Europe
Posted by blodmell in Uncategorized on September 18th, 2011
Common sense must be king with respect to Europe. I mentioned in the last blog that “Europe” and the broader crisis that word has become for global financial markets and “China tightening fears” continue to headline the fear element. Europe seems to have emerged as the number one fear and the unthinkable, the dissolution of the EMU, is now thinkable. Again, common sense has to guide us to the answer. Will it be in Germany’s interest to allow the collapse? What will cost more, Union or Disunion? AS the Economist magazine noted in their leader, Merkel has to spell out to the German people.
Let’s See If September Can Sustain A “Risk Rally”
Posted by blodmell in Uncategorized on September 2nd, 2011
I am posting less these days. I feel like a movie reviewer who has to write about the same movie every day. Every government on earth took debt to spend out of the financial crisis of 2008 and interest rates in the developed world haven’t left zero. Emerging markets have experienced an aggressive rebound while interest rates have risen to tame the growth yet the two great fears (drum roll…..Europe debt cris/ drum roll…China tightening fears have caused sell off in EM equity prices, twice!
Some of our China stocks, like China Life are trading at three year lows? Go figure? We watched Geely Auto go from 2 to 5 back to 2 again? Go figure. The boring and highly profitable mining business of iron ore, dominated by Vale has been a gripping soap opera. Go figure?
Even Brazil has been a rollercoaster and the “Brasil story” never changed. Yesterday the Brasil central made a daring and enviable move to lower interest rates after having raised them all year. They manage their economy with the same grace and style as they samba.
They can’t get the job machine in the USA going and Merkel is struggling to keep the momentum politically to defend the most basic vision of the EU, monetary union.
I am still an optimist but many have good reason not to be. Two years ago I posted that these would be tricky years for investors. The risk free rate would disappear as it has and equities would be the domain in a world of low interest rates. Even I didn’t imagine the intensity of the volatility but I have always said that it isn’t hard to pick good assets. The key is your average price.
As Painful As It Is, Spend Free Cash To Build On Cheap Prices. Brazil Is Overselling
Posted by blodmell in Uncategorized on August 10th, 2011
This has been a stunning week and will likely have an ugly finish. The pendulum will also probably overswing with all the fear. This is exactly why we don’t get invested from the start, but it’s time to show courage and use cash to build. The crisis is political and not fundamentally economic. We are formally entering global equity bear territory. Assets are truly becoming cheap.
We’ve Already Weathered A Drop In Brazilian Stocks
Posted by blodmell in Bank account in Switzerland, Emerging Markets on July 27th, 2011
Its stock index is down almost 14 per cent this year. Bank share prices have lost 10-20 per cent, the construction sector is in an even worse state, and the shares of some industrial companies have dropped as much as 40 per cent. Our steelmakers in Brazil such as Gerdau and SID have been clobbered but they keep paying great dividiends. Inflation fear headlines are in the papers. Yet, the basic macroeconomic story is still very rosy. More on the patience theme.
Patience. Patience…With This Nerve-racking Market Volatility
Posted by blodmell in Global Economy on July 20th, 2011
Focus on hard economic data (global output/inflation/interest rates/current account balances/trade volumes) and corporate earnings which continue to be positive…not on the drama in Europe, however serious, or outsized fears of a “hard landing” in China, however possible. Just remember that the markets are constantly pricing in their greatest fear and greates hope at once. Meanwhile, speculation and massive trading volumes make that process ever more exaggerated. I always say markets are quite literally, hysterical. This is why we must focus on the long run and patiently build positions when prices are below our average price per share. It ain’t glamorous but any other strategy will turn us into traders. There is nothing wrong with “trading”. We just don’t think it is consistent with the goals of our individual investors.
www.crinvestmentadvisors.com
Don’t Doubt Vale Mining
Posted by blodmell in Emerging Markets on July 5th, 2011
Vale SA (VALE3), the world’s largest iron-ore producer, sees no slowdown in demand from China as the country seeks to build 36 million low-income houses in the next five years, Chief Financial Officer Guilherme Cavalcanti said. The country will continue leading global consumption of the steelmaking raw material as it invests in new dwellings and infrastructure, Cavalcanti said on Bloomberg Television’s “The Pulse with Maryam Nemazee” today in London. Difficulties in bringing new projects to the production stage will cause a demand-supply imbalance lasting six or seven years, he said. “We aren’t feeling any contraction in demand for iron ore mainly because infrastructure building is still going on in there and also social housing,” Cavalcanti said. “The urbanization process in China is far from over, so we think that these will keep leading the demand for iron ore.”
It Seems The Risk Rally Is Returning. Keep Focused on Economic Data and Corporate Earnings
Posted by blodmell in Emerging Markets, Global Economy, Investment Advisory on July 4th, 2011
The Broken record player repeats, “Watch this quarters flow of hard economic data and especially corporate earnings.” I know it is difficult for investors to stop obsessing over Greece, or China tightening fears or a hard landing in Brazil but we must emotionally detach from this news real. Financial journalism is no different than pop “Breaking news” journalism. They all need a hot story to keep the drama going. Nobody wants to get excited about leading economic indicators and earnings but that is the real story.
Frankly, the scary story that isn’t getting the attention it should is the likelyhood that the United States won’t deliver the tremendous budgetary cuts necessary to continue their role as the global economic leader and Champion of the global reserve currency. That’s a story.
A Thoughtful Sunday
Posted by blodmell in Bank account in Switzerland, Emerging Markets on June 26th, 2011
Dear Clients,
I just finished reading the entire June issue of Foreign Affairs, “The Secrets of Germany’s Success”, “Globalization and Unemployment”,
“The Financial Rebalancing Act, ” , and, importantly, “What China Wants”.
These were articles that touched my intellectual curiosity and affirmed my long term perceptions after pounding bloomberg reports and observing the last round of global hard economic data. What a Sunday.
Friends, the bottom line is that the markets have been falling the last 6 weeks. One has to ask whether you think it’s all falling apart or this is just another faze. I think it is short term. Commodities will become more dear and the population is growing. Emerging Markets have the momentum and will continue to for those reasons.
Keep buying our good assets if they fall in price and be patient. If prices fall beyond fifteen percent then we increase our limit orders out to twenty percent.
Equity Prices Are Awfuly Low. This is Why We Have Cash
Posted by blodmell in Emerging Markets, Global Economy, Investment Advisory on June 20th, 2011
I know it hurts to see those nice market gains as of the end of April disappear. A lot of commentaries imply that the sideways/volatile market is here to stay. Since we aren’t traders, we must patiently build positions when prices are down. The valuations on the
Brazilian steelmaker, SID, are stunningly low. This company pays big dividends. Keep buiding on these excellent long term stories.
Hold The Line
Posted by blodmell in Emerging Markets, Global Economy, Investment Advisory on June 13th, 2011
I’ve been awful busy lately and the markets have kept the pressure on. Folks are obsessed with Greece. The same ol’ China fears linger. Even Brazil is under pressure as the doubters ponder whether they are in a bubble. The “double dip” word is even being dropped again.
The USA is in an awkward “soft patch”. Remember, markets are being bought and sold in a rear view mirror. Prices are constantly pricing in “worst case scenario” fears. We have to be patient right now and keep building on our positions when prices are cheap. The commodity stories haven’t changed in a month just the fears around them.
By the way, that Amalgamood vision I posted on last week is being presented at a conference in London this week. I can’t make it but I’m eager to hear more about it.
Buy on dips! I know it is a cliche but a good one.
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