Money and Finance
- Dundee 2011 Annual Report
We have been living through such a time as we witness the financial markets ebb and flow based on not totally understood macroeconomic events. The world remains in a major financial crisis and central bankers are taking extreme gambles which could have...
- A Series Of Unfortunate Events: Common Sequencing Patterns In Financial Crises - By Carmen Reinhart
ABSTRACT We document that the global scope and depth of the crisis the began with the collapse of the subprime mortgage market in the summer of 2007 is unprecedented in the post World War II era and, as such, the most relevant comparison benchmark is...
- In Striking Shift, Small Investors Flee Stock Market
Renewed economic uncertainty is testing Americans’ generation-long love affair with the stock market. Investors withdrew a staggering $33.12 billion from domestic stock market mutual funds in the first seven months of this year, according to the Investment...
- Rick Bookstaber: Common Sense Crisis Risk Management
Found via Simoleon Sense. Unfortunately, although we can hope that this sort of information will end up with those regulating the markets, it is beyond the realm of anyone in the private sector. But here are a few common sense things we know about the...
- First Eagle Reopens Two Mutual Funds
First Eagle joins Longleaf and Third Avenue in opening previously closed funds recently.-Arnhold and S. Bleichroeder Advisers said on Tuesday it will reopen two of its First Eagle mutual funds that invest in overseas markets.-The $21 billion First Eagle...
Money and Finance
First Eagle Funds Conference Call - May 6, 2008
Jean-Marie Eveillard:
Now, let me move to an update to the current investment scene as we see it. I think investing is a matter of trying to balance what I would call circumstances and prices. In terms of circumstances, we have been, for a while, in a financial crisis, probably the worst since the end of World War II, which is a polite way of saying that it’s the worst since the Great Depression. This financial crisis is, to a large extent, I believe, a result, a consequence of the previous 25-year credit boom that was briefly interrupted in 1990. That credit boom, because it went on so long, in the last few years of the boom, the acrobatics by financial types, not us mind you, were extraordinary. Then the credit cycle turned in August of last year, with the sub prime housing crisis, and it has been painful ever since.
Now, I’m sure, of course, that the crisis will find its resolution; all crises do eventually. The key question, I believe, is, “How long and how painful the transition will be towards the resolution of the crisis.”
We are just beginning to see the economic consequences of the crisis. In other words, the economic slow down. We also have to worry, I believe, about the unintended consequences of the very unusual steps taken by the Federal Reserve to prevent the crisis from degenerating. Among those unintended consequences, of course, is the status of the dollar as the world’s reserve currency and the possibility that domestic inflation will accelerate.
Now it’s true that we’ve had, depending upon how one counts, six or seven financial crises over the past 20 years. And it seems to me that most investors take the attitude that in the past six or seven crises, it was all right to start buying equities in the middle of the crisis because those six or seven crises were handled by Mr. Greenspan, the former Chairman of the Federal Reserve. In each instance, he flooded the system with liquidity and after a few uncomfortable months, the crisis was over.
I would not bet the farm on a repeat of that scenario. It may happen that the crisis is over quickly, but again, I wouldn’t bet on it.
If I move to prices, the American equity market is off about 10 or 12% from its high last October. The high came at the end of a five-year bull market between 2002 and 2007.
In Europe, equity prices are also off 10 to 15% from their highs of last year. In Japan, the market is off much more than that. Not to mention China, where up until recently, the market was off about 50% from its high. But then China, and to a lesser extent, India, had been involved in major bubbles.
So what I’m saying about global prices is, hey, stock markets are off from their highs, but at least in the U.S. and in Europe, the decline is, so far, quite moderate. Nevertheless, as equity markets come down, as they did since last October, a few opportunities, to our mind, appeared here and there. We’ve been net buyers since the beginning of 2008, but I must say we may not be looking in the right places for all I know, but we have not come up with a great many opportunities yet.
There is nothing wrong with waiting. As Warren Buffett has said, “One has got to wait for the fat pitch.”
Now, let me move to an update to the current investment scene as we see it. I think investing is a matter of trying to balance what I would call circumstances and prices. In terms of circumstances, we have been, for a while, in a financial crisis, probably the worst since the end of World War II, which is a polite way of saying that it’s the worst since the Great Depression. This financial crisis is, to a large extent, I believe, a result, a consequence of the previous 25-year credit boom that was briefly interrupted in 1990. That credit boom, because it went on so long, in the last few years of the boom, the acrobatics by financial types, not us mind you, were extraordinary. Then the credit cycle turned in August of last year, with the sub prime housing crisis, and it has been painful ever since.
Now, I’m sure, of course, that the crisis will find its resolution; all crises do eventually. The key question, I believe, is, “How long and how painful the transition will be towards the resolution of the crisis.”
We are just beginning to see the economic consequences of the crisis. In other words, the economic slow down. We also have to worry, I believe, about the unintended consequences of the very unusual steps taken by the Federal Reserve to prevent the crisis from degenerating. Among those unintended consequences, of course, is the status of the dollar as the world’s reserve currency and the possibility that domestic inflation will accelerate.
Now it’s true that we’ve had, depending upon how one counts, six or seven financial crises over the past 20 years. And it seems to me that most investors take the attitude that in the past six or seven crises, it was all right to start buying equities in the middle of the crisis because those six or seven crises were handled by Mr. Greenspan, the former Chairman of the Federal Reserve. In each instance, he flooded the system with liquidity and after a few uncomfortable months, the crisis was over.
I would not bet the farm on a repeat of that scenario. It may happen that the crisis is over quickly, but again, I wouldn’t bet on it.
If I move to prices, the American equity market is off about 10 or 12% from its high last October. The high came at the end of a five-year bull market between 2002 and 2007.
In Europe, equity prices are also off 10 to 15% from their highs of last year. In Japan, the market is off much more than that. Not to mention China, where up until recently, the market was off about 50% from its high. But then China, and to a lesser extent, India, had been involved in major bubbles.
So what I’m saying about global prices is, hey, stock markets are off from their highs, but at least in the U.S. and in Europe, the decline is, so far, quite moderate. Nevertheless, as equity markets come down, as they did since last October, a few opportunities, to our mind, appeared here and there. We’ve been net buyers since the beginning of 2008, but I must say we may not be looking in the right places for all I know, but we have not come up with a great many opportunities yet.
There is nothing wrong with waiting. As Warren Buffett has said, “One has got to wait for the fat pitch.”
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Book (mentioned by Eveillard): The Investor's Dilemma: How Mutual Funds Are Betraying Your Trust And What To Do About It By Louis Lowenstein
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Lowenstein Paper: Journey Into the Whirlwind: Graham-and-Doddsville Revisited
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Five value-oriented mutual fund managers that might be worth looking into:
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First Eagle Funds
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FPA Funds
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Longleaf Partners Funds
-
Fairholme Funds
-
Wintergreen Fund
- Dundee 2011 Annual Report
We have been living through such a time as we witness the financial markets ebb and flow based on not totally understood macroeconomic events. The world remains in a major financial crisis and central bankers are taking extreme gambles which could have...
- A Series Of Unfortunate Events: Common Sequencing Patterns In Financial Crises - By Carmen Reinhart
ABSTRACT We document that the global scope and depth of the crisis the began with the collapse of the subprime mortgage market in the summer of 2007 is unprecedented in the post World War II era and, as such, the most relevant comparison benchmark is...
- In Striking Shift, Small Investors Flee Stock Market
Renewed economic uncertainty is testing Americans’ generation-long love affair with the stock market. Investors withdrew a staggering $33.12 billion from domestic stock market mutual funds in the first seven months of this year, according to the Investment...
- Rick Bookstaber: Common Sense Crisis Risk Management
Found via Simoleon Sense. Unfortunately, although we can hope that this sort of information will end up with those regulating the markets, it is beyond the realm of anyone in the private sector. But here are a few common sense things we know about the...
- First Eagle Reopens Two Mutual Funds
First Eagle joins Longleaf and Third Avenue in opening previously closed funds recently.-Arnhold and S. Bleichroeder Advisers said on Tuesday it will reopen two of its First Eagle mutual funds that invest in overseas markets.-The $21 billion First Eagle...