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What We Are Reading

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Is It a Good Time to Invest in Emerging Markets?

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Are you wondering why you should invest in emerging markets? Here’s something to consider. For long-term investors, a unique opportunity presents itself in emerging market equities because of the rare combination of cheap equity valuations, depressed currencies, and positive momentum in equity prices and economic fundamentals.

Discover how a building-block approach to valuation creates forward-looking returns rather than the idea that it’s too late to invest, and how depressed currencies show a projected real return of 3.9% a year over the next decade. In addition to this, EM stocks are trading cheaply and showing robust 12-month price momentum.

The classical British economist David Ricardo’s advice to investors to “cut short losses” and “let your profits run on” couldn’t be more relevant. While the Trump election was forecast to leave a trail of destruction, this article delves deeper into why it is better to invest in attractively valued emerging market assets even in the midst of fear and uncertainty, which are making a slow exit. 

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Edelweiss Journal: Reflections on Trump’s America; The Challenge of Preserving Capital within the Financial System

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This issue of the journal from Edelweiss Holdings has two brief essays on relevant issues that hold value for any investor today.

Reflections on Trump’s America unveils historic perspective on the patriotic and business-wise President-elect Donald Trump. Within the context of financial markets, his election has received jubilation worthy of the second coming of an industrial revolution. Yet, even as Mr. Trump’s businesslike ideas should be welcomed in a nation that has veered further and further into an economic unknown, this essay shows how there is little reason for the boundless euphoria of anticipated greatness.

The Challenge of Preserving Capital within the Financial System by James Watson is an essay that makes for compelling read. While touching on myths attached to liquidity and the troubling imposition of control on individual financial affairs, this essay makes a point that has been echoed by Multi-Act; when credit implodes – as it must – only HQ stocks will have any sort of bid, as market participants realize that the inherent strength of HQ stocks were obscured with the hype attached to liquidity and credit mis-pricing.

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Macro

Role of Network Effects and Critical Mass as mental models in Business

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Replete with examples, Tren Griffin, a senior director at Microsoft, explores two powerful mental models: Network Effects and Critical Mass. Drawing on years of experience as a businessman for one of the world’s most renowned tech companies, Griffin offers practical expertise with adept and clarity. In this article, Griffin explains how companies can use these two mental models as a protective moat. 

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Macro

Don’t Confuse Cheap with Value

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There are just two ways to behave as an investor,

One requires buying cheap, selling at a profit, and repeating the process. This requires making hundreds, sometimes thousands of smart investment decisions in the course of a career. To make many smart decisions is too hard.

The second way to invest just requires one decision: buy a great business. This way is to adopt a strategy that requires being smart only a few times. Almost no one does this despite the obvious advantages. It requires the right investor base.  This article shows you how.

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Value stocks and Patience – may be the only way to turn around Bleak Returns

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It is a terrible time for investors. With bleak returns seeming to be the norm across the globe in this tumultuous stretch, they are relying on varied valuation metrics in hope of enhancing dividends. This piece discusses the best valuation metrics to gauge whether a stock is “cheap” or “expensive” and also provides an insight into Andrew Lapthorne’s views on why modern-day investors have to be brave to hold on to value stocks and be prepared to lose money for some time.  Read More

Macro

Why India’s Currency Debacle is a Lesson for Westerners

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As Indian citizens struggle with the inevitable teething troubles that the demonetization episode has brought upon them, it is important to know that this shouldn’t seem like a remote threat to Westerners. It establishes a significant point – state-issued paper currency exists only at the acquiescence of the State. One verdict can make it totally worthless. Read on to know why this Indian chapter must be seen as a lesson (read: warning) by the Western civilization and also why the value of gold cannot be debased by government decree. Read More

Macro

What Bridgewater’s Ray Dalio Told The New York Fed

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Ray Dalio, founder, Bridgewater Associates, is a vocal opponent of quantitative easing by central banks. In his speech at the Federal Reserve Bank of New York on October 5 this year, he presented what may seem to be a rather gloomy picture akin to a depression warning.

Learn about long- and short-term debt cycle and read what one of world’s most influential investors has to say about the limits to central banks’ monetary policies.

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Macro

Time to stop dancing: Asset inflation cycle coming to an end?

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Why is it that after ninety-something months of zero or near-zero rates, growth is still sputtering? Why is the corporate sector in an earnings recession? Why is the productivity growth negative? And why do central bankers still insist that no recession is in the forecast?
Read this article to dismiss the myth if in reality the central bankers can control the cycles and public behavior and can act as last anchor of confidence to eternity. Read More

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Australian Real Estate- A Chinese Syndrome?

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People looking to reason out the concerns about the valuation statistics in the Australian real estate market must be awake to one of the most crucial factors – Chinese property buyers. With the lower Australian dollar supporting the demand for Australian housing (especially for foreign investors), the flood of Chinese money gushing into this market is not showing any signs of slowing down. Read all about Australian residential property going under the hammer, the influx of Chinese currency and its implications, and the efforts banks and regulators are taking in this article.

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