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06/21/2013 8:30 am EST
Fidelity Investor's Jim Lowell shares his global outlook on investing, including his views on the Eurozone and Asia, as well as the emerging markets.
Now Jim, in one of your recent newsletters, you were talking about the possibilities and the potential of the global economies and global stock markets, and you pretty much hit on every region of the world. Which area are you really concentrating on right now?
Well, the US feels safe and secure, so I worry a lot less about that. That means that we can begin to explore the rubies and the rubble inside the Eurozone, still I would say a catastrophic space overall in terms of the concept of the zone. The only reason it has been held together is by force, not by desire.
The question for an investor: Is now the time to start bottom fishing the inside of Europe? We, of course, are buyers of managers, so we buy the manager, not the fund, and we look to managers that have expert track records of going into very distressed, not just industries, but economic regions.
Clearly, the Eurozone is one, but when you break out the Eurozone...for example Italy is probably a remarkably good place to consider trying to invest in.
You have real manufacturing, you have a saving population, a very healthy dose of cynicism about whether or not the government can or cannot bail their own citizens out, let alone the region. So it has real products, real exports, and of course brandedly is very powerful.
Inside of Portugal, you will have companies that derive the majority of their revenue either outside of the Eurozone or from stronger members inside of the Eurozone. The same could be said of Spain. Not so much of Greece, which is really just a tourist economy.
If you can cherry pick your country inside of the Eurozone, and if you have a manager who has a good, strong track record doing so, I think it is worth parachuting them in at this point.
And you are really advocating ETFs, not individual investments?
I do not own an individual stock myself.
My personal assets are all in actively managed mutual funds and some exchange traded funds. The reality is for individual investors to pick the one stock inside of the Eurozone that the world experts have somehow overlooked—and is not already included in a more diversified, more liquid, lower-cost ETF—is basically zero.
Well, and to be able to understand enough about those countries, it is just impossible.
You would have to be an expert political scientist, a thoroughly good economist, as well as an excellent investor. Now, those three things rarely stitch together into an individual investor. I hope they are doing some more fun things with their lives than try to do the things that I have to do with the life that I have chosen.
Now what about in the Pacific Rim? Are you interested in any areas there?
Japan is a clear winner for me as a trade, maybe as an investment. The distinction there is that, from a trading perspective, a weak yen is very attractive for the larger-cap Japanese exporters, and also the weak yen is very attractive for keeping more Japanese at home buying mid- or small-cap consumer goods.
China, I would be short. I think a good play would be going short China and going long Japan; that would not bother me a bit.
The emerging markets as a whole swung very heavily towards the Pacific Rim in terms of where investor money was flowing. That is because that is where the profits were over the last five to eight years. But right about now we are seeing, I think, a secular shift. The labor force is coming back closer to our borders, so I would look at a country like Mexico.
We know that say Marketfield (MFLDX), a wonderfully well actively managed fund, is short China, long Mexico. That is a very interesting trade, based on that secular shift of cheaper labor, closer to the border, less export costs, and getting more business.
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