This is Dr Doom speaking, Marc my words
Bodhisatva Ganguli & Sanjay Kular
MUMBAI
ACROSS markets worldwide, he goes by the name of Dr Doom. He anticipated the '87 stockmarket crash, the Asian crisis a decade later, and the devaluation of the Russian rouble in '98.
For good measure, he also predicted the burst of the technology bubble way back in '99, at the height of the dotcom. Marc his words. Marc Faber, Swiss-born economist, fund manager and author of the popular investment newsletter Gloom, Boom & Doom, Faber lived up to his reputation when ET spoke to him on the eve of his visit to India.
The current downturn could last longer than most people expect, he said. "We're in a deep recessionary phase, the main reason being the sharp drop in capital spending in the past 12 months. It's difficult to predict when we will recover. But going by the economic cycles of boom and doom, it will certainly take a long period."
The last bull phase was riding on high capital spending, but now that has vanished. The September 11 terrorist attack in the US will further worsen the situation as it could slow down the pace of globalisation.
Faber feels that there could be a long bear market in the US, based on historical experience. "There was a bull market between '20 and '29, followed by the stockmarket crash and the great depression. The stockmarket did not get back to peak levels till '54. Subsequently there was a bull run in the '60s, which was followed by the market moving sideways in the '70s. The last bull run was the long bull run between '82 and '00." Thus, if past experience is any guide, a new bull market is a long way off.
In light of the sharp economic slowdown in developed markets, it looks safer to bet on some companies in Taiwan, South Korea and China, according to Mr Faber. "There is a shift of the manufacturing base to emerging markets like China, most of world's manufacturing will eventually end up in China," says Faber.
The Japanese economy, Faber feels, is a basket case because of the huge bad-debt problem afflicting Japanese banks. A collapse of the Japanese economy could spill over to other Asian economies, which are already in recession. On India, Faber is of the opinion that it is largely a "domestic-centric" economy.
More than 90 per cent of India's GDP originates from domestic production and, therefore, the downtrend in the global markets is unlikely to have a major impact on its growth rates.
How would the downturn affect the prospects for Indian software? "A lot of global corporates are on a massive cost-cutting exercise. They are closing down high-cost activities in the US, Europe and Japan; and attempting to outsource from low-cost ones in emerging markets. India will definitely gain from the situation and be able to capitalise on increased outsourcing from the US and Europe. India's software services would outperform as compared with IT services firms in the rest of the world."
economictimes.com |
