The continuous search for cheap, promising stocks in both the familiar and far-flung markets of the world has seen Mark Mobius, the head of Templeton Asset Management, become a wealthy, nomadic investor and occasional travel journalist, SIMON MUMME writes.
Bad markets can bring good news to Mark Mobius, a renowned emerging markets investor who travels, with the aid of a company-owned US$20 million Gulfstream IV jet, roughly 300 days each year to various patches of the globe to oversee portfolios. The current down markets and high inflation in emerging economies, it seems, are familiar territory for the value manager, who says that profits are made after, not before, these events. “We are now in a bear market. We have had three since December 2005,” says Mobius, executive chairman of Templeton Asset Management. “We’re three months into it, and the worst that we expect is one and a half years of this going ahead.”
In the 40 years since the late Sir John Templeton began investing in emerging markets (which, at the outset, included Japan), the business he founded has rode out wars, revolutions and government coups in addition to an assortment of global financial crises: the 1970s oil troubles, Black Monday, the 1993 Mexican peso crisis, the Asian currency meltdown, the 1998 default in Russian government debt and demise of hedge fund Long-Term Capital Management, the 2000 dotcom bust and the present credit crisis.
For Mobius, there are two sides to each downturn – while short-term performance suffers, bargains abound. The cornerstone of Sir John’s investment approach is still quoted as the firm’s guiding principle: “to buy when others are despondently selling and sell when others are greedily buying”. But while pessimism in emerging markets drives down the prices of stocks, there is sometimes not enough liquidity to fully take advantage of the devaluations, Mobius says.
He is confident, however, that liquidity will return. The basis of this judgment is the M3 measure of money supply that Templeton constructs from weekly US Federal Reserve reports, which provides an understanding of how much money the Fed is pumping into markets. Mobius says the M3 shows a rate of growth in money supply of approximately 15 per cent during August, up from 10 per cent in July. “We expect there to be continuing net outflows from markets, but not on a massive scale. The bottom line is that the Fed continues to pump money out into the system and that is creating a continuing flow.”