According to billionaire hedge fund manager George Soros, it’s not only Great Britain who might require a financial bailout sometime soon. From Reuters’ Cecilia Valente this morning:

Billionaire investor George Soros said on Tuesday Eastern Europe was a “prime candidate” for International Monetary Fund (IMF) support.

Speaking at the London School of Economic ahead of the G20 summit, Soros said: “G20 should not just provide pious words but should take steps to stabilize periphery countries.”

Source:

“Eastern Europe ‘prime candidate’ for IMF help-Soros”
Cecilia Valente
Reuters, March 31, 2009

The British must feel a little bit like the late American comedian Rodney Dangerfield these days. Dangerfield, you might remember, immortalized the phrase, “I don’t get no respect.”

Back on January 20, legendary investor Jim Rogers spoke to Bloomberg’s Paul Gordon about the outlook for the U.K. economy and the pound, and said:

For the last 26 years, the U.K. has been selling oil, the North Sea. That’s what’s saved the U.K. in the past three decades. It’s finished. The North Sea oil is running out. Within the decade, the U.K. will be importing oil again. And then they’ve got nothing to sell… I mean, again, I hate to say it, but I would not put any money in the U.K. I’ve sold all of my sterling…

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Now, Rogers’ partner in the Quantum Fund, billionaire hedge fund manager George Soros, is warning that the United Kingdom may need a financial rescue. Rachel Sylvester, Alice Thomson, and Philip Webster wrote in The Times (UK) this past Saturday:

Britain may have to go to the IMF for a huge financial bailout, the influential investor George Soros warns today.

The man who made $1 billion on Black Wednesday in 1992 told The Times that Britain was particularly vulnerable to the economic crisis.

Mr Soros – speaking days after an auction of government bonds failed for the first time in 14 years, ringing alarm bells about Britain’s ability to fund its growing debts – said that Gordon Brown might have to go begging for billions of pounds in international aid. He also warned that next week’s G20 summit in London was the last chance to avert a full-scale depression that could prove worse than that in the 1930s.

“You have a problem that the banking system is bigger than the economy . . . so for Britain to absorb it alone would really pile up the debt,” he said. Asked about the chances of Britain having to seek help from the International Monetary Fund, he said that if the banking system continued to collapse, it was “a possibility”. At this stage, he added, it was “not a likelihood”.

He was not optimistic about the G20 meeting, saying the odds were that it would fail because there were so many differences of opinion. The price could be years of economic devastation worse than the Great Depression. “It is really a make-or-break occasion.”

Source:

“George Soros: Britain may have to seek IMF rescue”
Rachel Sylvester, Alice Thomson, and Philip Webster
The Times (UK), March 28, 2009

The “Pied Piper of Emerging Markets” is leading his followers to Asia these days, according to Dow Jones Newswires. The Wall Street Journal’s Ellen Sheng wrote about emerging markets veteran Mark Mobius this morning, and said:

Mark Mobius, executive chairman of Templeton Asset Management Ltd., sees Asia heading into a bull market.

At a time when many other fund managers are sitting on the sidelines, waiting for assurance the markets won’t go off another cliff, Mobius isn’t hesitating.

“This is the best time to invest, when investors are nervous, pessimistic,” he told Dow Jones Newswires in an interview.

“Valuations now are very, very attractive,” he said, noting that prices in Asia now at the same level as during the Asian financial crisis. Asian equities are now trading below 10 times projected earnings; by comparison, Asian stocks were trading between 15 and 18 times earnings a year ago…

Mobius, who also likes Latin America, notes that Asia stands apart because of its fast growth, strong corporate balance sheets, and strong government spending.

“The fastest economies are in Asian markets…that economic growth is going to be reflected in stock markets as we go forward,” he said. “Asian countries also have pretty good foreign reserves they can use for developing their countries and domestic market.” he added.

Dr. Mobius shared some investment picks during the interview. From the piece:

Within Asia, Mobius has been bullish on China for quite some time… At the moment, some of his top picks in the populous country include China Mobile Ltd. (CHL) and Industrial & Commercial Bank of China Ltd. (1398.HK), China’s biggest bank by assets…

In the greater China region, Mobius also likes Taiwanese technology firms such as Taiwan Semiconductor Manufacturing Co. (2330.TW). Mobius said he likes the company because it is a well-run fabless chip maker, in a position to benefit from a recovery in consumer spending next year.

Other areas Mobius is eyeing include banks and cement companies in Thailand, and information technology companies in India such as Tata Consultancy Services Ltd. (532440.BY) and Infotech Enterprises Ltd. (532175.BY)

Source:

“INTERVIEW: Templeton’s Mobius Sees Bull Run Starting In Asia”
Ellen Sheng
Wall Street Journal, March 30, 2009

I apologize for not posting any new material this week, as I have had the flu since Sunday night.

Posting will resume on Thursday.

Thank you for your patience.

Christopher Hill
Editor

Billionaire hedge fund manager George Soros has been warning of a global financial crisis for some time now. And when The Australian’s Peter Wilson interviewed the former partner of Jim Rogers lately, he noted how Soros has been handsomely-rewarded for such foresight. Wilson wrote yesterday:

And foreseeing the biggest economic crisis since the Great Depression has certainly paid off financially. In August 2007, with the first symptoms of the credit crunch on the horizon, Soros came out of semi-retirement to reassume control of his Quantum investment fund, astutely repositioning it for the tsunami about to hit. By year’s end Quantum was up almost 32 per cent for 2007, netting Soros profits of $US2.9 billion at a time when other financiers were struggling to break even.

His fortune was estimated at $US11 billion by Forbes in September 2008 and it has grown even larger amid the spreading financial carnage. That same year, in which Hedge Fund Research estimates the hedge fund industry lost a record 18.3 per cent, Soros was up another 9 per cent.

The chairman of Soros Fund Management, whose new book The Crash of 2008 and What it Means: The New Paradigm for Financial Markets is scheduled to be released before the end of this month, shared his latest outlook for the global economy with readers of the Australian publication. From the piece:

The entire world, but especially the West, should now brace for slower economic growth, he warns, and it will be at least a decade before the US sees robust growth. One important effect will be a new wariness in China about the US economic model, Soros says. “The Chinese used to look up to the West and try to imitate the West and they have now discovered that it may not be the right thing to imitate. They now feel suddenly impelled to develop their own system and in some ways they are actually ahead of us.

“For instance, they have been using variable capital requirements as a policy tool. They changed the minimum capital requirements for banks 17 times in the past year, first raising it rapidly and then lowering it. I think we will have to learn to do the same thing.”

In any case, the Chinese government can no longer be relied on to plough money into US government debt, he warns. “They will have less money to spend because their surplus is shrinking and their exports are falling, so they will have less to dispose of, so I think that there will be a definite shift.”

Source:

“George Soros interview: A very good crisis”
Peter Wilson
The Australian (Australia), March 19, 2009

These days, there’s a lot of speculation going on as to where legendary stock investor Warren Buffett will deploy his $2.5 billion cash war chest. However, according to Bloomberg’s Elizabeth Stanton yesterday, his potential targets can be narrowed down. She wrote:

Warren Buffett’s renewed focus on U.S. takeovers may lead him to Sysco Corp., VF Corp. or Danaher Corp., according to criteria the billionaire investor lists in his annual report.

The chairman of Omaha, Nebraska-based Berkshire Hathaway Inc., who took a four-country tour of Europe last year in search of targets, told Bloomberg Television last week that he’s now most likely to pursue U.S. deals after the Standard & Poor’s 500 Index sank to the lowest level since 1996 this month. While the credit crisis is preventing rival bidders from borrowing money, Buffett has $25.5 billion in cash to deploy.

The world’s most successful investor is seeking acquisitions after his company suffered the biggest annual drop in book value since he took control four decades ago. Sysco, North America’s largest distributor of food to restaurants; VF, the world’s biggest clothing maker; and Danaher, maker of Craftsman tools, are among 50 companies that meet his standards, according to data compiled by Bloomberg.

Stanton shed some light on what the “Oracle of Omaha” is working with, and what he desires in a takeover target. From the piece:

Buffett, 78, is seeking to spend $5 billion to $20 billion on an acquisition, according to the 2008 report.

He prefers “simple” businesses with pretax profit exceeding $75 million, “consistent earnings power,” “good” returns on equity and little or no debt, the annual filing says.

There are 50 U.S. companies with that much market value and profit, a return on equity exceeding 10 percent and a debt-to- equity ratio less than 50 percent, Bloomberg data show. Sysco, VF and Danaher are also the sort of easy-to-understand businesses that Buffett favors.

The following is the complete Bloomberg list of potential Buffett targets:

Aetna
Aflac
Agilent Technologies
Allergan
Anadarko Petroleum
Aon
Archer Daniels Midland
Baker Hughes
Becton Dickinson
Brown-Forman
Bunge
Cardinal Health
Carnival
Chubb
Computer Sciences
Covidien
Danaher
EOG Resources
General Dynamics
Halliburton
Hess
Illinois Tool Works
Intercontinental Exchange
Intuit
ITT
Kohl’s
Loews Corp.
Marathon Oil
McKesson
Newmont Mining
Noble Corp.
Noble Energy
Nucor
Precision Castparts
Raytheon
Reynolds American
Rockwell Collins
SAIC
Smith International
Southern Copper
Southwestern Energy
St. Jude Medical
Staples
Sysco
TJX
Union Pacific
VF
WellPoint
W.W. Grainger
Zimmer Holdings

Source:

“Warren Buffett’s Takeover Tests Passed by Sysco, VF (Update2)”
Elizabeth Stanton
Bloomberg, March 19, 2009

Legendary bond investor is concerned that the Federal Reserve’s decision to buy up long-term government bonds may weaken the U.S. dollar. Reuters’ Jennifer Ablan wrote last night:

Pimco’s Bill Gross said it is unclear what was behind the Federal Reserve’s surprise decision on Wednesday to buy up to $300 billion in Treasuries…

“It’s unclear whether today’s policy changes by the Fed are coordinated with the Treasury,” Gross, co-chief investment officer at Pacific Investment Management Co, told Reuters in an interview on Wednesday.

While the move might benefit the economy and financial markets in the short-run, it may pressure the U.S. currency. Ablan added:

Gross, who helps oversee more than $800 billion at Pimco, said the economy and, by extension, the financial markets “needed a substantial shot of adrenaline.”…

“The Fed’s balance sheet may approach $3.5 trillion — nearly a 100 percent addition — which will help substitute for the private sector’s delevering over the past 12 to 18 months,” Gross said…

“These actions are high-quality bond-friendly and dollar unfriendly,” Gross said.

Source:

“Pimco’s Gross: Unclear why Fed moved Wednesday”
Jennifer Ablan
Reuters, March 18, 2009