Marc Faber is well known for avoiding the 'error of optimism'. Most people know him as an unflappable bear, but his past buy recommendations - from North Korean debt to Russian shares - have been known to pay off well. He speaks to DEBORAH ORR about why he is putting money into such obscure corners of the world as Romania, Kazakhstan and the Ivory Coast. You made a call on the Thai market recently. Do you think this is the time to buy? Basically, the market is now relatively cheap in comparison to the US stock market or the Hong Kong stock market. Our philosophy has always been to get out of markets when the herd is buying and get in when the herd is exiting. Most people in the fund management business cannot take a straight five-year view because they have to perform month by month to get new money into their funds. Only funds that perform get new money. The result is that when a market is going down, there is momentum on the selling side and when a market is going up there is momentum on the buying side. You have this kind of volatility in individual stocks - the momentum stocks in the US - and you have volatility in the relatively small markets in Asia. When such a market starts to go sour you get probably an over-reaction on the downside. I think this is now happening in Thailand. I don't expect tomorrow a new bull market in Thailand, but based on our analysis, there are now lots of companies that are selling at maybe half their replacement costs. Which type of companies? Hotels and industrial companies. We're not so keen on the banking and finance sectors. I think maybe a lot of skeletons will still come out of the cupboard there. We are not so keen on banks in Asia anyway because of their exposure to the property markets. We are kind of negative about Asian property markets. What do you see ahead for the property market? The property market in Thailand hasn't gone down sufficiently yet because properties are held by a lot of families that are well-to-do and they haven't had to sell yet. But some forced selling may surface. And, there is still a lot of supply coming on stream in Bangkok. So, I think that the property market is going to stay bad for a few years. Anything else you can tell us about Thailand? I think Thailand is a typical case where people became overly optimistic. They committed the error of optimism and now they are committing the error of pessimism. I don't think Thailand will continue to grow at 10 per cent per annum, but the economy can grow at 4 to 5 per cent per annum. That country will overcome the present crisis, but it will take time to heal the wounds. And do you think now is a good time or would you wait? You know, we are bearish about stocks in general. But, if someone put a gun to my head and said you have to buy Hong Kong stocks, or specifically Hong Kong property shares, or you can invest in Thailand, I would take Thailand. Last summer, you were quite bearish on Hong Kong, but the market has come up a lot since then. The typical stock hasn't moved that much and property stocks have given back quite a bit of their gains. Secondly, the US market, since the low last July, has gone up 26 per cent. If the US market hadn't gone up 26 per cent, this market wouldn't have moved. In fact, the Hong Kong market is an example of a market that has performed badly. Since January 1984, the US market is up close to 80 per cent. And the Hong Kong market, as of today, is up less than 10 per cent from January 1994 levels. That is typical of a market that has performed very badly in comparison to other markets. And now that the Hong Kong market has broken down, the prospect of the index going to 20,000 or 28,000 is very slim. When do you think the bottom is going to fall out in Russia? I think it's not a bad time to take some profits. I think the market will have a massive correction and then whether it will make a new high depends on many factors. But I think we are getting to a stage when we can see a big correction coming. On the buy side, besides Russia and Thailand, what would you recommend? Cocoa. And now we are going to the Ivory Coast. I think some African countries might be interesting. Romania, this we like. We have started to invest in Romania. And we are kind of interested to invest in Central Asia - Kazakhstan and Uzbekistan. What is the attraction there? These are countries at the very early stage of economic development but potentially a country like Kazakhstan could be another Australia - small population, extremely resource rich.
