Mark Mobius on the State of Emerging Markets

Mark Mobius, arguably the most respected emerging markets investor and one of the great investors period, answered five questions for Institutional Investor magazine:

1 What did the financial crisis teach us about emerging markets?

Everybody was affected, including emerging markets equities. But what we learned is that emerging markets are much more resilient — they recovered much faster than developed countries. Another thing is that emerging markets have garnered more exchange reserves than Western countries. In the past, emerging markets were always short. Now China has $2.3 trillion and Russia has more than $395 billion in reserves. They certainly do not have to ask for aid.

2 What’s the near-term economic outlook?

This year we expect emerging markets to grow, on average, four times more than developed countries, or 4 to 5 percent versus 1 percent. India and China will be growing at 7 to 9 percent.

3 So are big investors shifting more money from the U.S. and Europe to emerging markets?

Institutional investors are by and large very underweight emerging markets. The average American pension fund has 2 to 8 percent in emerging markets, but all emerging markets stocks globally represent 20 percent of the world’s GDP. During the crisis everybody retreated to what they thought was safe: U.S. dollars. Then you had this rapid buildup, and a lot of these institutions were kicking themselves for not staying in. Now they are thinking, Am I getting in at the top? They have to start building a program that gets them into emerging markets at a much higher weighting. To be underweight emerging markets right now is crazy.

4 How much should investors allocate to emerging markets?

Well over 15 percent. When you travel to these markets you can feel it — the vibrancy and growth. Yes, there are challenges, but then you look at developed markets like Greece. That’s what I call a submerging market.

5 What are the hottest emerging markets now?

Brazil is at the top, then Russia, China and India. But besides the BRICs: Turkey, Poland and Thailand.

An easy way for an individual investor to invest in emerging markets is to buy into an Emerging Markets Stock Index Fund, which is what I have done.

Targeted Clothes and Footwear Purchases

Tim Ferriss once passed along the advice, “Buy the most comfortable bed and pair of shoes you can afford. If you’re not in one, you’ll be in the other.”

Prioritize comfort if you’re going to be wearing something every day. Only recently have I appreciated the wisdom of this advice. Growing up I wore more or less the same thing: jeans or sweatpants, t-shirt, and if cold (California cold) a hooded sweatshirt. I hated shopping and had no interest in fashion per se so my wardrobe was a hodgepodge of clothes I received as Christmas gifts, whatever my Mom picked up at Mervyns for me, and whatever I purchased at the outlet stores in Vacaville, CA.

It’s still 90% a hodgepodge of hand-me-downs, and I still hate shopping and still wear that combination most days, but in the last few years I’ve made a handful of targeted, strategic purchases of clothes and footwear that have dramatically increased my comfort, style, and by extension, projected self-confidence.

Shoes — I found via the Boulder Running Store Asics Foundation running shoes. I buy the maximum support version of the shoe so I can easily hike in them too. (I wore them all through Patagonia.) I buy a new pair, exact same kind, every year. I used to never spend more than $100 on shoes. These cost me about $120 and they’re totally worth it. Gretchen Rubin says a true secret to happiness is to wear running shoes all day.

Sandals — I upgraded from my usual Nike or Adidas sports sandals and purchased Reef sandals. More durable, more comfortable, thicker base.

Socks — Any brand is fine, but Thorlos are supremely comfortable, easy to get on and off, and absorb sweat.

T-Shirts — I bought a few American Apparel tri-blend basic t-shirts. So so so comfortable, especially if you’ve only worn “free” t-shirts. They look good. I highly recommend having a couple of these in your closet.

Outerwear — What to wear on the outside that’s not too formal (sports coat) nor too informal (hoodie)? For years I wore my San Francisco Giants fleece to all sorts of business meetings. Now I have two better options: The cashmere sweater from Land’s End (a bit pricey but super soft and comfortable and versatile for both formal and informal) and the lightweight Nike Dry Endurance Jacket which is great for walking outside in chilly/crisp weather or trekking outside in light rain environments.

Pants — I have not found anything better than basic, cheap, loose-fitting jeans and basic sweatpants. Same goes with hoodies.

Travel Clothes — I own a couple button down travel shirts like this one which absorbs sweat, dries quickly, breathes in hot weather, and contains two breast pockets which is helpful for storing things. I own two pairs of super light weight and fast drying boxers.

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Here’s The Onion’s magazine cover Heterosexual Men’s Fashion, spoofing the NYT fashion issue. People who buy fake clothes / merchandise are more likely to cheat in other ways. The end of the hipster? (I hope so.)

The Age of Early Self-Conception

On Facebook the other day I viewed a profile of a "friend" who's in college and she typed this as her bio:

me? hmm. well, i'm a fighter. i'm a little crazy, but i'm passionate and i love hard when i do let myself love. when i'm upset, i need ice cream and to have my back rubbed. i'm restless by nature, and am happiest when i'm moving. i'm athletic but not a jock, musical but not a musician, and neither side of my brain seems to be dominant. sometimes i find comfort in words, and sometimes in numbers, but always in the smell of spring and my best friends. i'm bad with change, but get tired of staying the same. i'm contradicting and i think too much, but i'm told that it's cute. i believe in things that happen for a reason, and i hope that Vassar is one of them. i am extreme, i am loved. i am hopeful.

When reading her rather self-conscious, careful bio (though the lowercase letters and opening phrase "me?" attempt to signal the opposite), I was struck: When else have so many millions of people under age 22 been asked to write their "biography" for public consumption? When else have hundreds of millions of people been asked to (essentially) publicly list their interests, favorite quotations, religious views, and political views?

Imagine the tens of millions of 15 year-olds who go to set up their profile and see a big white text book that says "Bio." As the cursor blinks, they ask themselves, "What is my biography? What are my interests? What are my religious views? What is my relationship status? Am I sexually interested in men or women?"

Social network people say that the profile we look at the most is our own. We are very interested in how we present ourselves to the world. But perhaps more important, we are interested in trying to figure out ourselves. As younger and younger people set up profiles, they end up confronting some of the central angst-inducing identity questions early in life.

Insofar as this all prompts reflection on issues, I say 'tis a good thing. But there's also a risk of people too quickly pouring cement on their identity. A 15-year-old selects from a drop down menu "Liberal" and views his page a few times a day. What does that do to his willingness to evolve his mindset?

There should be a checkbox at the top of your profile labeled "Keep Your Identity Small" and it would keep the "bio" box open but disable the other drop-downs. There should be a drop-down option for "Uncertain" in each category.

(A hat tip is owed to somebody for talking to me about this, but I cannot remember who.)

The Two Schools of Strategy

…the history of strategy as a struggle between two definitions, strategy as positioning and strategy as organizational learning. The positioning school, led by Harvard’s Porter, sees strategy making as the choice of where you want to compete, in what industry and from what spot within that industry, and how—on price, with distinctive products, or by finding a niche. The organizational-learning school, by contrast, maintains that no company that’s already up and running can choose its strategy as if it had a blank slate. Almost gleeful in its derision of the positionists—at least its leading spokesman, McGill’s Henry Mintzberg is—the learning school also argues that virtually no strategy ever works as originally planned. The point, they say, is for the company to set off in one direction, learn from the response it gets from markets and competitors, and then adjust accordingly.

That’s from The Lords of Strategy by Walter Kiechel. Full review forthcoming. Here is Mintzberg’s book The Rise and Fall of Strategic Planning.

Cerro Pochoco in Outer Santiago

Santiago is like San Francisco in that there are many close getaway locations for weekend adventures. There are also microclimates abound — in a couple hours you can be in snow or in beaches.

This past weekend J. and I hiked Cerro Pecho. We found this blog post and followed it all the way. Beautiful views, and noticeably cleaner air. Only hassle were the dogs. Unlike Atacama, there wasn't rape happening all around us, but they were loud with their barking…

Pochoco-7