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Dr. Doom: There's Value in Asia, Inflation in the US

CNBC.com
Friday, 6 Feb 2009 | 12:34 AM ET

One of Warren Buffett's favorite metrics is market capitalization as a percentage of gross national product. He thinks when GNP is down to about 75 percent or so, it's a good time to buy.

Marc Faber, editor and publisher of The Gloom, Boom & Doom Report tells CNBC's Asia Squawk Box that by these standards, the U.S. market is not particularly cheap.

Dr Doom: It Pays to Wait in Asia
Marc Faber, Editor and Publisher The Gloom, Boom & Doom Report, feels that the U.S. market at current levels, isn't cheap. Asian markets on the other hand, are much more value for money -- there are stocks that pay you to wait out the recession. He shares his thoughts with CNBC's Martin Soong.

"If you take say, the Dow Jones or the S&P in real terms, in other words, inflation adjusted or the market cap in the U.S. as a percentage of GDP... it's still close to a hundred actually, it's not at 75 (percent), and by historical standards, it’s still very high," Faber said.

(Watch the full Marc Faber interview on Asian markets)

Faber feels that Asian markets are far better value that U.S. equities -- you get paid to wait in Asia -- and Faber doesn't see a huge downside risk, but rather an upside potential.

"If you look at the dividend yield in Asia compared to the bond yield, it's about three times higher. So even though we will have dividend cuts for sure, I think that as a shareholder, you begin to be paid by waiting," Faber asserts.

Faber, better known as Dr. Doom, believes that there still is tremendous downside momentum in the global economy.

" ... We fell off a cliff, and now the news will remain bad, but maybe not quite as bad as over the last few months. And then the Goldilocks crowd that is always around us, and will never give up -- no matter what -- they will say now, see the global economy is improving. Let’s buy," Faber adds.

Is US Following Zimbabwe?
The U.S. is following the Zimbabwe school of thought, quips Marc Faber, editor & publisher of The Gloom, Boom & Doom Report. He tells CNBC's Martin Soong and Amanda Drury why printing more money will not help the economy.

Faber also sees inflation as a major factor in the future of the U.S. economy.

(See Marc Faber's views on inflation in the U.S.)

"We have the Austrian school -- the school of rational expectations, monetary schools. And in the U.S., we have a totally new school, and it's called the Zimbabwae school. And it’s founded by one of the great leaders of this world, Mr. Robert Mugabe. He has managed to totally impoverish his own country. And that is the monetary policy the U.S. is pursuing. If something is going wrong, print. If it doesn’t get fixed print more. If it then goes even worse, print more."

Faber sees hyperinflation as a possible consequence of the loose monetary stance the U.S. is taking, though he doesn't believe that they are there yet.

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