CNBC Asia

I am scheduled to appear on Asian Market Watch tonight between 8pm and 8:30 EST. Here is a list of topics that might come up; Oil came out of the blocks strongly in 2006 and there was nothing from the OPEC meeting in Vienna to convince the market that things would be very different anytime soon. The idea that energy can go down a lot from here and stay down does not make sense to me. Supply and demand are close to even right now. Demand is growing faster than supply. This means higher oil prices than what is considered normal. That does not mean that oil can go back into the $50’s and stay there for a while. This will continue to mean very good things for energy companies. The big story on Tuesday centered around Alan Greenspan’s last hurrah. I am concerned with how complacent the market seems to be about getting a new Fed chairman. Chairman Bernanke is more of an academic. There will be differences between Bernanke and Greenspan in terms of communication and perhaps methodology. I expect an adjustment period with a little more volatility for stocks, bonds and the dollar. While I think the Fed should have stopped raising rates a while ago, I expect another hike in March. The State of the Union speech is not very likely to have a huge impact on trading (unless he comes across as strong on keeping the dividend and cap gains tax cuts in place) on Wednesday but it seems Bush’s popularity numbers tend to go down after these speeches. This could contribute to eroding...

In The Spirit

This is a painting by Erin Crowe, the artist that has been on CNBC all day working on another Greenspan painting. I don’t see much benefit to spending time trying to assess how Greenspan rates compared to other Fed chiefs but whether you love him or hate he has left quite a big foot print behind...

Best of the Best?

John Connor, the manager of the Third Millennium Russia Fund (TMRFX), was on to talk about Russia. I made a mention of him once before about a month ago. In that last post I noted that he was lagging the Russian market by about 35 percentage points. As of that day (12/27/2005) the index was up 83% and TMRFX was 47% for 2005. The segment today focused on year-to-date.Year to date for 2006 the fund is lagging again. Once in an accident, twice is a coincidence, three times….. In 2004 the fund outperformed the index for most of the year but then lost its lead at the end of the year (it is possible that the chart is not accounting for the year end distribution properly). The fund also lagged in 2003. I’m not sure why the fund gets such a high rating. In recent years it has lagged a lot of the time. If you hired a student to manage a fund and the pool of stocks he can choose from all goes up a lot, what do you think the results will be? They’d be pretty good whether they beat the average or not. TMRFX might be a great way to invest in Russia but unless I am missing something, there is not much value being added which makes it reasonable to question Mr. Connor’s understanding of the...

Multi National Companies

The second post about George Soros has had more comments than any other post I’ve written before, for that I say thank you. The most recent comment had a point that comes up a lot that I wanted to address. For the people who want to invest in emerging markets, it seems to be that the best way to get into those markets safely is buy investing in large multinational’s/foreign companies that do buisness in those regions. To me that seems like ETF’s like PID and KIE are a good way to get involved in these markets. As a set of global natural resources play’s the iShare’s Canada/Australia, and the ETF IGE, could be a good play on the natural resources that China/India will need in the future. It seems to me that almost every interview on CNBC about international markets this question comes up. What about buying US companies that do business in emerging markets? The answer on TV always varies. This discussion is emerging markets, right? A big American industrial or insurance company is not an emerging market company. Part of you fundamental process may be to include a company because it derives revenue from emerging countries.This chart compares Petrochina (PTR), AIG and the S+P 500 from April 2000 through year end 2002. The action on the chart perfectly captures my point. AIG does a lot of business in emerging markets. Perhaps it was the emerging exposure that allowed AIG to do better than the S+P but it still tracked closer to the S+P than PTR. I should note that I looked at Caterpillar in this same...

Meandering

Is it possible the market is flat because of the State of the Union Address? Is it flat because of the Fed tomorrow? Is it flat because it is just taking rest? I’m not sure what the best answer is. One prediction for 2006 that I did not hear very often was that there would be more volatility in 2006. With January winding down it is safe to say 2006 is starting out with a little more volatility than in 2005. While I do not expect Japan-like volatility, Barry Ritholtz’ point about too many months having gone by without a 10% correction looms over my thinking. A fast violent correction of that magnitude would be better than a three or four month rolling over to get that point. Historically, slow capitulation is worse for the market than four day panics. I repeat this notion often on this site and when talking to clients. The idea is to really embrace and understand, at a time when you are not at a heightened emotional state, that selling into panics is the wrong thing to do the vast majority of the time. Selling (reducing exposure) when the market has rolled over slowly and people on CNBC are justifying the decline is a good time to sell. A flat market like today is a great time to study...