As we enter 2009, we are overwhelmed with headline after headline talking about the disasters that await us. China will slow, credit will not flow, the United States is heading for economic ruin, etc., etc., etc. Well, I am here to dispel some of the panic and share with you our strategy in Asia for investment success.
There are 4 major themes:
1. China will slow but will not be a disaster. Okay, so 8 percent growth as a target is probably not reasonable. That's okay. 5 or 6 percent growth is still healthy. Granted this will create problems on the short-term, but on a relative basis, Asian economies, in general, will continue to do well. It will be productive and some countries will face headwinds more than others but do not believe for a moment that the Asian market is permanently derailed. It is not. Selectively, invest in Asia. There are opportunities. Shanghai. Hong Kong. Australia. From commodities to infrastructure companies; opportunities abound. It will be a volatile but profitable ride.
2.Commodities still matter. Okay yes, the price of aluminum, food products, and oil has plummeted. If you were invested in these assets before, it has been unpleasant, but that is not to say that commodities should not be part of your investment strategy. When panic subsides and economic growth is again discussed, commodities will matter. Selectively adding these assets to your portfolio strategy can provide opportunities even after a dismal 2008. Global growth will restart and when it does, commodities will be inhaled once again.
3.Don't count out the United States. There is a case to be made that while the U.S. is struggling, it perhaps entered a downturn earlier than the other economies. And if this is true, it will likely be one of the countries emerging sooner from our global downturn. The dividend rates in other companies are incredibly high and in the end, the U.S. economy is still resilient. Are there challenges? Absolutely, but there are strong policy actions taking place which we think will yield results. Make the U.S. a part of your investment philosophy. Technology looks cheap. Take Nvidia for example. Lots of cash. A growing market. New alliances with Apple. Electronic Arts could be a great value. Tough current sales but video games aren't going away. Know any kids? what's their favorite activity? video games.
4.Do what Buffet said: "Be greedy when others panic". Okay, stop for a moment and ask yourself, is the world panicking right now? The answer is yes. With U.S. treasuries currently paying 0 percent, that is as close to an indication of panic as you can get. Maybe you know someone who has taken out their money from the market and has placed their money in between their mattresses or perhaps buried their money in a hole. The world is full of stories of people who cannot take the pain anymore. It is in this moment that opportunity is at hand and I believe that is the case now.
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Yes, we face challenges and yes all is not well but that does not mean that we should assume that all will end in disaster. That is not reasonable. You'd be in denial to say we have no problems but it is equally a characteristic of denial to say there are no opportunities. So be greedy when other people panic but keep a balanced view. That will serve you well when the world screams the sky is falling.