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3
Morningstar FundInvestor
Septemb
er 2015
“This is a once in a decade opportunity where the
Mexican peso, Malaysian ringgit, Korean won, Indone-
sian rupiah, and Brazilian real have tested all-time
lows. Today fundamentals are far better and capital
reserves stronger than in the
1990
s when they were
in crisis. The Mexican peso has fallen further than
it did in the tequila crisis of
1994
even though it has
little debt and has a strong economy. The panic is not
rooted in market fundamentals.”
American Funds New World
NEWFX
manager Rob
Lovelace sees this as a healthy correction rather than
a repeat of
2008
: “U.S. stocks have had a strong run.
There has been a bit of a ‘hope’ rally in Europe and
Japan, though emerging markets haven’t had much of
a rally at all. That’s a big difference compared with
before the
2007
–
09
global financial crisis. All areas of
the global capital markets have not rallied indiscri-
minately. That is why I think this correction is not a
repeat of the global financial crisis, but rather more
akin to the market downturns we experienced in
1994
and
1998
.
“These situations when we are most fearful are
generally the moments of greatest opportunity.
In
2009
, when the market was at its bottom, nobody
wanted to buy.”
Oakmark Select
’s
OAKLX
Bill Nygren is taking the
sell-off in stride: “Sometimes we just forget that the
market doesn’t really need a reason to have a
10%
correction, which we basically had over the past four
trading days. They occur pretty frequently—about
once every year and a half, on average, historically—
and they are really nothing for investors to worry
about as they are pretty common.
“For energy companies, quality of balance sheet is
important. We want to invest in companies that
can weather a reasonable-length depression in the
commodity price. One of the advantages of oil
investing compared with other international commo-
dities is that because decline curves are relatively
rapid on existing wells, it doesn’t take very long for
production to slow down. Because of that, market
forces have to push the price more toward a level that
justifies new investment by oil companies. ... What
excites us about this is that the market seems to be
pricing a lot of these companies as if
$40
oil is
going to be a permanent fixture, but we’re quite con-
fident that prices need to get back up to that
$70
or
$80
level to incentivize oil companies to invest in new
wells. Without that, a couple of years down the
road, we’re going to be in seriously short supply.”
Five-Year Market Appreciation in Value of $10,000
It has been a remarkable run for U.S. equities even after this latest drop. Even China is ahead of where it was five years ago. But emerging markets have been
completely left out of the party, as they are now in the red for five years. Data from 09/01/10–08/31/15.
2010
2011
2012
2013
2014
2015
24,000
20,400
16,800
13,200
9,600
p
MSCI EAFE NR USD
p
MSCI EM NR USD
p
Barclays US Agg Bond TR USD
p
MSCI China A NR USD
p
MSCI EU NR USD
p
S&P 500
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