Practical analysis for investment professionals
31 July 2015

Weekend Reads for Global Investors: Bridgewater, the Financial Times, and Gold

Posted In: Weekend Reads

Our views about China have changed.”

Those six opening words and the full report that followed by Bridgewater’s Ray Dalio received much attention around the world last week, from the front page of the Wall Street Journal to the Wechat Moments (similar to Facebook) of many retail investors in China. In a nervous market environment in which the Chinese government has reportedly been sending police officers to investigate short sellers, the report’s popularity probably was not what Bridgewater desired. Very quickly, the firm sent out a statement clarifying its position.

As a veteran of the hedge fund industry and one of the most-watched hedge fund managers, Dalio certainly had a point when he observed in the original note that the most significant damage done by China’s stock market crash could be to the investor’s psyche. Bubbles are almost always created when unsophisticated investors chase the market thinking it can only go in one direction, up. So the recent sharp declines across the Chinese stock markets on an almost daily basis dampened the hopes for a generation of “investors” looking to get rich quick.

Indeed, I did a search in my Wechat Moments and chat groups — the comments and postings by my friends, who include some of the smartest investors in China as well as others who have never bought a stock. The last posting that included the words “stocks up” was dated over a month ago. It’s also obvious across more public social media channels — those believed to be less influenced by the government — that there are hardly any bulls left. That leaves one wondering, though, what did Warren Buffet say investors should do “when others are fearful“?

Another important market development that I think investors around the world should pay attention to is falling gold prices. Again, gold investors seem to be pessimistic all around. MarketWatch recently discovered research previously published in the Financial Analysts Journal by Claude Erb, CFA and Campbell Harvey that predicted poor gold returns following periods of high gold prices.

The chilling prediction Erb makes is that gold investors are probably in the “bargaining” stage, using an analogy from the Kübler-Ross five stages of grief model. He thinks gold can go much lower from here! This is a situation where it seems even more difficult for anyone to apply the “when others are fearful” argument. Doesn’t it feel more like a value trap?

The last story I want to highlight came from the journalism world, where there is a saying: “Report the story, don’t become part of it.” Global financial news powerhouse the Financial Times and Nikkei broke that taboo when the latter announced last week that it is buying the former. The New York Times, as usual, dug deeper and highlighted how the management of Nikkei always adored the Financial Times and how much more successful Nikkei has been in terms of popularity and finances compared to its acquisition.

Below is a list of links from the paragraphs above as well as some of the other interesting reads I have come across in recent weeks. Happy reading and enjoy the weekend.



Emerging Markets

The Soft Side of Business

And Now for Some Readings Truly for the Weekend . . .

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All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.

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About the Author(s)
Larry Cao, CFA

Larry Cao, CFA, senior director of industry research, CFA Institute, conducts original research with a focus on the investment industry trends and investment expertise. His current research interests include multi-asset strategies and FinTech (including AI, big data, and blockchain). He has led the development of such popular publications as FinTech 2017: China, Asia and Beyond, FinTech 2018: The Asia Pacific Edition, Multi-Asset Strategies: The Future of Investment Management and AI Pioneers in Investment management. He is also a frequent speaker at industry conferences on these topics. During his time in Boston pursuing graduate studies at Harvard and as a visiting scholar at MIT, he also co-authored a research paper with Nobel laureate Franco Modigliani that was published in the Journal of Economic Literature by American Economic Association. Larry has more than 20 years of experience in the investment industry. Prior to joining CFA Institute, Larry worked at HSBC as senior manager for the Asia Pacific region. He started his career at the People’s Bank of China as a USD fixed-income portfolio manager. He also worked for US asset managers Munder Capital Management, managing US and international equity portfolios, and Morningstar/Ibbotson Associates, managing multi-asset investment programs for a global financial institution clientele. Larry has been interviewed by a wide range of business media, such as Bloomberg, CNN, the Financial Times, South China Morning Post and the Wall Street Journal.

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