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Session Summary. Investments: Where is the Money in 2010 – What are the Risks?

February 4, 2010

Michael Power: Put your money in Singapore dollars until mid-year. Then invest in emerging markets, coal and consumer stocks in emerging markets with current account surpluses. Avoid the West. Avoid banks in the West. Put some money in frontier markets. Chinese growth will continue to be driven by the rise of the middle class.

David North: Buy protection on credit, as markets are overcooked (e.g. CDS on banks). Buy dividend futures, especially in the UK, as cash flows are high. Take the opportunity to bet against rate increases, as they will not happen.

Michael Gomez: Invest in places that will benefit from rebalancing. Buy Asia and Asian currencies, which should appreciate. Avoid the euro and emerging European currencies. Europe is prone to defaults, given weak balance sheets. Invest in strong balance sheets in countries with good monetary policy and inflation targeting, such as Brazil. You can buy 5y bonds there at 13%. Among G7 countries, Germany is in favor. There is a need to differentiate in emerging markets and buy Brazil over Turkey, for example.

Nassim Taleb: Go no-risk with a small percent and high-risk with the rest. For the speculative component, short the S&P and be long in precious metals; bet on hyperinflation with OTM calls on gold and puts on bonds; short USTs as long as Bernanke and Summers are in office; trade on the breakup of Europe. Russia is stable.

Hugh Hendry: Think of Keynes’ “Economic Consequences of the Peace”. The euro is the new gold, and governments cannot repay. The amount of debt taken on is enormous and still highly risky, as none of the debt has gone. Mr Hendry would not take any risk now. Debt will squeeze the vitality out of economies. Buy the idea that rates will not rise. The policymakers will not be able to create inflation, as monetary policy does not work. People are all long risky assets as a hedge against inflation and short treasuries, which is dangerous. He likes land and agricultural equities in the long term, but they are risky in the short term. The problem with Asia is excess capital and low returns on capital. It makes no sense for the Chinese yuan to be so cheap. China could fail and go from first to last, as its economic model is unsustainable.

Ashot Khachaturyants: Buy Russia, especially oil stocks with exposure to East Siberia. Nanotechnology and project financing are promising.

Marc Faber: The consensus is to buy Asia. Japan is a good idea as a huge economy where the market has been down for over 20 years. When inflation comes, avoid currency and bonds and buy equity and foreign assets. One should buy land as civilization may collapse; farms in Argentina are promising. Water is a real issue, especially in India. Chinese economic growth is likely to slow this year.

 

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