How the rules of investing changed | stockbee

3/17/2007

How the rules of investing changed

Dr. Marc Faber, the editor of The Gloom, Boom and Doom Report and author of Tomorrow's Gold, is a very shrewed observer of events and market trends. His latest article has some very interesting insights.

The game’s changed says Marc Faber. It used to be when one asset class went up others were ignored. Today they all go up together though the leaders in each boom change...
The feature most common to previous investment booms was that a bull market in one asset class was accompanied by a bear market in another important asset class. Precious metals soared in the 1970s, but bonds collapsed. Equities and bonds rose in the 1980s, but commodities tumbled.

In the 1990s, we had rolling bubbles in the emerging markets, but Japanese and Taiwanese equities were in bear markets while commodities continued to perform poorly. Finally, the last phase of the global high-tech mania
(1995-2000) was accompanied by a collapse of the Asian stock markets and Russia, as well as a continuation of the Japanese and commodities bear markets. By the late 1990s, most emerging markets (certainly in Asia) were far lower than they had been between 1990 and 1994. In the 1990s, emerging markets grossly underperformed the US stock market.

Currently, looking at the five most important asset classes - real estate, equities, bonds, commodities, and art (including collectibles) - I am not aware of any asset class that has declined in value since 2002!

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