Yesterday, I had the opportunity listen to an excellent speaker, Russell Napier, at a luncheon hosted by the Baltimore CFA (Chartered Financial Analyst) Society, of which I’m a member. Mr. Napier is a renowned financial market historian, and has done extensive analysis of all different types of historical market cycles. He is currently an author and a consultant to an Asian investment brokerage company.
I thought I would share some of his more interesting views. While not all that optimistic generally due to high debt levels and soaring budget deficits globally, he’s actually fairly positive on the U.S. for the next year or two. He believes that both the U.S. dollar and U.S. equities may do well because he’s expecting capital to begin flowing back into the country. He argued that while the U.S. certainly has plenty of problems, it’s still fairly attractive on a relative basis to Europe and Japan. Anecdotally, he pointed out that large pension funds in Europe that he works with are significantly underweight U.S. equities right now, and may begin increasing their allocations if the recovery continues. He’s more negative on U.S. bonds, but believes interest rates will rise gradually, not suddenly or abruptly.
Overall, it was very informative, and provided lots of food for thought. While we may not agree with all of Mr. Napier’s arguments, attending events like these helps us to challenge our own views and assumptions, which improves our overall decision-making process as we manage portfolios.
