TD: Now what about a CEO? What are the characteristics you might look for in a resource exploration or development company CEO that meets with you and says, “Marc, we’re looking for financing”?
Marc Faber : Well, I think in every company you want management that is skillful. Obviously that has talent, and preferably, you have management that has their interest aligned with yours as a shareholder.
In other words, they ideally own a lot of shares in the company you invest in. Good management is management that can adapt to change.
That is the key because when I started to work on Wall Street, the favorite stocks among institutional investors were companies like Sears, JC Penney, Kodak, Xerox, Polaroid, and so forth. Most of these companies have disappeared because management was not able to adjust to the changes in the world.
I mean there was at the time an analyst at who followed the photographic industry, Polaroid and Kodak. They were these two companies and on the periphery she followed Fuji photo film.
Her projections were how many people in the world would buy a Polaroid camera over the years, and how many pictures the world would take with Kodak cameras, and then how many films eventually Kodak would sell.
Her projections were eventually all exceeded—but not with Kodak films and not with Polaroid cameras. But with mobile phones that were taking pictures electronically. I mean you see every idiot nowadays taking pictures all the time to put on Facebook, to look at himself or herself. Nobody is interested in these pictures except themselves. But it didn’t benefit Kodak and Polaroid.
So there are these changes that occur in the world of investments and that is why I always say when you have these studies about, for example by Jeremy Siegel, on how the Dow Jones has performed between 1800 and today. I once told Jeremy, “Look Jeremy, if you invested in 1800, in stocks in the U.S., 80% of the companies at that time were canal companies and banks. In the first big bust, the Depression of 1840, 1841, most of them went bankrupt and eventually all the canal companies in America went bankrupt, all of them, even the most profitable ones, like Erie Canal.”
Then people invested in railroads in the 19th century. By 1895, 95% of the railroads went bankrupt. So the studies don’t take these statistics into account; how many companies fail if you invested in stocks in 1929. Most of them no longer exist.- in bullmarketthinking Click here to watch the full interview
Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.Dr. Doom also trades currencies and commodity futures like Gold and Oil.