Disclosure: Marc Faber is the chairman of a fund I consult for.
I enjoyed reading Tomorrow’s Gold: Asia’s Age of Discovery by Marc Faber. In the investment world, Dr. Marc Faber, also known as Dr. Doom, doesn’t need an introduction. He’s a well-known contrarian investor. He’s the author of the famous Gloom Boom Doom newsletter (~$1500 per year) and he’s on TV all the time pitching his next prediction. I’m sort of a contrarian investor also, but my philosophy and his are totally opposite. He’s more a macro top down investor and I’m a bottom-up valuation guy. Even if I don’t share the same point of view as Mr. Faber on everything, I respect his work and opinion.
Tomorrow’s Gold was published in 2002. Faber is an economic historian (PhD in Economics). I like economics and I like history, so I’m not setting myself up for disappointment. Three quarter of the book is interesting facts and figures, and it’s an extremely well researched book. The other 25% is the prediction part which I’m less fond of. Since the book was published thirteen years ago, some of his predictions are obviously off. I can’t expect him to be perfect either. But he does get some stuff right like the major themes of the book, the rise of emerging markets and the economic softening of the develop countries slow. But I don’t care about predictions. Predictions are interesting to talk about but in my opinion they are worthless. What I liked the most is rise and downfall of civilizations. How empires were forms and disappeared. What happened to powerful rich cities? How the center of importance and influence moved around the world. There’s a good chunk of the book on major bubbles, busts and crowd psychology. History seems to repeat itself over and over. And of course, Mr. Faber doesn’t hold back on taking a couple swipes at the central bankers.
Of course Mr. Faber is not the only guy making predictions on Wall-Street. We could fill a couple stadiums with “market forecasters” filling the airwaves with their bold predictions. I just wish they would keep score. The TV host gets a nice quote out of you and there never seem to be any follow up with your claims. If you are a smooth talker with a great personality, you could be wrong all the time and they can’t get enough of you on TV. You just move on with your next headlining prediction. I’ve been following Marc Faber’s career in the last couple years and his predictions have been all over the place that it’s impossible to keep a score sheet. The thing about predictions is that if you make enough of them, eventually they’ll start to come true. There’s a joke in the industry regarding perma-bears that goes like this: “I’ve predicted 15 of the last 8 recessions.” Calling a market correction is the easy part. The secret of forecasting is timing and the magnitude of the correction. A lot of “experts” called the burst of the housing bubble in 2008 but nobody predicted that it almost sent us back to the stone age.Being a good enough prognosticator to hold the investor community’s attention most of the time is an entirely different matter and Marc Faber is one of those guys.
To conclude, it’s a great book filled with knowledge. I learned a lot and I recommend it to anyone with interest in economics or history to read it. However I don’t think this book really makes you a better investor. The book guides on where to look in the world for opportunities and it pretty much stops there. The ideas of the book are hard to apply to everyday investing. I find it hard to tie economic theory to investment ideas.