Dr Faber's brilliant new book

For anybody who wants to understand business and investment cycles this book is a good place to start. Indeed, the one way that the world might rid itself of such boom-bust cycles would be if more people read and digested the message of this famous contrarian, and acted upon it.

However, human nature being what it is, and as Dr Faber points out, fundamentally unchanged in centuries, the booms and busts of the business and investment cycles will always be with us.

I hope Dr Faber will forgive me if I now interpret the message of his book - which is impressively and comprehensively global in its sweep - for the benefit of Middle East readers with a more parochial viewpoint. This is after all Dr Faber's main intention, that we should gain insight into the present from studying the past.

Dr Faber breaks the business cycle down into phases zero to six. In brief, zero is a bombed out market post-crash and six is the stage before this. Where is the Middle East now?

My estimate is that most of the real economy is in phase one ready for take-off, while the UAE, Bahrain and Qatar are already in phase two with a boom in place. At the same time the investment market is still largely stuck in phase one, with Kuwait and Saudi Arabia showing the first signs of phase two.

This suggests that many of the investment markets in the region offer excellent value right now. Dr Faber says he likes to sell out in phase two of the business cycles to avoid the more uncertain phase three as the boom develops.

Moreover, Dr Faber is very emphatic in believing that a 20-year bear market for commodities is now behind us. That is clearly excellent news for the Middle East and oil revenues. It suggests that the oil revenues of the past three years are the new status quo and not an aberration caused by world events.

Indeed, Dr Faber links the present boom in commodity prices to easy money policies by the Federal Reserve and other monetary authorities around the world. This has clear implications for asset prices in the Middle East and other emerging markets.

Dr Faber thinks $1,000 to $1,500 per square metre for apartments in prime locations in major cities is now cheap. For those buying real estate in Dubai at less than $1,000 a square metre this is clearly good news.

His point is that commodity price rises will kick off inflation in the value of real assets and that the US dollar will devalue not so much against other currencies as against commodities. Thus buying real assets like equities and real estate is a very good idea in the Middle East, and equities linked to oil are a particularly good buy.

The downside is that US and European equity markets do not look a good buy on a short, medium or even long term view. Dr Faber points out that these equities have underperformed for long periods in the past, and could do so again. He thinks buying and holding for the long term is a serious mistake.

But any serious investor should buy this book and come to his or her own conclusions. For my part I hope the rumour that Dr Faber may be a guest at the International Investment Forum in Dubai this May is true as it would be good to question him in person.