We are here today with Paul Goodwin, editor of Cabot China &
Emerging Markets Report. How are you doing, Paul?
I am fine, thanks.
You developed an emerging markets timing system which lets you know
whether to be adding to your positions or scaling back. Could you
tell us a little about your system, and what the outlook for
emerging markets is, based on that?
Sure. The Cabot Market Timing Strategy is based on the idea that it
isn't really possible to know what markets are going to do in the
future, but we can certainly know what they are doing right now.
We use a 25 and 50-day simple moving average on the particular
index that we're using, which, in my case, is the
Power Shares Golden Dragon China
(MUTF_CA:AIM51203), and we see if the index is above its 25 and
50-day moving averages, and if those averages are moving up.
So, right now the Power Shares is up at 24.40, the 25-day moving
average is down at 22, so we have a nice, strong bull market in
Chinese stocks, we have a pretty fair margin there, a very
So, when we have a situation like this, where the market is
definitely bullish, we increase our exposure to emerging market
funds, and if the market is down, when it falls below those moving
averages, then we reduce our positions somewhat and go to cash.
We don't really have an outlook on what the market is going to do,
but this system makes sure that we never miss a bull market and
that we never stay heavily invested in a bear market.
One interesting point that you've made is that US commentators
often allow their ideology to cloud their view of China, which is
an area that's the primary focus of yours, but that you have no axe
to grind. Could you explain that?
Yeah, I know that there are a lot of people in the same way that,
you know, I knew people who went through World War II who would
never buy a
(OTCMKTS:VLKAY), in the same way there are people who see China as
essentially a communist dictatorship and they say they will never
invest there, and you know, I don't want to argue with these
I could point out that China has brought more people out of poverty
than any country in the past century, but I don't really care. What
I'm trying to do is to advise people on how to find the strongest
stocks in the strongest emerging markets.
So if people want to be patriotic about it, or if they want to view
China as the enemy, as people did, say, with Japan back when it was
strong, that's their business, but I'm looking for strong stocks
and strong markets.
You've also noted that you don't have a country bias when you look
globally, and while you do look closely at China, you're also
willing to look anywhere within the emerging markets world. Where
are you seeing opportunities now?
Well, one stock I kind of like right now is called
), it's essentially the
) of Latin America, and its stock has been in an uptrend for
awhile, and I think there is great opportunity in Latin America.
But when I say I don't have a country, or even a regional bias, I
really don't care where the growth is coming. I don't have
projections for what's going to happen in, you know, Turkey, or
Kazakhstan, or anything of the sort. I'm looking for strong stocks
that are delivering good results.
Given that you also do focus on China, for those investors who are
willing to invest there, is there a stock you'd mention that you
particularly like at this time?
I, you know, I think one that I really like right now is a name
that everyone should be familiar with. It's
), which generally is-whenever people mention Baidu they generally
) of China.
Baidu does have a commanding lead in the search market in China,
but for various reasons the stock, after peaking in 2011, went from
166 about down to 83, and along with a lot of Chinese stocks, they
were just out of fashion.
But it's really hard to argue with a company that has, the last
three years of revenue growth are 81%, 92%, and 57%, and I think
with the stock now trading up around 135, I still think it
represents a great value and a great way to play the strength of
Well, thank you very much for joining us today. We really
appreciate your time.
Editor's Note: This article was written by Paul Goodwin of
Cabot China & Emerging Markets Report
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