Oil to Extend Drop With U.S. in Recession, Faber Says

By Carol Massar and Alexis Xydias

Sept. 2 (Bloomberg) -- Oil will likely drop further in the next three to six months, according to investor Marc Faber, who reiterated his forecast that the second half of 2008 won't be ``favorable'' for commodities.

The decline in crude, which today slid to a five-month low, is a ``symptom'' of economic slowdowns in the U.S. and Europe, Faber, who forecast the so-called Black Monday crash in 1987, said in an interview with Bloomberg Television from Bangkok.

``In the U.S., if statistics were compiled properly, the economy would be in recession, same in Europe,'' said Faber, 62. ``Oil coming down is a symptom of economic weakness, not a symptom of strength. All I can say is we peaked out in commodity prices.''

Crude and gold led a decline in commodities today as Hurricane Gustav spared the U.S. Gulf states the destruction caused by Katrina and Rita in 2005. Economists forecast U.S. economic growth will slip to 1.5 percent this year from 2 percent in 2007, according to a Bloomberg survey.

The S&P GSCI index of 24 commodity futures has dropped as much as 7 percent in two days, to the lowest level since April 2. Oil is trading at a five-month low, 27 percent below the record $147.27 a barrel reached July 11.

Airline Stocks

Today's retreat in oil sparked a rally by U.S. airlines, with AMR Corp., American Airlines' parent company, climbing $1.65 to $11.98 in Germany. Faber said he recommended the shares two months ago even though it is a ``disastrous'' airline. Since reaching the 2008 low on July 15, AMR has more than doubled.

``In investing money you should not look only at your personal experience,'' Faber said. ``You can buy stocks of companies that are of poor quality. If they are low enough, they can rebound.''

The publisher of the ``Gloom, Boom and Doom Report'' newsletter also said investors expecting a stock market rally in Thailand will be disappointed. The country's SET Index dropped to a 19-month low today after Prime Minister Samak Sundaravej declared a state of emergency following clashes between pro- and anti-government demonstrators.

Samak issued the decree after fighting between government supporters and the People's Alliance for Democracy left one person dead and 41 injured. The People's Alliance, which is seeking Samak's resignation, has occupied the Government House, which contains the prime minister's office, since Aug. 26.

`Political Mess'

``Thailand is essentially a political mess,'' Faber said. ``The economy is not very dynamic and it will continue to kind of move ahead slowly.''

The SET Index has lost 25 percent since street protests started on May 25. Overseas investors sold a net 98 billion baht ($2.8 billion) of Thai stocks in that period.

The decline has left the SET valued at 9.9 times the earnings of its 476 companies, the cheapest since December 2006, data compiled by Bloomberg show. Dividend payouts for Thai companies in the index reached 5.12 percent of share prices today, the highest since March 2007, Bloomberg data indicate.

``Thai shares are inexpensive,'' Faber said. ``That will give some support to the market,'' he said. Still, if people ``look for a strong stock market, I think that will be misplaced.''

To contact the reporters on this story: Carol Massar in New York at cmassar@bloomberg.net; Alexis Xydias in London at axydias@bloomberg.net.