Faber: Oil, Commodities to Decline Further Near-Term

Macro investor Marc Faber, a commodities bull until the spring of this year, says that commodities have further to fall. From Bloomberg:

Oil will likely drop further in the next three to six months, according to investor Marc Faber, who reiterated his forecast that the second half of 2008 won’t be “favorable” for commodities.

The decline in crude, which today slid to a five-month low, is a “symptom” of economic slowdowns in the U.S. and Europe, Faber, who forecast the so-called Black Monday crash in 1987….

“In the U.S., if statistics were compiled properly, the economy would be in recession. Same in Europe,” said Faber, 62. “Oil coming down is a symptom of economic weakness.”….

Faber said he favors shares of AMR Corp., American Airlines’ parent company, even if the air carrier is “disastrous.” The stock’s 54 percent slump in 2007 and this year’s 26 percent slide makes AMR appealing, he said.

The publisher of the “Gloom, Boom and Doom Report” newsletter also said investors expecting a “strong stock market” in Thailand will be disappointed…..

“People simply have to understand Thailand is essentially a political mess,” he said. “The economy is not very dynamic and it will continue to kind of move ahead slowly. These people looking for a strong stock market, I think that will be misplaced.”

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  1. Dean

    That is only part of what Marc Faber says. Keep in mind that his main critisim is that he gets the trend right but the timing wrong.

  2. Anonymous

    Faber has nailed it across the board the past couple of years, starting with naming names in the subprime lender sector just in front of the crash there.
    He has been uncanny, both in trend and timing over this period.
    It has paid to follow his advice, take my word for it.
    (I subscribe to his letter).

    Anyone scared off by the Gloom, Doom name is being superficial.

  3. Mickslam

    H was also right about the stock market crash timing. I think he started shorting a few months early, but used supply/demand analysis to determine there was going to be lots of supply starting in January.

    Faber is really good overall. Note that as a macro guy he tends to be what I call a long gamma trader/analyst – he tries to predict home runs rather than collect money consistently.

  4. mxq

    Diesel demand from china was likely behind the demand increase during the past 9 months or so.

    A lot of this had to do with China’s petrol buying spree ahead of the olympics, as they have admitted this themselves (here’s a good chart that correlates pretty well w/ oils stratospheric run). Of course, the effect on prices was exacerbated…rather than mitigated…b/c specs outnumber real players by a large multiple (see page 22).

    Nevertheless, assuming China’s demand reverts to a pre-olymipic runup (no pun)…is $75bbl so hard to imagine?

  5. Jesse

    He left himself a lot of ‘wiggle room’ in the Bloomberg interview this morning.

    He said that he is not sure whether this is a “short term or long term peak in commodities” that we have just seen.

    Don’t they all.

  6. Dean

    To: Ano holding Marc Faber is high esteem. So am I. My point is that you can not cherry pick selective statements from Marc Faber, rather you have to examine his total position.

    For those who are already subscribers you already know that his last newsletter went out circa August 20th and his next one is expected September 7th-8th.

    My personal observation was that Faber changed his position somewhat (imperceptible to some) and I can not conclude as to his current frame of mind until I read his September 8th pronouncement (following his trip to Syria of all places).

  7. Juan

    Perhaps the multi-year run up in oil and most other commodities should be seen as a symptom of financial excess and herding behaviour rather than strictly or even predominately real economy related. In which case, ‘oil coming down’ can also be seen as ‘a symptom of [financial] weakness’ (crisis) exacerbated by synchronizing global recession.

    If this is the case, which I believe it is, crude can fall well below $75, whatever takes place w/China demand.

  8. James

    I agree. There is a lot of risk in commodities right now. I cant stress how badly they could meltdown. Everyone has been able to hide in the weak dollar long commodity trades for the last five years.

  9. ndk

    Ospraie fund just went under. I’ll go out on a limb and guess this will be near the end of this downturn.

    Like I said, squeezed out the leveraged shorts on the top; the leveraged longs are getting crushed now.

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