Legendary emerging markets investor Mark Mobius thinks that the attraction of U.S. dollars and Treasuries will start to wane. From the CNBC website yesterday:

Despite continued woes in the U.S. economy, the greenback has seen an unexpected surge against currencies around the world.

As investors become ever more risk averse, emerging markets are bearing the brunt of a flight to safety.

But Mark Mobius, executive chairman of Templeton Asset Management, sees a reversal around the corner.

“As everyone is rushing into US Treasurys, they need U.S. dollars to do that and have therefore sold everything in sight,” Mobius told CNBC.

“This is why emerging markets have gone down, why commodities have gone down. as everyone is moving into dollars.”

But Mobius said that “as US Treasury rates go down to 1 percent or below you will see the attraction of US Treasurys waning.”

Mobius also believes that emerging markets have learnt a bitter lesson since the Asian Crisis of 1997-1998.

“One big lesson was ‘don’t borrow in a currency you are not earning in’,” he said.

Source:

“Appeal of Dollar, Treasurys Can’t Last: Mobius”
CNBC, November 20, 2008

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Marc Faber appeared on CNBC this morning and said that a “very strong” rebound in asset markets was possible within the next 3 months. The Swiss-born investment adviser and fund manager told viewers:

Well, I think we have reached extreme points in the sense that asset markets are, by and large terribly oversold, whether these are gold mining shares, or commodities, or equities. On the other hand, we have an overbought U.S. dollar and overbought U.S. Treasury bonds. So I think that volatility will continue. But what you could get within the next 3 months is a very strong rebound in asset markets, in equities, and a sell-off in bonds, and eventually a selloff in the dollar.

In the meantime, the editor of the monthly investment newsletter The Gloom Boom & Doom Report is partial to gold. Dr. Faber said:

I still like gold simply because it’s a cash that is not the liability of someone else. What disturbs me a little bit about gold, near-term, is that it’s one of the few assets that has held up very well. And, if you get a very strong rebound in equity markets it is conceivable that people will then sell assets that have held up well and part their money in distressed assets. In other words, in U.S. stocks, in emerging market stocks, and ? There’s one sector in the gold sector which has sold off very dramatically. These are gold mining exploration companies. They are at extremely depressed levels, and I would imagine that even if the gold price went down somewhat, these exploration companies could actually rally.

You can watch the 10 minute 49 second interview here.

Source:

Marc Faber Interview
CNBC, November 21, 2008

Legendary investor Jim Rogers talked to some British financial publications recently about his latest investment outlook. On Tuesday, the transcript of an exchange between the former partner of George Soros and the Financial Times (UK) appeared on their website. Rogers indicated that he was bearish on the U.S. dollar, going so far as to warn that it might be a “doomed currency.” From the interview:

FT: It’s a year since we last interviewed you. You were aggressively bearish about the dollar, but you thought there would probably be a rebound and you would take that as an opportunity to get further out of the dollar. Have you made a further exit from the dollar?
JR: Not yet, no. And the reason I haven’t is because we’re in a period of forced liquidation of everything. We’ve had only eight or nine periods like this in the past 150 years, where everybody has to reverse their positions on everything. There is a gigantic short position in the dollar and they’re all having to cover as they reverse their positions, so this rout is going to go on much further than I would have expected - to my delight, because then I’ll get to sell at higher prices. I don’t know whether I’ll get out this month or this year even - maybe next year, but I do plan to get out of the rest of my US dollars, because this is an artificial rally caused purely by short covering.
FT: How will you tell when that deleveraging is finally over?
JR: I’m sure I won’t get it right, but I do hope that when there’s a lot of euphoria about the dollar and everybody’s saying, well, see, there’s no problem with the dollar . . . I hope I’m smart enough to recognise it and finally get out of the dollar, because it is a flawed and, maybe, even doomed currency.

The CEO of Rogers Holdings continued to talk about the greenback in a piece by Eoin Gleeson that appeared on the MoneyWeek (UK) website yesterday. Gleeson wrote:

What should investors do about it? “Bet against the dollar. And bet against long-term US bonds as well”. With a wave of corporate defaults likely this year and America’s debt problem spiralling out of control, any rally in the greenback and the US economy this year will be short-lived, he reckons.

The Singapore-based investor also talked about an asset class he knows very well. From the piece:

So what about Roger’s beloved commodities? They’ve taken a pounding along with other asset classes. Well, commodities have collapsed because we are in the midst of a global sell-off of everything, says Rogers. But the recession is only going to make the long-term bull case for commodities even stronger.

With miners struggling to get their hands on loans, they are not going to be opening too many new mines over the next year. It’s the same for farmers. And that means, just like in the thirties and the seventies, that commodities will rebound a lot quicker than shares, and this time they will continue to rise for another 10 to 15 years. “Even if commodities fall for a year or two, it’s not the end of the bull market,” he recently told Resource Investor. So what does he recommend?

“Buy gold, cotton and sugar”. Keep an eye on African oil stocks, - particularly in Angola, which will soon surpass Nigeria as the continent’s largest producer of oil. And, he tells Investors Chronicle, he’s keeping an eye on Taiwan. “I’m just sitting and watching because during this period of forced liquidation, some of these emerging markets are going to go down by more than they should simply because they went up by more than they should have.”

Rogers went into greater detail about emerging markets during his discussion with Investors Chronicle (UK). Jonathan Eley wrote Wednesday:

China is the only emerging market in which he has remained invested recently. “I had sold out of all other emerging markets… because there were all these MBAs on airplanes flying round the world looking for new emerging markets. They were all being over-exploited.”

Yet, Rogers is still keeping an eye out for opportunities. Eley wrote:

What’s on his watchlist? Taiwan is one new candidate. “I’ve never bought Taiwan before in my life, but there is peace now,” he says, referring to the frequent tension between China and its small nationalist neighbour in the past.

He believes that the two Koreas will be unified far sooner than many people think, and points out that despite its vile regime, Myanmar is also starting to open up. “It’s got 70 or 80 million disciplined, educated people, lots of natural resources, and it sits right between India and China. What better location is there than that?”

Outside of Asia, the co-founder of the legendary Quantum Fund thinks Africa has some possibilities. From the piece:

What about Africa, I ask? “There are huge opportunities in Africa. If there were six of me, two of me would be in Africa now. Angola is going to be the largest producer of oil in Africa sometime within the next year or two, overtaking Nigeria. Tanzania is making dramatic changes, too”.

Kilimanjaro Hotel Kempinski Dar es Salaam, Tanzania

Sources:

“The dollar is a flawed, maybe even doomed currency”
Jim Rogers
Financial Times (UK), November 18, 2008

“What Jim Rogers thinks you should buy now”
Eoin Gleeson
MoneyWeek (UK), November 19, 2008

“Jim Rogers on emerging markets”
Jonathan Eley
Investors Chronicle (UK), November 18, 2008

As I’ve noted previously on Investorazzi.com, legendary money manager Jeremy Grantham has been buying equities. Yet, how did the chairman of Boston-based investment firm GMO decide now is the time to start buying stocks? Well, Steven Goldberg, writing for Kiplinger.com, provided some insight yesterday as to how Grantham might have come to this conclusion. Goldberg wrote:

In making his forecasts about U.S. stocks, Grantham worships at the altar of “reversion to the mean” — the notion that valuations eventually return to their long-term averages. He calls it “our single big truth.” Over the long term, he notes, the stock market’s average price-earnings ratio is about 15. When stock prices are higher than those long-term medians, he turns bearish. And vice versa.

Grantham also pays attention to profit margins. The long-term average net-profit margin for S&P 500 companies is 5.6%. Currently, Grantham thinks profit margins are way too high. As the recession deepens, he believes margins will fall much lower — back to their historical averages. That’s a negative for stocks. But because of the bear market, P/Es have fallen so far that he sees stocks as good buys now.

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Goldberg also pointed out what the British investor is buying these days. The investment adviser wrote:

What is he buying now? Grantham’s favorite stocks are high-quality U.S. and foreign blue chips. He’s also turned bullish on emerging-markets stocks — they have been pummeled even worse than U.S. stocks during the bear market.

Grantham is negative on stocks of small U.S. companies and real estate investment trusts.

Source:

“A Bear Turns Bullish”
Steven Goldberg
Kiplinger, November 19, 2008

Chicago has a special relationship with billionaire hedge fund investor Edward Lampert due to his position as chairman of Sears Holdings Corp. Sears, Roebuck and Company, or Sears, as a good number of you may already know, is a chain of department stores that has its headquarters in the Chicago suburbs. As such, I wasn’t surprised when the Chicago Tribune’s Sandra Jones wrote a piece last week that dissected Mr. Lampert’s investments as of the end of last quarter. Jones wrote:

ESL Investments Inc., Lampert’s Greenwich, Conn.-based hedge fund, began buying shares in credit card issuer Capital One Financial last year. The fund held 9.9 million shares, valued at $504 million, as of Sept. 30, according to documents filed with the Securities and Exchange Commission late Friday. The fund also said it bought 34.6 million shares of mortgage giant Fannie Mae, valued at $52.9 million, in the quarter ended Sept. 30.

The U.S. government took control of the Federal National Mortgage Association, known as Fannie Mae, on Sept. 7, after a wave of mortgage defaults.

Additionally, Lampert’s fund bought 550,000 shares of Hartford Financial Group Inc., worth $22.5 million, and nearly doubled his stake in CIT Group Inc., to 7.3 million shares worth $51 million, in the quarter, the filing said.

Lampert owns 52 percent of Hoffman Estates-based Sears through ESL, making it his largest equity investment. He also holds large stakes in AutoNation Inc., AutoZone Inc. and Citigroup Inc.

Source:

“Lampert takes hit on Sears holdings”
Sandra M. Jones
Chicago Tribune, November 15, 2008

Taking advantage of depressed stock prices around the world, emerging markets veteran Mark Mobius has been busy acquiring global equities. Bloomberg’s Fabio Alves and Monica Bertran wrote on Monday:

Mark Mobius said he’s “aggressively” buying consumer stocks, including cellphone companies, retailers, banks and furniture makers, as faster economic growth in China, India, South Africa and Turkey offsets sagging demand from developed nations.

“We see a consumer boom in all of those countries,” Mobius, who oversaw more than $24 billion in emerging-market stocks on Sept. 30 as executive chairman at Templeton Asset Management Ltd., said in a Bloomberg Television interview from Johannesburg. “Per-capita income is growing at a very rapid pace in these countries.”

Mobius, who has more than 40 years of experience working with emerging markets, thinks that the slowdown in the global economy might be shorter than most people expect. From the Bloomberg piece:

The global economic downturn may not be as long or severe as expected because of the coordinated fiscal and monetary stimulus put forth by policy makers worldwide, the 72-year-old investor said today…

The slowdown “will be rather short-lived and, of course, the markets will anticipate this,” Singapore-based Mobius said. “There will be some deceleration, but these are still fast-growing countries.”

São Paulo Stock Exchange, Brazil

Dr. Mobius also likes the prospects of Brazil, which he believes offers a great opportunity for investors. From the Telegraph (UK) earlier today:

Brazil has a growing consumer base with personal wealth to spend. This stands to benefit Brazilian companies, particularly in the consumer sector. Brazilian exporters also contribute to growth. We also favour undervalued companies with high dividend paying stocks, net generators of cash and low leveraged companies. At the same time, companies with a strong market position and competitive advantages are also attractive.

We continue to maintain a positive outlook on Brazil and its enterprises. We believe the irrational panic that forced many funds to withdraw from Brazil and the stress of the local currency due to the global liquidity concerns, have depressed valuations of the companies to create an enormous opportunity for investment.

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Sources:

“Mobius Says He’s Buying China, India, South Africa (Update2)”
Fabio Alves, Monica Bertran
Bloomberg, November 17, 2008

“Emerging market guru Mark Mobius punts Brazil”
Telegraph (UK), November 19, 2008

Today, a guest post of mine appears on “MarketClub Trader’s Blog” from INO.com:

“Investing Legends Buying Up Stocks”

Legendary investors Jeremy Grantham and Warren Buffett recognize stock investors are in a panic, and are taking advantage of the situation by actively acquiring equities.

Regulatory filings this past quarter revealed that legendary investors Warren Buffett and George Soros increased their stakes in two well-known oil producers. Bloomberg’s Erik Holm, Edward Klump, and Linda Shen wrote on November 14:

Warren Buffett’s Berkshire Hathaway Inc. became the largest shareholder in oil producer ConocoPhillips… in the third quarter as stock markets tumbled.

Berkshire had more than 83 million shares in Houston-based ConocoPhillips as of Sept. 30, compared with about 17.5 million on March 31, the company said today in a regulatory filing…

ConocoPhillips traded as low as $67.31 a share in the third quarter after closing 2007 at $88.30.

According to the Bloomberg reporters, the Chairman of Berkshire Hathaway is taking a chance on the oil producer based on the forecast for increased global consumption down the road. They wrote:

Berkshire, which purchased MidAmerican Energy Holdings in 2000 and reported record profits last year from selling holdings of PetroChina Co., is betting on a long-term increase in energy demand worldwide. Global oil consumption will increase about 25 percent to 106 million barrels a day by 2030, the International Energy Agency said this week.

Petrobras Oil Derrick

Like the legendary stockpicker from Omaha, George Soros also increased his position in a major oil producer. MarketWatch’s Tony Cooke wrote on November 15:

The hedge fund of billionaire investor George Soros increased its stake in Brazilian state-run oil company Petroleo Brasileiro (PBR) to 21.1 million American Depositary Receipts as of Sept. 30 from 11.5 million at June 30.

Soros Fund Management LLC made the move as the ADRs tumbled during the quarter to about $44 from about $71 each…

The Petrobras stake was by far the largest in the Soros fund’s reported holdings, which totaled $3.8 billion at Sept. 30, up from $3.7 billion at June 30.

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Sources:

“Buffett’s Berkshire Boosts Stake in ConocoPhillips (Update3)”
Erik Holm, Edward Klump, and Linda Shen
Bloomberg, November 14, 2008

“Soros fund ups Petroleo Brasileiro stake”
Tony Cooke
MarketWatch, November 15, 2008

Edward Lampert, who some call “The Next Warren Buffett,” has been busy buying up stocks of the nation’s largest car dealer. According to the Associated Press yesterday:

Billionaire investor Edward S. Lampert continued to buy shares of AutoNation Inc., putting nearly $1.4 million more into the nation’s largest car dealer last week.

Lampert, a former AutoNation director who was already the company’s largest shareholder, bought 228,700 shares for between $5.90 and $6.15 per share on Thursday and Friday, according to a regulatory filing.

That follows purchases of 529,000 shares for $3.2 million, announced earlier last week. Lampert-controlled entities now own more than 78.6 million shares, or nearly 44.5 percent of the Fort Lauderdale, Fla., company’s outstanding stock.

Source:

“Eddie Lampert again raises stake in AutoNation”
Associated Press, November 17, 2008

Jim Rogers is still convinced commodities are a better investment than stocks and bonds at this point in time. Bloomberg’s Kyung Bok Cho wrote yesterday:

The rout in global markets may continue while bonds will be a “terrible” investment as economic problems may persist until 2010, investor Jim Rogers said.

“Stocks in the West are still expensive on any historic valuation method,” while “bonds are going to be a terrible place to be for the next 10, 20 years,” Rogers, chairman of Singapore-based Rogers Holdings, said at a conference in Seoul today. Equities in the West will be “in a trading range for years to come,” he said.

Despite an environment where more than $28 trillion has been lost in global equity markets and credit losses and write-downs have totaled $690 billion, the former partner of George Soros has made some purchases lately. The Bloomberg reporter wrote:

“I have started going back into the markets; that does not means it’s the bottom,” Rogers said. His purchases since mid-October include commodities and equities in China and Taiwan, as well as “a Korea stock,” he said, without giving details. “We may be hitting ‘a’ bottom,” Rogers said. “I don’t know if it’s ‘the’ bottom.”

Sungnyemun Gate
Seoul, South Korea

And commodities are still the place you want to be, according to the investor who called the beginning of the latest bull run in hard assets back in 1999. From the Bloomberg piece:

Rogers continues to favor commodities as an investment as fundamentals are “unimpaired” amid a global liquidation of assets, he said. “You will see that stocks have gone down more so far than commodities. That will continue as far as I’m concerned.”

An MSCI index of developed- and emerging-market stocks has lost 44 percent so far this year, compared with a 30 percent decline in the Reuters/Jefferies CRB Index of 19 commodities.

Source:

“Global Stock Market Rout May Continue, Rogers Says (Update1)”
Kyung Bok Cho
Bloomberg, November 11, 2008