What do the giants say? (Some practical and upbeat market analysis)

Schalk Louw of Contego Securities writes that Mark Mobius, very well-known fund manager of Templeton Asset Management, aroused worldwide attention recently by announcing that the economic recovery was already well under way, despite the weaker unemployment data globally.

He was convinced that the results should become better and better and that there was indeed still value to be found in the market, despite the fact that emerging markets had more than doubled in value (VSA$) since the beginning of March 2009.

But who is Mobius and just how strong is he financially? Well, for one, he was the same person who announced last year in March – when everyone was extremely nervous – that emerging markets surely offered some of the best value ever. He was personally responsible for managing slightly over $34 billion (nearly R250 billion). This made me wonder (although I don’t think $34 billion is not a lot of money): if Mobius’s views could cause so much optimism, what would the views of the big players out there be?

Warren Buffett (manager of Berkshire Hathaway, at present capitalised $191 billion) recently said in an interview: "We're on the right course", and encouraged President Obama to speak with "enormous confidence" about the country's economic future. He says the stimulus is working and the economy will improve in the next 2-3 years. "We're hiring," he adds referring to many of his Berkshire Hathaway companies, another sign that the recovery is on track.

The financial giant Irish Life ($610 billion under management) announced a few weeks ago that: “Despite these concerns the global economic data continued to improve as both the IMF and the OECD both increased their outlook for the global economy, which is now expected to grow by about 4,2% in 2010 and 4,3% in 2011.”

Much the same as Mobius, they feel that “The recovery in the US continued to broaden and became less reliant on the inventory cycle and government stimulus. However emerging markets remained the key driver of growth, despites talks of a possible slowdown in China.”

State Street Corporation, with $492 billion under management, feel that people will naturally be hesitant (or even fear that we may enter a second recession), especially considering the present levels of volatility in the markets. They nevertheless recently announced that ‘the momentum in place from the emerging markets, the improvement in the US financial sectors’ position and the gradual process of consumer re-balancing are risk reducing factors that should eventually tip the balance towards investing in undervalued equity and credit markets.”

Blackrock Institutional Trust Company (with $329 billion under management) clearly sees a whole number of concerned investors who still have a very real fear of renewed credit problems which make the financial system vulnerable all over the world, that there is a long-term threat of high inflation and that large deficits and rising tax levels will pose greater adversity, and even that equity markets are entering a bear market. Recently, however, they said: “From our perspective, these issues are real concerns, but are unlikely to come to fruition.” They expect that as soon as it becomes clearer that economic recovery has come to stay, as mentioned by all the big groups above, investors will return to the market.

I don’t know about you, but if five groups who manage altogether $1,7 trillion (more than 6 times the whole annual South African GDP), have all told us over the last month that the economy is recovering and that a double dip is unlikely, I am certainly going to listen. However, follow their further advice by starting to purchase selectively and with care!