BUSINESS WEEK ARTICLE REINFORCES FOXHALL’S GLOBAL STRATEGY
This week BUSINESS WEEK(1) published an article about the well known Princeton University professor and economist, Burton Malkiel. The article reinforces the underlying foundation of FOXHALL CAPITAL’s global investing strategy.
Burton Malkiel is most famous for his classic finance book, “A RANDOM WALK DOWN WALL STREET.” In the past, he has been a leading proponent of the “EFFICIENT MARKET HYPOTHESIS,” which contends that prices of publicly traded assets reflect all publicly available information.
“FROM WALL STREET TO THE GREAT WALL”
But now in his new book, “FROM WALL STREET TO THE GREAT WALL: HOW INVESTORS CAN PROFIT FROM CHINA’S BOOMING ECONOMY. (W.W. Norton, December 2007) he now sees Asia and specifically China as the greatest investment opportunity in the world today.
He says investors are getting a bargain for “the most undervalued currency in the world.”
In this new book, Malkiel suggests an investment strategy that focuses on “exchange traded funds (ETFs) that focus on Chinese companies trading in Hong Kong and New York. He also recommends ETFs holding shares of companies in countries that are China’s major trading partners.” Malkiel’s investment strategy tries to combine both China ETFs with broader Pacific Rim ETFs.
This closely parallels the FOXHALL CAPITAL global investment strategy. We not only invest in China and the Pacific Rim but we completely agree with Malkiel that a major investment opportunity is investing in the countries that are China’s major trading partners-like the U.S.-because many U.S. companies will be the major beneficiary of the Asian economic expansion.
“GLOBAL BARGAIN HUNTING”
In Burton Malkiel’s last book, “GLOBAL BARGAIN HUNTING: THE INVESTOR’S GUIDE TO PROFITS IN EMERGING MARKETS,” he concluded that the “growth opportunities in emerging markets are perhaps as great as they were when we wrote the first edition, and the bargains appear to us to be better than ever. We are convinced that all investors with long-term horizons who are able to tolerate the volatility and risks so characteristic of these markets should hold a portion of their portfolios in emerging-market securities.”
In writing about the Asian miracle, he said, “it is well to remember that these economies have achieved increases in living standards in one generation that took several generations for Western countries. And even if growth rates in all emerging markets slow dramatically in the future, they are still likely to far exceed those for the developed world.”
“The fundamental strengths of the emerging economies remain intact. Labor costs are low, work ethics are strong, and the people are thrifty and have a commitment to education. Taxes are relatively low compared with those of the developed world, and entrepreneurs have sprouted like wildflowers.”
“Equity investments in emerging markets are also great diversifiers since these markets
tend to have low correlations with the United States and other developed-country markets over the long term. U.S. powerhouses see the current situation as ideal for global bargain hunting. GE’s former chairman and CEO, Jack Welch, wrote...that Asia ‘should provide us with a unique opportunity to make the strategic moves that will increase our presence and our participation in what we know will be one of the world’s great markets of the 21st century...”’
I couldn’t have said it better myself! It always helps to have a world-renowned economist’s research support the FOXHALL CAPITAL global investment strategy.
Until next week—
(1) BUSINESS WEEK July 2, 2007