Hope everyone had a nice weekend— or holiday, in the case of my American readers.

Today I’ll be carrying out some maintenance and upgrades on Investorazzi.com, so please be patient if you notice some “funny stuff” going on while on the weblog.

Thanks!

Christopher E. Hill
Editor

There will be no new relevant material posted on Investorazzi.com this Thursday due to the Thanksgiving holiday in the United States.

New posts are planned for Friday.

Thanks!

Christopher E. Hill
Editor

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

FREE VIDEO: How low can the Dow go?

Dumbfounded. That’s the best word I can think of to explain how a number of investors feel when trying to comprehend what’s transpired in the financial system in recent times. Even experienced Wall Street veterans didn’t recognize this latest storm until gale force winds were pounding at the doors of the “old firms.” You would think these guys, of everyone on the Street, would understand the intricacies of the global financial system, right? Wrong. Such knowledge, it appears, escapes even the best investors. Fabrice Taylor wrote on the online edition of Globe and Mail (Canada) today:

My job would be a lot easier if I actually understood the way the global financial sector works. I mean really understood, as opposed to broad-brushed sketches of intelligence gleaned from books and media. Abstract art doesn’t really cut it in this case. Realism is what you need.

Don’t feel too badly if you don’t get it either. You’re not - we’re not - alone in that painful ignorance. Jeremy Grantham is one of the sharper investing minds in the world. He’s been around for decades and is chairman of GMO, a Boston-based institutional money manager with $120-billion (U.S.) of other people’s money. I’ve heard him speak and he has a knack for explaining the complex with clarity and conviction.

Mr. Grantham and his colleagues are opinionated and, unlike most of his index-hugging counterparts in the grey world of investment, bold actors. Mr. Grantham started warning about the credit crisis three years ago, and never stopped. He adjusted his portfolios. He saw housing as a huge bubble and warned that the fallout would be brutal…

But here’s the kicker: For all his prescience, for all his deserved confidence when it comes to commenting on financial markets, Mr. Grantham knows next to nothing about the financial system. That’s not a slight, it’s his own admission.

“I want to emphasize how little I understand all of the intricate workings of the global financial system. I hope that someone else gets it, because I don’t. And I have no idea, really, how this will work out. I certainly wish it hadn’t happened. It is just so intricate that all I can conclude, by instinct and by reading the history books, is that it will be longer, harder and more complicated than we expect.”

Feel better? Probably not, but at least we’re not as dumb as we thought we were. And rest assured that he probably knows more about it than the majority of the economists and market strategists you see quoted or interviewed on TV.

FREE VIDEO LESSON: Fear

Also in the piece, Taylor reiterated what Grantham told Barron’s recently regarding GMO’s investment strategy:

He’s a little more sanguine today, telling Barron’s that some stocks are starting to look attractive, adding that the firm’s next move would be to start buying emerging markets and small-cap international names, although there’s no hurry, in his view.

Source:

“Dazed and confused by the meltdown? You’re not alone”
Fabrice Taylor
Globe And Mail (Canada), October 15, 2008

India’s CNBC-TV18 spoke to well-known commodities investor Jim Rogers this morning. Rogers, the author of Hot Commodities, correctly predicted the rally in hard assets that began in 1999. Here are some notable excerpts from the exchange:

CNBC: We have seen commodities decline in the last couple of months, do you think it’s a moment to buy or there is more decline left in the market?
ROGERS: It is better to buy when things are going down rather than when they are going up but I have no idea whether this is the best time. Normally September and October in investment markets are weak months so you are at the right time to start investing in commodities if you have it.

CNBC: What would you buy? Would you buy commodities or funds or into mining companies, what seems best to you?
ROGERS: It depends on your ability. If you know a lot about commodities, you can invest in commodities and that’s difficult in India. If you are a good stock picker then you are much better investing in commodity companies or commodity funds. If you know a good stock picker who runs a fund buy that fund, you will make more money.

CNBC: What are you betting on the non-agro or the agricultural commodities?
ROGERS: I bought agricultural commodities recently. They have gone down and everything has been going down for the last couple of months. I would rather buy agriculture than most things these days.

CNBC: You have never liked US dollar but we have seen a resurge come in to that? How long do you think this would stay?
ROGERS: We are having a rally in the dollar because everybody is bearish on it including me and that always leads to a rally. I don’t know how long it’s going to last but I plan to sell this rally sometime in the next month or a year. I don’t know how long this is going to go but I know that US dollar is a terribly flawed currency and it has got terrible problems down the road.

CNBC: Gold prices have come down from USD 1,034/oz to USD 730/oz, do you think there is more downside left here or would you buy at these levels?
ROGERS: I am going to try to buy little bit of gold today here in India, not a major position. If it continues to go down, I hope I am smart enough to buy more. Gold could go to USD 500/oz and could have a big correction. All markets do that, they have big corrections and they scare everybody but a 50% correction is normal. If it goes down 50%, I hope I am smart enough to buy a lot more.

CNBC: What would you buy as of now?
ROGERS: I recently bought airline stocks, agriculture, Renminbi, Swiss Francs, and Japanese Yen.

CNBC: Do you still believe we are into a bull commodity market and we might see more highs going on from here?
ROGERS: Over the next decade, we are going to see more highs. The world is in a recession now; you may see lower prices for some commodities for a while just as you may see a lot lower prices for a lot of stocks. Of the two classes, I would rather own commodities than stocks because when the economies revive, commodities are going to revive first and go up the most.

Source:

“Invest in commodities now: Jim Rogers”
Moneycontrol.com (India), September 12, 2008

Dr. Doom, Marc Faber, spoke to India’s CNBC-TV18 this morning. Here are some notable excerpts from the exchange:

CNBC: Do you expect a bigger slide in commodities from here after what has happened already?
FABER: Over the last six weeks or so, the dollar has been very strong and commodities have been weakening including gold. Some foreign currencies have been very weak like the New Zealand dollar, Australian dollar, euro, pound sterling. Now the dollar is overbought, the S&P 500 and commodities are oversold and we can have a counter trend rally. In other words, the S&P 500 can recover 100-points or so and the dollar could correct here from 1.40 against the euro to 1.50. The pound could rebound the Australian dollar, New Zealand dollar. At the same time, we can have rally in commodities but new highs in commodities won’t happen anytime soon.

The contraction of liquidity in the world will continue. We will need a base building period around this level before we start recovering in asset markets or at worst we will have another major slide in 2009, 2010.

CNBC: In the past few weeks and months there have been a lot of growth concerns. What is the likelihood that both equities and commodities underperform over the next few months?
FABER: Most countries I visit are in recession. In other words, growth is still there but it is not as strong as it was a year ago. A lot of countries have negative growth rates at the present time. But, the markets are already down very substantially. India is down from 21,000 to 14,300 or so. So to some extent, the markets have already discounted slower economic growth or a recession. The question is to what extent have they discounted profits that are not going to recover for several years and the market has not discounted that. Having said that when I look at markets in the US and also in Asia, we have reached a relatively oversold condition right now and sentiment is quite negative and the news coming out of the US is very negative. So in general, when the news is very negative, markets can temporary bottom out and rebound.

CNBC: When you say that we may not see new highs for commodities in a hurry, is it crude that you are referring to?
FABER: You may not see a new high for many asset classes including the Indian Sensex for many years. The oil price is unlikely to go up very substantially unless you have a geopolitical confrontation, which is really possible once Mr. McCain is elected in US.

CNBC: The earlier feeling was that if commodities get into a bear market then equities will get out of theirs. Is it possible that both these markets remain in bear phases?
FABER: If you look at the direction of asset classes since 2001 and October 2002 then equities and commodities have moved in the same direction. All other asset classes like real estate in developed markets, emerging markets and even bond prices have moved up and that is the very famous Bernanke bubble. You can say Thank You to Bernanke, he has created the greatest bubble in the history of mankind. Now the consequences will be felt and they will be felt for quite some time because credit growth has de-accelerated in an unprecedented fashion and that leads to falling asset prices and recession.

CNBC: What commodity looks most likely to rebound form here between precious metals, base metals and even what’s been happening with crude?
FABER: A lot of commodities have become oversold because they are down 50% or more in some cases but I don’t think a new bull market is getting underway any time soon. Commodity prices will be higher in 2015 because all Central Banks are money printers and they do nothing else but print money. When their economies don’t do well, they just go out and print more money and cut interest rates which leads to competitive devaluations. So, if the US dollar is strong then the likelihood is that the Fed will cut interest rates increases and if the US dollar is weak, their hands are tight. If the Australian dollar or the pound sterling is very strong, then the tendency for these Central Banks is to cut interest rates.

At the end of the day, the whole world will end up with interest rates around zero and we will get into a very highly inflationary environment. When everything goes up, the price of TV, bread, and stocks but in real terms the stocks will go down.

Source:

“Sensex may not see a new high for many yrs: Marc Faber”
Moneycontrol.com (India), September 12, 2008

Back on September 2, Zoe Hughes of Private Equity Real Estate magazine reported that private international real estate investment firm Colony Capital, LLC, is looking to diversify into energy and infrastructure. Hughes wrote:

Colony Capital is considering long-term plays in the energy and infrastructure fields as part of a bid to diversify the private equity real estate firm’s brand, according to president Richard Saltzman.

In an exclusive interview published in the September issue of PERE magazine, Saltzman spoke about the firm’s strategic push, revealing energy and infrastructure were two spaces that could have “deep opportunities” for the firm in the future. He also spoke about Colony’s opportunistic investments, notably in the distressed arena.

Fukuoka Dome Baseball Stadium
Acquired by Colony Capital in 2004

Source:

“Colony gears up for diversification drive”
Zoe Hughes
Private Equity Real Estate, September 2, 2008

Earlier today, legendary investors Marc Faber and Mark Mobius talked about Thailand as the Southeast Asian country wrestles with political instability. Thailand’s SET Index dropped to a 19-month low Tuesday after Prime Minister Samak Sundaravej declared a state of emergency following clashes between pro and anti-government demonstrators.

Marc Faber, the famous Swiss-born investor who resides in Thailand, appeared on Bloomberg Television this morning from Bangkok and talked about the political crisis, the economy, and the investment outlook for Thailand. The editor of The Gloom Boom & Doom Report said:

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

But at the same time, these people look for a strong stock market. I think that will be misplaced. At the same time, Thai shares are inexpensive. You can buy lots of Thai companies at a dividend yield of between 5 and 8 percent. So, that will give some support to the market.

Templeton Asset Management’s Mark Mobius also addressed the Thailand situation when he appeared on CNBC this morning. The emerging markets veteran said:

We are bullish on Thailand long-term. And we have been for quite some time because we think that these political disturbances sort of refresh the political climate and pushes for reform. So, we think after this is over, things will be good…

Based on our experience, from many, many years in Thailand, things will get better. There’s no question about that. You may have to wait for a while. But the interesting thing about the market is it hasn’t come down very much in the face of these demonstrations. So, I would like to see some further correction in the market before going back in.

(CNBC: How much of a correction?)

20, 30 percent like that.

You can view 9 minute 14 second Faber segment here.

You can view the 3 minute 31 second Mobius segment here.

Sources:

Marc Faber Interview
Bloomberg, September 2, 2008

Mark Mobius Interview
CNBC, September 2, 2008

Due to the Labor Day holiday, there will be no new material posted on Monday. Posts will resume on Tuesday.

Have a great weekend!

Christopher E. Hill
Editor

There will be no new material appearing on Investorazzi.com today. The regular posting schedule of Monday through Friday will resume tomorrow.