Mark Mobius’ faith in emerging markets remains strong, despite growing political concerns over Pakistan and Russia. Charlotte Banks wrote on the website for the London-based publication Professional Adviser earlier today:

Despite an unstable stockmarket and rising political uncertainty, Mark Mobius, executive chairman of Templeton Asset Management, believes that Pakistan still offers long-term value…

“It is a big and important country which is full of very intelligent people so there is no reason why they shouldn’t do quite well,” he said.

Turning his attentions to another emerging market which has raised political concerns for investors, Russia, Mobius says he hasn’t been put off and he is not concerned about investing there.

“The problems are not going to scare us away from Russia - in the long term we think the country is going to be fine and will not be avoiding it in any way,” he said. “In the long term, the country is too important to ignore.”

Square of Europe, Moscow

Source:

“Mobius points to Pakistan as a long-term winner”
Charlotte Banks
Professional Adviser (UK), August 29, 2008

Jim Rogers appeared on CNBC early this morning and talked about a number of issues, including:

Possibility Of Recession

Recessions are like forest fires. Forest fires clean out the underbrush, they clean out things so that the forest can come out with a solid foundation and start with a new burst of growth. That’s what recessions are for. This is just like forest fires.

Keynesian-Type Stimulus Plan

Keynes has been pretty much disproven by most people, except maybe at CNBC…

Well, we will see what happens with this new stimulus package from Japan and from the United States. If you ask me, it’s the same mistake that America made in the seventies, they refused to let anybody fail, they kept propping things up with band-aids, and America had one of its worst decades its had in its 200 years of history. Likewise with the Japanese in the 1990s, they had their lost decade. I’m afraid we’re just extending things out, and we too, are going to have a lost decade.

U.S. Presidential Candidates

On Senator Barack Obama:

Well, he’s talking about spending a lot of money. Yes, I don’t consider that very good, going deeper into debt. The United States is already the largest debtor nation in the history of the world. I’m not sure that that’s going to solve anything.

On Senators Obama and McCain:

Neither one of these guys understand what’s going on. They don’t understand currency markets, economies, they don’t understand the world. You know, both of them will cause us more problems than they’re going to solve. If you happen to be friends with whoever wins, sure, you’re going to have a better time in the next four years. But the rest of us, the 300 million Americans, are all going to be worse off in the next four years. In fact, the world will be worse off.

Wall Street Bail Out

They’re bailing out Wall Street because all their friends are on Wall Street. When Ben Bernanke gets a phone call from the head of Lehman Brothers, he takes the call. But if some poor school teacher in Oklahoma calls Ben Bernanke, he doesn’t take the call. You know, he’s dealing with his friends on Wall Street, trying to save them, when in fact he should let them fail. And that would be a better solution. At least for 300 million Americans.

Letting Financial Institutions Fail

We’ve been having investment bankers go bankrupt for a few hundred years. Are you suddenly telling me that if investment banks on Wall Street go down the tubes, that the world’s going to come to an end? Listen now, a lot of 29-year-olds out there are driving Maseratis. Let them turn in their Maseratis. Let some of the rest of the people in America have a good time rather than people on Wall Street…

Fannie Mae, Freddie Mac Bailout

Why should the 300 million Americans take on the $6 trillion of debt that Fannie Mae and Freddie Mac incurred? We didn’t have anything to do with it. It’s not our responsibility that a bunch of incompetents and crooks went out and ran up $6 trillion of debt. Why should we pay for it? It’s bad enough when the incompetents and crooks in Congress run up huge debts. But when people who aren’t even elected run up debts, why should Americans have to pay off that debt?

Inflation

Inflation’s going to get worse.

Commodities

I have not sold any commodities, and I’ve bought some more agriculture recently.

Emerging Markets

The ones that are in businesses which will not be affected by recession are going to do fine. Agriculture farmers around the world are finally going to be a lot better off. Maybe in ten years we’ll have 29-year-old farmers driving Maseratis instead of 29-year-old stockbrokers riding around in Maseratis. If you’re in the right areas, you’re going to do fine. But everybody’s going to be affected when large economies go into recession…

I’ve sold out of nearly all emerging markets because they were very over-exploited in the last two or three years. So I don’t really own shares in any emerging markets except of course China and Taiwan, which I still own. But other than that, I’m basically out of emerging markets around the world. Too many people around the world are flying around looking for hot emerging markets. That’s not a time to be investing in them.

Europe

Taxes are much too high in Europe. Nobody wants to invest in Europe with a high tax rate.

You can watch the entire 13 minute 3 second segment here.

Source:

Jim Rogers Interview
CNBC, August 29, 2008

Yesterday, Koh Gui Qing of Reuters India talked about the recent political upheaval in Pakistan and its effects on the domestic financial markets. Qing wrote:

Pakistan’s financial markets will increasingly miss the political stability under Pervez Musharraf as the country’s nascent but turbulent transformation to democracy from dictatorship keeps foreign investors away.

Some analysts said although Pakistan’s transformation into a democracy will get the thumbs-up from investors in the long run, the jostle for power may deter foreign investors in the near term and limit any market recovery…

Pakistan’s stock market is at a new two-year low and the rupee has weakened to a new record low.

Emerging markets veteran Mark Mobius offered his views on the situation in Pakistan to Reuters. According to Qing:

“The departure of Musharraf does not necessarily mean that stability and a guarantee of U.S. aid is out the window,” said Mark Mobius, executive chairman at Templeton Asset Management.

Mobius said Pakistan’s stock market has “probably already discounted the worst case scenario”.

Source:

“Pakistan’s rocky road to democracy deters investors”
Koh Gui Qing
Reuters (India), August 27, 2008

Tom Dyson, contributing editor to DailyWealth, a free investment newsletter that uses contrarian investment strategies, talked about his recent meeting with legendary investor Jim Rogers in the August 25 issue of the publication. Dyson wrote:

Last week, I met Jim Rogers for a drink at the apartment complex where he lives in Singapore…

Jim Rogers is a famous American speculator. He’s written four bestsellers on investing. He’s been to hundreds of countries. And he’s made hundreds of millions of dollars from his investments.

Jim asked me what I’m doing in Singapore. I told him I’m traveling around Asia for 10 weeks and visiting China, India, Thailand, Malaysia, Korea, and Singapore.

“Well, you’re visiting all the wrong countries,” he said. He told me I should be going to Myanmar, North Korea, Cambodia, and Taiwan.

Nice article on the investment potential of these, and other, Asian countries. Be sure to check it out here.

Cambodia

Source:

“You Should Consider North Korea as an Investment”
Tom Dyson
Daily Wealth, August 25, 2008

Yesterday, Bloomberg’s Sree Vidya Bhaktavatsalam reported that Pacific Investment Management Co., which was founded by legendary investor Bill Gross and is the biggest manager of bond funds, is actively seeking as much as $5 billion to purchase mortgage-backed debt, according to two investors with knowledge of the matter. Bhaktavatsalam wrote:

The Distressed Senior Credit Opportunities Fund will invest in “senior” and “super-senior” securities backed by commercial and residential mortgages, said the people, who asked not to be identified because the fund is private. Senior debt is first to be paid off in a default…

The new Pimco fund, dubbed Disco, will focus on commercial loans as well as residential debt that doesn’t carry explicit government guarantees or the implied backing of securities issued by companies such as Fannie Mae or Freddie Mac, the investors said. It also will seek investments in securities backed by home-equity, credit-card and auto loans, they said, and can invest in debt secured by collateral outside the U.S.

The Disco fund has a 15-month investment period and a 5-year life. It will be jointly managed by Pimco’s credit teams in the U.S. and Europe, the investors said.

Bloomberg Bhaktavatsalam also noted in the piece:

Gross’s Total Return Fund advanced 9.4 percent in the past year to beat 99 percent of competing bond funds, according to data compiled by Morningstar Inc. in Chicago. The fund had 61 percent of its assets in mortgage securities as of June 30, up from 53 percent a year earlier.

Source:

“Pimco Seeks as Much as $5 Billion for Distressed Debt (Update1)”
Sree Vidya Bhaktavatsalam
Bloomberg, August 27, 2008

Legendary oil investor T. Boone Pickens, Jr., has a new forecast for the price of crude oil. According to CBS News yesterday:

In town for the Democratic convention to promote his “Pickens Plan” for alternative energy, billionaire oilman T. Boone Pickens predicted $200 a barrel oil within three years.

“In two or three years, we’re going to be at $200 a barrel—could be $300 a barrel for oil,” Pickens said inside the “Big Tent,” a complex outside the Pepsi Center set up for bloggers. “And consequently, our economy is going to struggle and our security is just—it’s a disaster.”

In an earlier post, I noted that back on July 22, Pickens told U.S. lawmakers that oil prices would hit $300 a barrel in 10 years if the United States failed to reduce its dependence on foreign imports.

Source:

“T. Boone Pickens Predicts $200 A Barrel Oil”
CBS News, August 27, 2008

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Well-known investor Jim Rogers talked about the prospects for crude oil while in Malaysia this past weekend. Bloomberg’s Chan Tien Hin wrote:

Jim Rogers, who in April 2006 correctly forecast the oil price would reach $100 a barrel and gold $1,000 an ounce, said he expects oil to continue to increase over the next decade.

“Over the course of time, it’s a bull market,” the chairman of Rogers Holdings said today after an investor conference in Kuala Lumpur. While the oil price could fall to $75 or rise to $175, the market will continue to increase over the next 10 years, he said.

The Bloomberg reporter noted that according to Rogers last week, the decline in commodity prices from record highs were only a temporary reversal in a bull market that he predicts will last for several years.

Source:

“Jim Rogers Says Oil Price Rise to Continue for Decade (Update1)”
Chan Tien Hin
Bloomberg, August 23, 2008

Bloomberg interviewed emerging markets veteran Mark Mobius, who shared his belief that Vietnamese stocks have tremendous investment potential. Bloomberg’s Van Nguyen wrote this morning:

Vietnam’s stock market offers investment opportunities after a 45 percent slump this year, said Mark Mobius, executive chairman of Templeton Asset Management Ltd.

“Vietnam’s stock market now is down, so there are more opportunities,” Mobius said in an interview in Ho Chi Minh City, where Templeton opened its Vietnam representative office today. “The market will go up and will be much more valuable in about three years.”

Mobius, who oversees about $40 billion in emerging-market equities, is increasing Templeton’s investments in Vietnam after it bought a 49 percent stake in the fund management unit of Joint-Stock Commercial Bank for Foreign Trade of Vietnam, known as Vietcombank Fund Management, earlier this year.

Ho Chi Minh City (Saigon), Vietnam

Nguyen noted the sectors Templeton’s Mobius is targeting. From the Bloomberg piece:

In Vietnam, Templeton will invest in retail banking, manufacturing and agriculture companies on Ho Chi Minh City’s stock exchange, Mobuis said. He expects the country’s economy to expand about 6 percent this year.

Source:

“Vietnam’s Stock Market Attractive for Investors, Mobius Says”
Van Nguyen
Bloomberg, August 22, 2008

According to the Wall Street Journal this morning, the world’s largest bond fund company Pacific Investment Management Company (PIMCO) favors agency mortgage-backed securities instead of government debt. PIMCO was founded by legendary bond investor Bill Gross, who serves as chief investment officer of the California-based investment firm. Min Zeng wrote this morning:

Despite the woes rocking mortgage companies Fannie Mae and Freddie Mac, bond-fund company Pacific Investment Management Co. continues to favor agency mortgage-backed securities over government debt.

Steve Rodosky, head of Treasury and derivatives trading at Newport Beach, Calif.-based Pimco, said the unit of Allianz SE prefers agency mortgage-backed securities, or MBS, the so-called pass-throughs sold by federally chartered firms, over debentures of the two companies as well as Treasurys as they provide more attractive yields.

“The best opportunities in the markets are in high-quality agency MBS,” Mr. Rodosky said in an interview Thursday. “You are getting a collateralized piece of paper at a significantly wider spread.”

The Journal’s Min Zeng noted:

Pimco’s flagship $129.56 billion Total Return Fund increased its mortgage-bond holdings last month to 65% from 61% in June, according to the data from the company’s Web site. In contrast, the fund continued to shed government-debt holdings, including Treasurys and agency debt last month for the seventh straight month. The fund is the world’s largest bond fund and is run by Bill Gross, the company’s chief investment officer.

Source:

“Despite Fuss, Mortgage-Backed Bonds Have Fans”
Min Zeng
Wall Street Journal, August 22, 2008

Legendary stock investor Warren Buffett appeared on CNBC’s “Squawk Box” this morning. Reuters’ Jonathan Stempel and Euan Rocha covered the event and wrote:

Warren Buffett said the U.S. economy is unlikely to improve before 2009, and there was a “reasonable chance” that Fannie Mae and Freddie Mac shareholders would be wiped out though the companies themselves are too big to fail.

The “Oracle of Omaha” touched on a number of topics, including:

Credit Crisis

Referring to credit deterioration, Buffett said, “Right now the situation is still getting worse, and I would say that I don’t see any early end to that.”

U.S. Economy

He also said Federal Reserve Chairman Ben Bernanke “does not have any magic wand” to bolster an economy facing weak growth and mounting inflation. “In my judgment it won’t be any better five months from now,” he said.

U.S. Stocks

Buffett said U.S. stocks are broadly “more attractive” than they were a year ago, adding that Berkshire has no currency bets against the U.S. dollar.

U.S. Mortgage Giants

Fannie and Freddie shares have plummeted as speculation grows about a government bailout of the companies, which own or guarantee almost one-half of U.S. mortgages. Shares of both have fallen more than 90 percent in the last year.

“They’re too big to fail,” Buffett said. “That doesn’t mean that the equity can’t get wiped out, and it almost has. In a practical sense, as institutions, they don’t have any net worth.”

Buffett forecast that “you’ll see some action fairly soon” to support the companies, but that he has not been approached to assist in any bailout. He said “nothing is going to happen” to investors in the companies’ insured mortgages or debt, but “the equity and preferred stock is another question.”

Transcripts of his “Squawk Box” appearance can be found here at CNBC’s “Warren Buffett Watch.”

Source:

“Buffett sees economy weak into ‘09”
Euan Rocha, Jonathan Stempel
Reuters, August 22, 2008