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.
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.
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.
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.”
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.
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.
Each week, we take a look at which stocks John Reese’s Validea.com Guru Strategy computer models have newfound interest in, and which they have soured on. Here’s a look at some of the stocks John’s strategies have upgraded or downgraded today.