Mobius: EMs Safer than Treasuries, Dollar

Templeton Asset Management’s Mark Mobius says the U.S.’s debt issues have made emerging markets a safer bet than U.S. Treasuries and the dollar, and says he doesn’t think another global recession is coming anytime soon.

“The debt crisis in the U.S. and Western Europe puts emerging markets in a very strong position because their debt to GDP ratios are much lower than the developed countries and their foreign reserves are greater than the developed countries,” Mobius told CNBC, which reports that he’s also bullish on commodities and gold.

Mobius sees positives in the U.S., however. “The consumer is alive and well and kicking both in the U.S. and in emerging markets, so I’m not too frightened [about a global recession],” he said. “The consumer has lots of cash to spend and they want to spend, because they don’t want to hold currencies.”

Mobius says he’s high on emerging market retail stocks, and packaging companies. He also discusses the frontier markets he’s high on.

 

 

 

 

Siegel and Shiller Debate the Debt Conundrum

How should the U.S. go about cleaning up its debt mess? In a recent interview with MarketWatch, two of the world’s top economic minds — Professor Jeremy Siegel of Wharton and Professor Robert Shiller of Yale — offered their takes. Siegel says Medicare is the big issue the government needs to address, and he doesn’t think tax increases will be necessary. Shiller says a policy of “tax and spend” that gets more Americans back to work is needed, though he says it would be extremely unpopular. Neither Siegel nor Shiller thinks U.S. legislators will allow a debt default, despite the current struggle to reach a compromise on the debt ceiling issue in Congress.

Sonders: Market Outlook Is Better than You Think

Charles Schwab Chief Investment Strategist Liz Ann Sonders says she doesn’t think a double-dip recession is in the cards, and thinks the outlook for the market is good — even if growth is slow. Schwab tells Yahoo! Daily Ticker that valuations look good based on 2011 and 2012 earnings estimates. She also says she’s examined years when the economy has grown at less than 2% or so, and years when growth has been below 3% or so. In both cases, she says, stocks have averaged returns of 13%-14%, with few negative years. One caveat: She says inflation must stay in check. But she adds that the recent economic soft patch has been helping on that front by keeping commodity prices down.

Doll on the Debt Ceiling’s Impact on His Portfolio

Blackrock Chief Equity Analyst Bob Doll says he hasn’t sold any stocks because of the debt ceiling imbroglio, and he expects a deal will get done.

“We’re going to have a massive circus,” Doll tells CNBC. “It’s not going to be fun. In the 12th, maybe 13th hour we get something done and we move on. Hopefully, it’s something substantial. If not, we’ll have to do something substantial down the line.” Doll also says the U.S. is headed in an “austerity direction”, though to what degree is unclear.

Doll says the markets haven’t been shaken by the debt ceiling talks because other good things are happening — progress has been made on Greece’s debt woes, he says, and recent corporate earnings and revenue reports have been good. But he says the debt sideshow has affected Americans’ psyches in a negative way. “It just doesn’t engender confidence,” he says. “And we’re in a period of time where confidence hasn’t been what we need it to be, both consumer and business, and we need to restore some of that. And if we can, we’ll get back to hiring some workers.”

How A Top-Performing Fund Manager Is Structuring His Portfolio

Top-performing mutual fund manager Dennis Stattman is high on energy stocks and unloved large-cap high-quality stocks, and says fast-growing markets like China, India, and Brazil also have his attention. Stattman, whose fund has had only three down years since its 1989 inception, tells WealthTrack’s Consuelo Mack that relative to other securities, stocks are a good option right now. But, he says, that may be more to do with the unattractiveness of other assets than the attractiveness of stocks. He also says stock valuations may be skewed because of high profit margins that aren’t likely to continue. Stattman also reiterates his belief that high debt and a coming “tidal wave” of spending due to demographic trends has created risk of higher inflation and interest rates, creating danger for fixed-income assets.

 

How to Find Growth Stocks that Keep Growing

Newsletter guru Jim Oberweis has found some gems in upstart growth plays like Baidu.com and Green Mountain Coffee Roasters, and in a recent interview with Forbes he explained how he finds such top growth picks.

“Our methodology is focused on the premise that investors tend to underestimate how long growth companies can continue their growth path,” Oberweis says. He says he looks for companies with strong financial performance that is backed up by a qualitative sign that that performance should continue, like a strong market position or ownership of an important patent. He also likes firms that have strong, increasing profit margins, and that operate businesses with high barriers to entry.

On the downside, Oberweis says warning signs that lead him to consider selling a stock include deteriorating financial performance, which can be a sign the firm is losing its competitive advantage. He also discusses how he tries to distinguish between firms that have developed high valuations but still look attractive as investments, vs. companies that have high valuations because of overexuberance.

ECRI Chief Sees Growth Slowing in Second Half

Lakshman Achuthan of the Economic Cycle Research Institute, which has an exceptional track record of economic forecasting, says the economy is slowing in a cyclical fashion — not just because of short-term, anomalous issues like the Japanese earthquake and tsunami. Achuthan tells Bloomberg that he sees growth slowing in the second half of the year, and perhaps into next year. And with forward-looking indicators not showing signs of improvement, he says it’s a big risk to take tackle issues of rising U.S. debt right now, even though it poses a longer-term problem. He adds that he sees a “double-dip scare” coming this summer, though he doesn’t know whether the scare will actually be accompanied by a new recession.

Big Returns in Small Stocks

In his latest article for Canada’s Globe and Mail, Validea CEO John Reese takes a look at his small-stock-focused Motley Fool-based strategy, which has returned 16.1% per year in its eight-year history in the U.S., vs. 3.5% for the S&P 500.

“Just as analysts and institutional buyers (which are often too big to take a meaningful stake in small stocks) tend to overlook smaller stocks, so too do average investors,” Reese writes. “Because of that, smaller stocks are often a great place to look for bargains using fundamental analysis. If a big company is trading at very attractive valuations and has a pristine balance sheet, it’s a good bet that legions of big investors will quickly be on to it. But with the little guys, a financially sound, bargain-priced firm can slide by unnoticed by the masses.”

Reese says his Fool-based model, which is inspired by the writings of Motley Fool co-creators Tom and David Gardner, has found plenty of those stocks over the years, both in the U.S. and Canada — his Canada-based Fool portfolio has returned more than 40% since its inception a little less than a year ago. He offers four picks from north of the border that currently get high marks from the approach, including Calgary-based energy services firm Pason Systems. To read the full article and see all the picks, click here.

Grantham: Resource Shortages Are Looming — Deal with Them Now

GMO’s Jeremy Grantham continues to warn about global resource shortages, saying in his new quarterly client letter that soil erosion and limited supplies of potash and phosphates “are the real long-term problems we face”.

Grantham says we have the means and brain power to live sustainably. “The problem is with us and our focus on short-term growth and profits, which is likely to cause suffering on a vast scale,” he writes. “With foresight and thoughtful planning, this suffering is completely avoidable.”

The energy sector, Grantham says, is an area where human ingenuity should lead to sustainable practices. Water and metals shortages will be more of a problem, but in the end Grantham says humans “will adjust our behavior enough to be merely irritated rather than threatened” with regard to those problems.

But the soil, potash, and phosphate issues are the real trouble, he says.

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