. Born in Switzerland and living for a number of years Hong Kong; he considers himself a world citizen. Thus, he provides a non-US based perspective which is very valuable in what has truly become a global marketplace. He favors investments that are the least correlated to asset markets for 2007. Here is his current thinking.
“The last few weeks have been characterized by a weak dollar and rising equity, bond and commodity prices. As we move into 2007, the pattern will be the same. Either the Fed finally decides to implement tight monetary policies which would strengthen the US dollar and weaken all asset prices except bonds, or the Fed continues with its expansionary bias.
In that case asset prices (except bonds) will continue to rise and the dollar will continue to weaken. However, it should be understood that under easy monetary polices, dollar assets (US equities, bonds and real estate) will, as has been the case for the last few years, under-perform foreign assets and commodities.”
That has certainly been the case this year. The Big-Build Out and BRIC, two portfolios I track on a weekly basis in the “Week in Review” articles have clearly outperformed the US markets. Both are up over 40% year to date.
Dr. Faber concludes with the following. “What investors should, however, clearly understand is that, since 2002, all asset markets have risen in tandem and have become very closely correlated. So, when for whatever reason liquidity shrinks, all asset markets could be vulnerable to massive liquidation!
The investment, which is least correlated to asset markets would appear to be a diversified portfolio of cash, farm land, and precious metals. In particular precious metals could benefit from financial turmoil!”
Anyone know where I can find some cheap farm land?