Stay Off the Financial Grid
Bill Browder, CEO of Hermitage Capital told "Squawk Box Europe" viewers to stay off the financial grid to preserver their capital.
Bill, as our viewers will remember was a major investor in the Russian market until the government decided they no longer wanted his cash. Now that he is barred from re-entering the country he is focusing his energies on the markets of the Middle East.
Bill is following the money. The rise in the oil prices has created a huge transfer of wealth from consumers to producers, and the GCC states are now using that capital to build up their infrastructures. Bill is investing in companies like Aldar and Arabtec which he says are trading at around 75 percent of their net asset value.
He believes this is one part of the world where the opportunity will remain in place despite the subprime-led destruction of value in Western stock markets.
Our guest host this morning Hugh Hendry had a similar line.
"This is no time for speculators," he declared. A rather buttoned down Hendry said he couldn’t think of a single to stock to recommend. He is convinced the safest place right now is the bond market. His view is that inflation will moderate and governments and central banks will have to respond to economic weakness with lower interest rates. This will take time, though, says Hendry, and until we reach that point the equity markets remain a dangerous place.
Hendry's Eclectica runs an agricultural fund and he believes in the fundamental story –- he has conviction that companies like Potash of Canada are undervalued by the market. But timing is the issue. He has been hurt by the recent downturn in commodity prices and thinks the current correction could run for some time longer.
For example, he suggested gold would be more likely to see $600 an ounce than revisit $900.
Both hedge fund managers are tuned into the current zeitgeist -- increasingly problems in US lenders are seen causing a second round of distress in the financials.
A final thought, equity market volumes are sclerotic and Western investors are very much on holiday. The real test of sentiment will come in September as traders and fund managers begin to return to their desks.
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