Summit Notebook
Exclusive outtakes from industry leaders
from Global Investing:
BRIC: Brilliant/Ridiculous Investment Concept
BRIC is Brazil, Russia, India, China -- the acronym coined by Goldman Sachs banker Jim O'Neill 10 years back to describe the world's biggest, fastest-growing and most important emerging markets. But according to Albert Edwards, Societe Generale's uber-bearish strategist, it also stands for Bloody Ridiculous Investment Concept. Some investors, licking their wounds due to BRIC markets' underperformance in 2011 and 2010, might be inclined to agree -- stocks in all four countries have performed worse this year than the broader emerging markets equity index, to say nothing of developed world equities.
For years, money has chased BRIC investments, tempted by the countries' fast growth, huge populations and explosive consumer hunger for goods and services. But Edwards cites research showing little correlation between growth and investment returns. He points out that Chinese nominal GDP growth may have averaged 15.6 percent since 1993 but the compounded return on equity investments was minus 3.3 percent.
But economic growth -- the BRIC holy grail -- is also now slowing. Data showed this week that Brazil posted zero growth in the third quarter of 2011 compared to last year's 7.5 percent. Indian growth is at the weakest in over two years. In Russia, rising discontent with the Kremlin -- reflected in post-election protests -- carries the risk of hitting the broader economy. And China, facing falling exports to a moribund Western world, is also bound to slow. Edwards goes a step further and flags a hard landing in China as the biggest potential investment shock of 2012. "Yet investors persist in the BRIC superior growth fantasy...If growth does matter to investors, they should be worried that things seem to be slowing sharply in the BRIC universe," he writes.
Thomson Reuters data earlier this year appeared to show some disenchantment with the BRIC concept. After rising 1600-fold between 2003 and 2007, assets in BRIC funds had shrunk to $28 billion by August 2011, almost a quarter below 2007 peaks, a bigger fall in percentage terms than most other fund categories.
What of O'Neill, the man behind the moniker? He talks increasingly of Growth Markets, a broader grouping that also includes other promising emerging countries such as Turkey and Mexico. But at a Reuters investment summit this week O'Neill noted that the main reason for BRIC stocks' underperformance has been a massive monetary policy tightening exercise in all four countries, prompted by rising inflation. With that at an end and valuations cheaper than they have been for a long time, he expects the BRIC markets, especiallly China, to do better next year despite slower growth. Time will tell.
Audio – Everybody loves a winner in Vegas, baby!
It seems that any sentence about Las Vegas, the people who work there or the stocks of the companies that run the big casinos ends better with the word “baby”. It’s almost like you can hear Frank saying it to Dino on their way into some smoky, after-hours cocktail party.
So, even though Bill Lerner, casino and gaming analyst at Deutsche Bank didn’t exactly end his comments on casino stock picks like Sinatra might have … well, it’s Vegas, baby!
Lerner, speaking at the Reuters Travel and Leisure Summit in New York, spoke extensively about the stocks in the gaming sector and identified the ones he thinks have the best chance at near- and longer-term success.
Lerner was one of the featured speakers at the summit, which continues through Wednesday in our New York headquarters. The Summit program is in its fifth year, and in 2009 will include top-level executives from industries and sectors including everything from Infrastructure; to Mining; to Investing in India, China, Japan and Russia; to Food and Beverages.
Automaker stocks underperform
Share prices for GM and Ford – the only components in the S&P 500 Auto index – have been underperforming the broad market for the past four years as sales began to slump and both automakers started to slash costs and cut costs — Source: S&P, Thomson Reuters Proprietary Research
the bailout might provide some hope to investors but does it make any sense to give money to companies that will destroy this money??
Demoplicans or Repocrats? A look at stock market performance and politics
Compiled by Thomson Reuters Proprietary Research Group
- There have been five terms out of the last 16 where the last year of the term has a negative return on the DOW, and four of those terms have been during a Republican president’s term.
- When we look at the previous 90 day returns before the new term, we see that the markets are generally positive (only four negative in the last 16 terms).
- Elections are generally held in the first week of November. When we take the previous 60 day returns before the new term (from Nov. 20 – Jan. 20), we see that the DOW returns are even more positive, with only two terms out of 16 preceded by negative returns in the previous 60 days. This says that the lack of uncertainty after the elections usually give a boost to the market.
- Only three four year terms have had negative returns. 1973-1981 (Oil crisis) and 2001-2005 (Dubya’s first term).
- On average, the 90 days before the new term performs much better (3%) than the 90 days after the new term starts (1.1%).
- The last three terms have started with negative returns in the first 90 days.
- Since WW2, the Dems have had 7 terms and the Republicans have 8 (excluding the 2005-2009 Dubya term). The Dems have done slightly better (8.3% vs. 6.7%) in terms of average annualized returns over this period. However, these numbers are skewed in their favor because of the Clinton-Bubble era.
Research shows: Only three four year terms have had negative returns. 1973-1981 (Oil crisis) and 2001-2005 (Dubya’s first term).
To that I say: Wait for it, Dubya’s second term isn’t over yet–0nly 1500 Dow points to go, an easy walk in the park.
