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The End of the BRICs ?


JEast
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“Every decade, there’s a theme that captures investors’ imagination -- the 1970s was about gold, 1980s was all about Japan and 1990s was about technology companies,” Ruchir Sharma, the New York-based head of emerging markets at Morgan Stanley Investment Management, which oversees $341 billion, said in a phone interview on July 8. “Last decade it was about the BRICs. That theme has basically run its course.”

 

http://www.bloomberg.com/news/2013-07-09/ruble-to-real-roiled-with-no-brick-in-brics-13-9-billion-lost.html

 

It's not the end, but one of the reasons why I was not so down on the US dollar a few years back.  Is it a small sign of the beginning of a US bull market?  Hang on boys and girls as either the turbulance is coming or the blast-off is.

 

 

Cheers

JEast

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I think it may blast off at these levels due to: 1) sentiment, 2) 12 year of sideways action while GDP and earnings growth, 3) best market system in the world, 4) modest valuation but cheap relative to other asset classes (bonds).  If you look at the bulls you have Berkshire, Monish Pabrai and Howard Marks.  The bears Fairfax and most of the rest of the financial media.  Oaktree's latest letter sums it up nicely:

 

http://www.oaktreecapital.com/memo.aspx

 

Packer

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I guess it depends upon how you look at 2008.  Marks and others think it is a once in 50 years event, Fairfax a more often occurance.  One of Marks comments has been if you build a portfolio to live through 2008, you will not have much a portfolio and it think to certain extent that is what you have with FFH's portfolio today.  I have seen this picture before (Growth Stock Outlook in the late 1980s and 1990s) and the ending is typically not to good for follower.

 

Packer

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To me it is not about fundamentals any more.  The market is pretty fully valued on fundamentals.  Either things stay smooth and we advance into an equity bubble due to QE, or something disrupts and we get a wobble.

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I guess it depends upon how you look at 2008.  Marks and others think it is a once in 50 years event, Fairfax a more often occurance.  One of Marks comments has been if you build a portfolio to live through 2008, you will not have much a portfolio and it think to certain extent that is what you have with FFH's portfolio today.  I have seen this picture before (Growth Stock Outlook in the late 1980s and 1990s) and the ending is typically not to good for follower.

 

Packer

 

From my knowledge of history, while not limited, Pabrai himself mentioned in an interview that the market dropped 70% from the high point to low point in the 70s. Though, I can't find data to back that up. I see a drop of about 43%

 

From 2000-2002 the market dropped about 45%.

 

From Oct of 2007 to March of 2009 the market dropped around 58%. Granted that's the worse one in a long time, so we'll see what happens next.

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Aren't you more of a deflationary guy?

 

Maybe I was not 100% as clear as I would have liked on previous posts, but I was (and still) more in a non-inflationary camp which is bullish for stocks.  For almost the the last 5 years I have been 90%+ in equities.  I have also pressed/challenged some of our astute contributors as to why they were holding so much cash given the values present at the time.

 

Growth Stock Outlook

 

Didn't know anyone still knew Charles Allmon.  I loved his commentary.  Though he was super conservative and nearly 100% wrong on his overall market direction for years, he put up some amazing risk adjusted numbers provided he was nearly always 70%+ in cash.  One hell of a stock picker in my view.

 

 

Cheers

JEast

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