Submitted by Taps Coogan on the 5th of May 2020 to The Sounding Line.
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For what little such an anecdotal observation is worth, I cannot remember a time when I have witnessed more universal agreement among economists, investors, money managers, etc… than the current agreement that we will not get a ‘V’ recovery in markets or the economy.
Despite people’s desire to compare this nascent economic crisis to the Global Financial Crisis (which lasted over a year) or the Great Depression (which lasted over a decade), we have tried to point out a few contrasting details. We do so not to understate the seriousness of this economic crisis. It is undoubtedly the fastest and deepest peace-time economic contraction in modernity and it is going to ruin many small businesses and industries. We do so simply to caution that its driving force is fundamentally different than that of other modern recessions and the fiscal and monetary response to it has been wildly different.
It is within that context that we share the following Economic Times of India interview with Mark Mobius, Mobius Capital Partners founder and legendary emerging markets pioneer. Mr. Mobius shares a rare bullish outlook, noting that emerging medical treatments, the tsunami of monetary and fiscal stimulus, and various emerging market trends make him believe that we are on the cusp of a new bull market.
Some excerpts from Mark Mobius:
“When… the market was tanking and I saw some of the valuations of really great stocks, I started buying. But then I said look, let’s not put all the money in. Let’s reserve some for an eventual downturn again. As you know, in these bear markets, you get false starts and they come down again… For our funds what we are doing is switching to better quality stocks which we couldn’t buy previously because the prices were too high. So it’s a great opportunity to switch.”
“You know the old saying, you should never let a crisis go to waste. The wonderful opportunity that we have now is to accelerate the (emerging market) reforms that were started before the crisis. In India for example, I think Modi has the opportunity now to push through various reforms which would have been politically difficult before…”
“You have to look at specific markets and specific companies, but in some cases, yes, these (market) recoveries will be sustained… there are always going to be corrections along the way, but I do believe we are at the cusp of another bull market going forward. I think the markets and the market participants are beginning to realize that this Covid-19 is curable. In other words, they are coming up with cures (TC: treatments might be more accurate), various medicines are beginning to work, and the vaccine will eventually come into play… The other aspect is the incredible liquidity that is being poured into the global economy, not only at the individual country level but at the international level. What the IMF and all these international organizations are doing to feed liquidity into these markets is another reasons why you’ve really got to think about equity so that you’re in an asset that is going to be moving with the rise in inflation.”
“There is a chance of (a retest of the March lows), but I doubt that we would go below the low that we witnessed. I doubt that will happen, but we will have corrections along the way… I do believe that we have already witnessed the bottom… I think equities are very very important at this stage because of the incredible printing presses that are working overtime globally. So, you have to be in equities which will adjust to these changes in currency movements and the devaluations of currencies. I’ve always said you’ve got to have some gold… and I think you’ve just got to be very, very cautious in the fixed income arena… There are some opportunities, but you’ve got to be very, very careful…”
There is much more to the discussion, so enjoy it above.
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