Dow down 104. Gold down $27 an ounce.
No big deal. Good thing, too, because we don’t have much time to think about it. We’re on the road… in Brazil.
At Bonner & Partners Family Office, the small family wealth advisory we set up in 2009 to help families protect and pass on wealth, we’re bullish on emerging markets stocks in general… and bearish on developed market stocks in general.
That’s because we’re long-term investors. And the long-term growth prospects – to our eyes at least – are better in the emerging world… where populations are still growing… debt build-ups aren’t as high… and relatively low market capitalizations for stock markets mean more room for growth.
But 2013 has been a bad year for the emerging markets… and a bumper year for most developed markets.
What’s going on?
Fortunately, we have a global network of analysts to help us…
“What we’ve been explaining to investors down here,” continued a colleague from Empiricus Research, “is that you can’t know the future. You can only prepare for it. And you do that by putting yourself in a position where the surprises are more likely on the upside than the downside.
“You just don’t buy expensive stocks, for example. You don’t know whether they will go up or down. But a surprise to the downside is more likely and more painful than a surprise to the upside.
“Some people refer to this as value investing. But we don’t really know what’s a value and what is not. Ultimately, we only have prices to guide us. And prices are very unreliable. So, we just look at what surprises might come… and what impact they will have on us.
“I mean, I know I will be surprised. So I want a surprise that I will like. And the way you get that is by making sure you always have more upside than downside.
“You look at the US stock market now and what you see is millions of people who are all sure that the market is going up… as long as the Fed continues to add money to the system. When the Fed stops, they think they are going to get out.
“But when everyone wants to sell, who will they sell to? So, in our view the surprise is likely to be on the downside… and it will be much more painful than a surprise to the upside.
“So, what will happen? We don’t know. But we tell our people to stay out of the stock market in Brazil… and the US.”
More to come…