Investing in The New Normal

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May 23, 2013

If you’ve been a long-time reader of the Value Investing India Report, you’ve probably realized that I read a lot of books on investing. The following quote by Brian Tracy sums up nicely why I continue to be a voracious reader: “To gain a competitive advantage in your career, read at least one hour per day in your chosen field. One hour a day will translate into approximately fifty books over the next twelve months. If you read an hour a day, one book per week, you will be an expert in your field within three years.” Successful investing is all about having an edge. Continuous learning helps make me a better investor and ultimately increases my edge. Recently, I’ve been reading The Art of Value Investing: How the World’s Best Investors Beat the Market (Wiley Finance). The book is co-authored by Whitney Tilson, who runs Kase Capital and co-founded the Value Investing Congress.

I haven’t finished the book, but I’ll plan on doing a full review once I’m done reading it. Although the book is about value investing there is a section dedicated to macroeconomic analysis. The book is actually a series of excerpts from interviews with some of the world’s greatest investors. In the macroeconomic section there was an excellent quote from Mohammed El-Erian of PIMCO, where he states the following:

Most of the time investing with less regard for macroeconomic forecasts is the right approach, but in my experience there have been times when one or a handful of major factors — such as large waves of liquidity going and going out — overwhelm traditional metrics of value to set market prices. In such times, ignoring those factors have proven to be dangerous.

The global economy is indisputably suffering its longest period of sustained volatility in the last 80 years. In my own investing career, I can’t think of a time where there was so much uncertainty in terms of the macro outlook. The risks are numerous and include a Chinese property bubble, Japanese debt bubble, an ongoing depression in Europe and unlimited QE in the US. All of the preceding risks are complex to understand on a standalone basis. However, the level of analysis required grows tremendously when you have to take into account the interplay between them. I don’t think any individual is capable of truly comprehending the entire picture. Unfortunately, as investors we must have a viewpoint on the bigger picture and invest accordingly or otherwise we risk being whipsawed by overly volatile markets. Mohammed El-Erian has dubbed this new investing climate “the new normal”. Even if you consider yourself a bottom-up stock picker, you simply can’t ignore the macro risks in the current environment. Fortunately, Mauldin Economics, an affiliate of the Value Investing India Report, is hosting a free 90-minute online video event called Investing in the New Normal on June 11 at 2 pm EDT.

Investing in the New Normal will bring together, on one stage, John Mauldin and five more of the of the world’s most respected financial minds: Mohamed El-Erian, Dr. John Hussman, David Rosenberg, Barry Ritholtz, and Kyle Bass.

These investors have often predicted big market-shaking moves before they happen, from the pop of the US housing bubble to the European banking crisis. I can’t think of a more interesting panel of speakers.

Additionally, the timing of this event couldn’t be better. With the Nikkei plunging 7.3% on Thursday (23/05/013), pressures are clearly building up in the world’s third largest economy. In my view the recent spike in Japanese government debt yields reflects what happens when a central bank starts to lose control. I think there are probably two investors globally who have the most accurate read on what’s going on in Japan. The first investor is Kyle Bass and the second is Jeff Gundlach. Fortunately, Kyle Bass will be participating in the video event.

Even if you’re only focused on Indian equities, I would highly recommend that you check out the event as you’ll get access to advice and opinions from some of the world’s top investors. To sign up for the event, you can click on the following link. I can guarantee that you will be a better informed investor if you participate and at the end of the day it’s the small advantages that compound over time and produce the biggest results.



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