Re: Jim Rogers predicts U$D will drop dramat
- From: Don Tiberone <s_knight8@xxxxxxxxxxx>
- Date: Wed, 24 Oct 2007 20:48:02 -0700
On Oct 24, 9:55 am, PeterL <po.n...@xxxxxxxxx> wrote:
On Oct 24, 9:15 am, "Bill<NOSPAM>Gr...@xxxxxxxx"
<BuffetHa...@xxxxxxxxx> wrote:
As of this morning he has put all his funds into chinese currency.
Says downside for buck is
huge as is the upside of the Reminmbi.
Stock market is headed down by half but so is dollar according to
Jim, shorting the dow will
not keep up with the downward dollar.
How do you put your funds into Chinese currency?
Well, I prefer buying funds with exposure to Asian currencies, most of
which are tied to the Chinese currency anyways. GIM has 50% in Asian
currencies. Although about 16% is in the Yen.
I've owned GIM for the past few years now. Michael Hasenstab is the
fund manager. I can't believe he's only 34 years old. Which is great
considering most of the other great bond fund managers like Dan Fuss
and Bill Gross, are getting old.
http://www.smartmoney.com/barrons/index.cfm?story=20071019
MANY STOCK-FUND MANAGERS consider visits to companies essential, to
get an up-close-and-personal reading on an enterprise's prospects and
to size up its brass. But the folks running most fixed-income funds
tend to be more sedentary. Rather than press the flesh, the typical
bond-fund chief prefers to remain at home, using sophisticated
computer software to seek out the right government bond, hedge the
best currency or divine the direction of interest rates.
Michael Hasenstab isn't the typical bond-fund manager.
"If you want to know what's behind a government's monetary or fiscal
policy, or hear about the latest macroeconomic trends from the people
involved in making those decisions, you have to get on a plane and
meet them face-to-face," says Hasenstab. He runs the $6.5 billion
Franklin Templeton Global Bond Fund (TPINX), which invests mostly in
bonds in emerging markets. "Country visits are as important for us as
company visits are for equity-fund managers," he declares. "Face-to-
face is important."
Established in 1986, the fund is a member of the Franklin Templeton
Investments family, which had about $600 billion in assets under
management at the end of September. There also is an offshore version
of the global bond fund, also run by Hasenstab but not open to U.S.
investors. That version has about $7.5 billion in assets. Over all,
Hasenstab oversees $22 billion in fixed-income products in these and
other investments.
"We look for the best investment opportunities in interest rates,
sovereign credit and currencies around the world, but mostly ex-U.S.,"
Hasenstab says, noting that he's bearish on the dollar and holds no
U.S. bonds. The fund invests in 95 securities and 24 currencies in 22
countries around the world.
The 34-year-old fund manager believes that the big opportunities
currently are in emerging areas of Asia, Latin America and central
Europe.
Thus, although the fund is based in San Mateo, Calif., Hasenstab and
some members of its 30-person team spend about a third of their time
on the road, meeting with government officials, picking the brains of
local think-tank strategists or simply monitoring the local political,
cultural and social environment, looking for anything that might point
to changes in interest rates, economic trends or government policy.
(The fund also has analysts in China, South Korea, Brazil and India,
as well as in London.)
Their research has led them to take big positions in the bonds of
Indonesia, Malaysia, South Korea, Brazil, Sweden and Poland.
For example, after Susilo Bambang Yudhoyono was elected president of
Indonesia in 2004 on an anticorruption platform, Hasenstab and members
of his team made frequent trips to Jakarta over the next two years to
gauge whether progress was being made. They found that the battle
against corruption was going slowly, but eventually "we detected a
real sense of change regarding foreign investment and macroeconomic,
fiscal and monetary policies."
"We could see that the government was doing the right things by
getting rid of fiscal subsidies on oil and gas, controlling inflation
and easing monetary policy," he adds. "As a result, capital was
pouring into the country from overseas and supporting the currency.
But none of this was showing up in the numbers yet."
Betting that it would sooner or later, Hasenstab began to steadily
build a position in Indonesian bonds, well above the weighting
recommended by his benchmark, the Citigroup World Government Bond
Index. Today, Indonesia is his third-largest country position,
accounting for about 6.6% of both his fund's bond and currency
portfolios.
"Indonesia has been cutting interest rates on falling inflation this
year and it has generated very strong returns in the bond market
[about 20% during the 12 months ended in September], which is
something we have taken advantage of quite significantly," notes
Hasenstab, who holds a Ph.D. in economics from the Australian National
University.
"We like to invest in countries that benefit from strong currencies,
solid economic growth and even the potential for falling interest
rates, which can boost the value of existing long-term bonds," he
explains. "We focus on long-term fundamentals and don't get
sidetracked by market fluctuations, which has kept our portfolio
turnover relatively low, compared to our peers'."
He points out that while a 10-year Treasury bill in the U.S. yields a
little over 4.6%, its counterpart in Indonesia generates about 9.8%,
while Brazilian treasuries yield around 12% and in Mexico investors
might capture a little under 8%. "The returns are generally much more
attractive in these markets," Hasenstab says.
Of course, the risks are higher in some of these markets, too. But
Hasenstab has been able to avoid the pitfalls while nicely rewarding
his shareholders. That, in turn, has attracted a lot of new cash.
Since he took over Templeton Global in January 2001, its size has
roughly doubled.
During the 12 months ended Sept. 30 - a period characterized by
rising international bond yields and U.S. dollar weakness - Templeton
Global Bond Fund-Class A returned 14.87% in greenbacks, while the
Citigroup World Government Bond Index gained 8.69% and the Lipper
Global Income Funds Average was up 5.19%. Templeton Global came in
second among the 106 global income funds tracked by Lipper.
The fund has returned, on average, about 13% in each of the past five
years, putting it in the top 5% of its Morningstar peers. And on July
31, Morningstar gave the fund's Class A shares its highest overall
ranking - five stars - based on its risk-adjusted returns against its
peers over three, five and 10 years.
Like some of his peers, Hasenstab offers 100% foreign-currency
exposure by not hedging currencies back into dollars or investing a
position of his portfolio in U.S. bonds. "It is purely opportunistic
whether we hedge or not," he says. Instead, he buys emerging-market
debt. Indeed, he may invest up to 25% of the fund's assets in less-
than-investment-grade bonds from nations such as Brazil, Poland,
Malaysia, Indonesia and Mexico.
And, unlike many of his peers, Hasenstab uses currencies for more than
a hedge. He takes active positions, by purchasing bonds denominated in
foreign currencies or by investing in forward contracts. About half
his currency exposure is in Asia, while 30% is in Europe outside the
eurozone.
While he avoids Japanese government paper - the yields are too low -
Hasenstab has 16% of Templeton Global Bond's assets invested in
Japanese yen. Considering how volatile currency markets can be, that
adds a layer of risk absent in other global fund offerings.
"Long story short," says analyst Bridget B. Hughes, who follows the
fund for Morningstar, "this is an aggressively managed offering, no
matter how thoughtful the process behind it. Although Hasenstab has
proved himself here, investors should be quite risk-tolerant and share
Hasenstab's long-term investment horizon."
Long term, Hasenstab sees a healthy environment for global bonds,
based on worldwide economic growth around 5% in 2007 and 2008, led by
Asia (mainly China) but also including countries on the periphery of
the core Western European developed economy, including Poland,
Slovakia, Hungary, Russia and even Sweden and Norway.
"There is a bit of dichotomy between the technical factors driving the
global bond market and the actual reality of the fundamentals, which
remain pretty good," according to Hasenstab.
For example, Asia's reduced dependency on the U.S. for its economic
and trade growth has created a tremendous opportunity, he contends.
"In the past, Asia's growth was linked to the U.S. business cycle," he
says. "But in the past couple of years, trade within the Asian region
has grown much faster than trade with the U.S., and economic growth is
no longer dependent on what's happening in the U.S., which creates a
good opportunity for the fund, specifically in the currency market."
Over 50% of Templeton Global Bond is positioned broadly across Asia to
take advantage of that continent's strong growth. In tandem with this,
Hasenstab favors Asian currencies.
In Europe, Hasenstab employs much the same strategy, trying to
capitalize on opportunities generated by political and economic
change. "We've found a lot of exciting opportunities in the periphery
of Europe, in places like Scandinavia and Central Europe, where we
find very strong growth rates and very strong current accounts," he
says.
In Sweden, for example, the government is moving to privatize large
parts of the economy and cut taxes. "There's very strong growth story
there, and that's something we are looking at on the currency side,"
he reports.
"We're very selective about where we invest but generally pretty
comfortable where we are in Europe and Asia, at present," he adds.
.
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