How
does traveling 250 to 300 days a year for work sound to you? It sounds fine to
Mark Mobius, the executive chairman of the Templeton Emerging Markets Group,
who does just that, year after year.
does traveling 250 to 300 days a year for work sound to you? It sounds fine to
Mark Mobius, the executive chairman of the Templeton Emerging Markets Group,
who does just that, year after year.
All those air miles criss-crossing continents
give the 78-year-old Mobius, who oversees a team of more than 50 people
managing some $45 billion, a rare perspective on emerging and frontier markets.
The Long Island, N.Y.-born investor spoke with Bloomberg from Hong Kong about
where to find “emerging markets investments” in the United States,
the extreme risks threatening investors over the next decade and how he manages
his own money. An edited transcript:
give the 78-year-old Mobius, who oversees a team of more than 50 people
managing some $45 billion, a rare perspective on emerging and frontier markets.
The Long Island, N.Y.-born investor spoke with Bloomberg from Hong Kong about
where to find “emerging markets investments” in the United States,
the extreme risks threatening investors over the next decade and how he manages
his own money. An edited transcript:
You’ve
blogged lately about how irrationality and emotion can drive investor
decisions. Why are you focused on this now?
blogged lately about how irrationality and emotion can drive investor
decisions. Why are you focused on this now?
Many investors have become quite concerned about
the global situation and so have focused entirely on the United States. We
thought it was a good chance to remind people to widen their scope a little,
because while focusing on the U.S. is fine — it’s a great market with good
companies — there are plenty of opportunities around the world, and global investing brings diversification. The only person who
shouldn’t diversify is the person that knows it all.
the global situation and so have focused entirely on the United States. We
thought it was a good chance to remind people to widen their scope a little,
because while focusing on the U.S. is fine — it’s a great market with good
companies — there are plenty of opportunities around the world, and global investing brings diversification. The only person who
shouldn’t diversify is the person that knows it all.
Also, while volatility’s down in the short term,
in the longer term it’s been on the upswing. Markets are bigger, there are many
more things happening in the markets, there are more instruments to go short
and long, and derivatives create volatility. Individuals and even institutional
investors have to be careful they don’t get caught up in it and get scared.
in the longer term it’s been on the upswing. Markets are bigger, there are many
more things happening in the markets, there are more instruments to go short
and long, and derivatives create volatility. Individuals and even institutional
investors have to be careful they don’t get caught up in it and get scared.
You’ve
also written recently about how some U.S. companies can be seen as emerging
markets investments.
also written recently about how some U.S. companies can be seen as emerging
markets investments.
There are many companies listed in London, New
York, even Frankfurt, where you’re really dealing with an emerging markets or
even a frontier markets company. If you bought Unilever
[UL] we’d consider that an emerging markets company — more than 50 percent of
its earnings are from emerging markets. Richemont [CFRUY], which is listed in
Switzerland and has brands like Cartier, gets more than half its earnings from
emerging countries. So does Avon [AVP].
York, even Frankfurt, where you’re really dealing with an emerging markets or
even a frontier markets company. If you bought Unilever
[UL] we’d consider that an emerging markets company — more than 50 percent of
its earnings are from emerging markets. Richemont [CFRUY], which is listed in
Switzerland and has brands like Cartier, gets more than half its earnings from
emerging countries. So does Avon [AVP].
It’s good to have some of those, but for full
exposure to emerging markets don’t overlook the many pure plays in China,
India, Nigeria or other parts of the world. Individual companies there are
growing faster than companies in the U.S. or U.K. Emerging markets represent 32
percent of the global market capitalization of stocks. That alone means you’ve
got to at least pay attention to what’s happening in these markets.
exposure to emerging markets don’t overlook the many pure plays in China,
India, Nigeria or other parts of the world. Individual companies there are
growing faster than companies in the U.S. or U.K. Emerging markets represent 32
percent of the global market capitalization of stocks. That alone means you’ve
got to at least pay attention to what’s happening in these markets.
Is it harder to get true
diversification today because global markets move more in lockstep — are more
correlated?
diversification today because global markets move more in lockstep — are more
correlated?
From time to time, particularly in times of high stress in markets
— the subprime crisis, SARS — markets will tend to move in the same
direction. Usually it won’t take long before markets begin to separate from
each other.
— the subprime crisis, SARS — markets will tend to move in the same
direction. Usually it won’t take long before markets begin to separate from
each other.
In
frontier markets we’ve noticed that correlation with other markets, even in
times of stress, tends to be low. You see that when looking at it from a
general standpoint — when comparing indexes. And our funds wouldn’t be moving
in line with the market, because we’re making individual stock selections
within each market. We’re not managing our portfolio against some benchmark.
frontier markets we’ve noticed that correlation with other markets, even in
times of stress, tends to be low. You see that when looking at it from a
general standpoint — when comparing indexes. And our funds wouldn’t be moving
in line with the market, because we’re making individual stock selections
within each market. We’re not managing our portfolio against some benchmark.
What’s the biggest risk to
investors over the next 10 years?
investors over the next 10 years?
The No. 1 risk is the possibility of either deflation accelerating
or inflation exploding. There could be two extremes hitting markets, and that could cause havoc
in terms of volatility. Right now many nations face a deflationary environment.
But then, given the amount of liquidity in the global marketplace, we can also
see the reverse of that, in very high inflation.
or inflation exploding. There could be two extremes hitting markets, and that could cause havoc
in terms of volatility. Right now many nations face a deflationary environment.
But then, given the amount of liquidity in the global marketplace, we can also
see the reverse of that, in very high inflation.
You’d
normally think that with the huge influx of liquidity there would be inflation.
But the banks that receive this money from central banks haven’t been lending
it. If there’s a rapid reversal of that, you could see inflation move up very
quickly, and the reaction of central banks could be intense, and excessive, in
withdrawing liquidity from the markets.
normally think that with the huge influx of liquidity there would be inflation.
But the banks that receive this money from central banks haven’t been lending
it. If there’s a rapid reversal of that, you could see inflation move up very
quickly, and the reaction of central banks could be intense, and excessive, in
withdrawing liquidity from the markets.
How can individuals deal
with that in their portfolios?
with that in their portfolios?
You’ve got to be exposed to companies that can withstand both
inflation and deflation. Usually, that means a company with a unique position in its market. In a
deflationary environment, if you have a strong brand
name and a prestigious quality image, people would be willing to pay
your price even with deflation. A good example is the luxury companies.
inflation and deflation. Usually, that means a company with a unique position in its market. In a
deflationary environment, if you have a strong brand
name and a prestigious quality image, people would be willing to pay
your price even with deflation. A good example is the luxury companies.
In
an inflationary environment you’ve got to own companies that can raise prices
fast enough to keep up with inflation. There are many companies
that own good brand names and can dominate a product category. It could be the
Unilevers of the world.
an inflationary environment you’ve got to own companies that can raise prices
fast enough to keep up with inflation. There are many companies
that own good brand names and can dominate a product category. It could be the
Unilevers of the world.
What would you say is the
biggest mistake investors make?
biggest mistake investors make?
Taking a short-term view that can bring a risk of being whipsawed. A good
example now is oil prices. We’ve seen oil prices drop, with some people looking
at $60 a barrel, and many people will react and sell oil companies.
example now is oil prices. We’ve seen oil prices drop, with some people looking
at $60 a barrel, and many people will react and sell oil companies.
That could be a big mistake (sell oil companies), because the
longer-term predictions have oil at $90 or even $100 a barrel. By making this
short-term decision on stocks that, by the way, have already gone down, you’re
selling at the bottom and may get caught having to buy at a top when prices
recover.
longer-term predictions have oil at $90 or even $100 a barrel. By making this
short-term decision on stocks that, by the way, have already gone down, you’re
selling at the bottom and may get caught having to buy at a top when prices
recover.
Many
companies at $60 a barrel will do very well because they’re diversified, and aren’t
only drilling for oil but are selling gas, selling diesel. So lower oil is bad for the exploration side, but for the
distribution side of oil companies it’s good. Many of these stocks have
gone down by 20 percent to 30 percent and pay excellent dividends, so it
doesn’t make sense to be selling them.
companies at $60 a barrel will do very well because they’re diversified, and aren’t
only drilling for oil but are selling gas, selling diesel. So lower oil is bad for the exploration side, but for the
distribution side of oil companies it’s good. Many of these stocks have
gone down by 20 percent to 30 percent and pay excellent dividends, so it
doesn’t make sense to be selling them.
What’s the biggest mistake
you’ve made in your personal portfolio?
you’ve made in your personal portfolio?
Keeping too much in cash and not being in stock funds. Someone asked our
company’s founder, John Templeton, when they should invest, and he said that
the best time to invest is when you have money. It’s very true. If you’re just
sittiing on cash and not investing, regardless of where the market is, you’re
probably going to lose out sooner or later.
company’s founder, John Templeton, when they should invest, and he said that
the best time to invest is when you have money. It’s very true. If you’re just
sittiing on cash and not investing, regardless of where the market is, you’re
probably going to lose out sooner or later.
Do you manage your own
money?
money?
I
put my money into our funds. Part of our bonuses are put in our funds and I
also buy funds outside of that. And not just our mutual funds. Diversification is very important, even among mutual funds.
put my money into our funds. Part of our bonuses are put in our funds and I
also buy funds outside of that. And not just our mutual funds. Diversification is very important, even among mutual funds.
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