Investment guru urges Eastern-centric approach

Turkey is likely to become less Western-oriented and more Middle Eastern- and Asian-focused in coming years, according to Marc Faber, an investment guru who visited Istanbul as a guest of Garanti Masters Private Banking.

“We have not lived through the latest crisis yet. The economic, social and geopolitical watch will be reset permanently after this crisis,” said Faber, who spoke to a number of select guests Tuesday night at the Swissôtel. Faber is the publisher of the “Gloom, Boom & Doom” report, an in-depth economic and financial publication, which highlights unusual investment opportunities around the world.

In his presentation, Faber questioned whether expansionary monetary policies and large budget deficits would lead to high inflation.

“The global economic revival and asset bubble experienced simultaneously between 2002 and 2007 caused an immense collapse,” he said. “The capital devastation caused by the decline in asset values in the last crisis is unique for the period since World War II. Expansionary monetary policies, which have caused the recent credit crunch, are the wrong cure for the problem. What other option does the Federal Reserve have when the ratio of the total debt of the credit market to gross domestic product is 375 percent?”

Prisoner of inflated markets

Noting that central bank experts have become “imprisoned” by inflated asset markets, Faber said: “When necessary, we should look at whether tight monetary policies are still applicable. A short-term boom stemming from expansionary fiscal and monetary policies is also a possibility. But how long it can be sustained? This poses a question. The current crisis has failed to clear the system. Policies introduced as a measure to combat the turmoil have the same content as the ones implemented after 2001.”

Replying to a question on hedge funds, he said the hedge fund industry itself is not very large but “banks have become hedge funds.”

“Nothing has been solved. The Fed wants to have more credit growth and again more leverage. That’s why I believe the final crisis will only occur when everything breaks down,” he said.

During his presentation, Faber said the slowdown in growth of international reserves is tightening global liquidity. He also forecasted “faster growth in emerging economies,” underlining high gasoline and oil consumption in these countries.

Responding to a question on Turkey’s future, Faber said Europe and the United States will become less important. “Especially the countries in the Middle East will have to make a choice: Are they more Europe- and American-centric or are they Middle Eastern- and Asian-centric? My advice will be to become more Middle Eastern-centric and Asian-centric and less Western-centric. Geopolitically, Turkey will likely be less supportive of U.S. policies in the future.”

Born in Zurich, Switzerland, Faber studied Economics at the University of Zurich and, at the age of 24, obtained a PhD in Economics magna cum laude. Since 1973, he has lived in Hong Kong. From 1978 to February 1990, he was the Managing Director of Drexel Burnham Lambert (HK). In June 1990, he set up his own business, Marc Faber Ltd., as an investment advisor and fund manager. He is the author of several books including “Tomorrow’s Gold: Asia's Age of Discovery,” which was first published in 2002 and highlights future investment opportunities around the world.