Wednesday, May 17, 2017

Tuesday, May 9, 2017

India has excellent economic potentials


In India, if you have growth rate – and I am relatively conservative here, some people accuse me of being too negative of Indian economy – but I am saying if India can grow at 4-7 percent per annum for the next 20 years, then earnings in my view will also grow at 4-7 percent in some corporations that are well managed. They will grow at 12 percent, maybe 15 percent. In some companies that are badly managed, maybe they will not grow at all.

So, my view is simply based on simple economics and I am not an academic at an Ivy League university. I observe what is happening in the world. But simply based on a common man economics, I think India has a good potential and I believe that foreigners will come into the market near the top and that will be the time we will have to sell Indian shares to the foreigners who will rush into India because they think it is the new El Dorado.

Tuesday, May 2, 2017

We have an unstable system and it is not sustainable


We have a system in place that is based on fiscal and monetary policies, and laws and regulations, that favor the corporate elite, the largest corporations, the captains of finance, and the 0.1% in general, because they are the asset holders. This moneyed class will not give up its privileges voluntarily. 

The privileged class will
 do everything in their power to keep these favorable conditions in place, which would include money printing in one or another form if there is a recession or if asset markets decline meaningfully.

I believe
 that an unstable system in which 
the majority of people lose out to 
the privileged few is simply not sustainable and will end either with a Bernie Sanders-type socialist gaining power or with the establishment of a dictatorship. 

Tuesday, April 25, 2017

Asian markets are doing better than US markets


In Asia just about every market has outperformed the U.S. In Europe, just about every market has outperformed the U.S. measured in U.S. dollar terms. So, I think that the impact of an improving Chinese economy is being felt more in other emerging economies than say, in the United States.

Tuesday, April 18, 2017

Vietnam and China have become major economic forces over the last 30 years

Recently PWC published a study about the long-term outlook of the global economy and about the ongoing shift in the balance of economic power in the world which essentially showed very clearly how some countries had become very important economic powers over the last 20 to 30 years including China and Vietnam and also India to some extent. 

That study concluded that by 2050, India, purchasing power adjusted, could be the third largest economy or the even the second largest economy. If you look at what has happened in Europe and the US where despite all the fiscal stimulus and money printing you have essentially very anaemic growth and you look at China where you have around 6%-7% growth while India has over 7% growth, who knows? 

Over the long term if you can grow even 5%, which in the global economy is a very rapid growth rate compared to Europe and the US, as an investor for the next 5 years, 10 years or 20 years, I would find ways to invest in India and in emerging markets in general. 

The emerging markets that is going to grow probably the most is Vietnam and Indo-China, Cambodia Laos, Myanmar. But having the outlook for India and with the proviso that we do not get into a major military confrontation. If we have peace and are nor beset by any huge natural disaster like a pandemic, then I the outlook for the Chinese economy, for the Indian economy, for emerging markets in general is far superior to the outlook in our rotten western democracies. 

Sunday, April 2, 2017

April 2017 Market Commentary Summary

Last week, I was interested in re-reading an article which had appeared last November (before the election) in The New York Times by Op-Ed columnist Nikolai Tolstoy entitled Consider Monarchy, America. Tolstoy is a historian and author of several books. He is also a committed monarchist.

Before rejecting Tolstoy’s views as outrageous I suggest my readers to listen to his arguments carefully. The reason I am discussing political systems is that I came across a study by PwC which paints a rather pessimistic picture for G7 countries (US, UK, France, Germany, Japan, Canada and Italy) relative to E7 countries (China, India, Indonesia, Brazil, Russia, Mexico and Turkey) for the future. The PwC study is entitled The long view: how will the global economic order change by 2050? Its key findings are as follows: emerging markets will continue to be the growth engine of the global economy. By 2050, the E7 economies could have increased their share of world GDP from around 35% to almost 50%. China could be the largest economy in the world, accounting for around 20% of world GDP in 2050, with India in second place and Indonesia in fourth place (based on GDP at PPPs).

A number of other emerging markets will also take center stage – Mexico could be larger than the UK and Germany by 2050 in PPP terms and six of the seven largest economies in the world could be emerging markets by that time.

Meanwhile, the EU27 share of world GDP could be down to less than 10% by 2050, smaller than India. PwC also projects Vietnam, India and Bangladesh to be three of the world’s fastest growing economies over this period.

The PwC study rightly says that emerging market investing requires the “patience to ride out the storms we have seen recently in economies like, for example, Brazil, Nigeria and Turkey, all of which still have considerable long-term economic potential based on our analysis,” but I should point out that we also had some storms in the G7 economies over the last 30 or so years (Japan post 1989, all markets post 2000 and also post 2007).

Also, whereas I do not believe that it is an ideal time to buy equities I equally think that relative to the US, emerging markets are about as undervalued as they will become.

Bloomberg recently reported that sales of art and antiques dropped 11 percent to $56.6 billion in 2016. The decline, on top of a 7 percent slide in 2015, wipes out the gains seen in 2013 and 2014, when sales reached an all-time high of $68.2 billion.

Noteworthy is that art sales are not much higher than in 2007 – ten years earlier despite a huge increase in purchases by Chinese collectors.


Tuesday, February 28, 2017

Resource stocks and Emerging markets are cheap relatively

Resource Stocks are undervalued, and I think Consumer Staples are also reasonably priced as well as REITS. 

I have a large exposure to REITS in Singapore and Hong Kong.

Thursday, February 23, 2017

Euphoria in the markets

I like the US markets in a sense that, for the first time since the bull markets began in March 2009. There is a euphoric move. In other words we are leading to a top somewhere here. 

Tuesday, February 14, 2017

Tuesday, February 7, 2017

Emerging markets to perform well compared to US markets

For the next 10 years, one will make more money in emerging markets than in the US. By historical standards, the US markets are extremely expensive and there is hardly any earnings growth.

In the last five years, we have seen an enormous inflow into ETF (exchange traded funds) and index funds and that has boosted large market capitalisation stocks in all markets, including India. The larger companies are relatively expensive in India. On the other hand, you have a lot of smaller companies that have been overlooked and neglected.

Tuesday, January 31, 2017

Marc Faber warns against protectionism and travel bans

Protectionism, I guarantee you, is not going to be good for the US. What if I'm a foreigner and I see a travel ban. So the private citizens, they see a travel ban on Muslims. Anyone with any brains will think what if tomorrow there is a travel ban on the Chinese and I own a property in the US or I own assets in the US and I can't access assets in the US. So I think this travel ban, psychologically, will have a very negative impact in the long run on the U.S. dollar and U.S. assets.


Tuesday, January 10, 2017

Economic statistics indicating US economy not growing

If I look at economic statistics that were published very recently, housing is not contracting but is not growing strongly either. Housing stats in November were down 18% month on month and down 6% year on year. Car sales in the US are weakening. Look around the world at the emerging economies. Most of the emerging economies are not really in recession with few exceptions like say Brazil but they are not growing rapidly either.

In some sectors of the economy, there is a recession -- not pronounced depression -- but business is lower than a year ago. In other sectors, it is flat but in general we have this asset inflation which has come essentially in many sectors of the economy to an end. Housing prices in San Francisco are no longer going up from an inflated level where well understood. Also in New York high end luxury is easing.

There are many symptoms that the economy is not strengthening but actually weakening and if interest rates go up substantially, that would choke off economic expansion.