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Mark Mobius on Emerging Market Funds · Masters in Business

0:00
Speaker 1: M. This is Mesters in Business with Very Renaults on
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Speaker 1: Bluebird Radio. This weekend. On the podcast, I once again
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Speaker 1: have an extra special guest, and I really mean an
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Speaker 1: extra special guest. Dr Mark Mobius is a legend in
0:19
Speaker 1: the world of emerging market and frontier investing. He's one
0:24
Speaker 1: of the first people, first Americans, who went out and
0:27
Speaker 1: actually started kicking tires and looking at various companies all
0:32
Speaker 1: around the world. He's been doing this so long that
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Speaker 1: when he first began, there were only six investable countries
0:41
Speaker 1: that you could put your money into. The rest of
0:44
Speaker 1: the world either didn't have public companies or public markets
0:49
Speaker 1: you couldn't get cash in, and now if there weren't custodians.
0:52
Speaker 1: It's amazing that this is the guy that essentially created
0:57
Speaker 1: e M. There were a couple of other folks doing
1:00
Speaker 1: something like this, but no one quite the way that
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Speaker 1: Dr Mark Mobius uh did. I found this conversation to
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Speaker 1: be absolutely fascinating. I had like another three hours worth
1:10
Speaker 1: of questions for him. We we barely got through an hour.
1:14
Speaker 1: If you're at all interested in what the process is
1:17
Speaker 1: like of doing e M investing, what you find that
1:20
Speaker 1: either makes you more enthusiastic about a company or a
1:24
Speaker 1: company you're enthusiastic that when you go and kick the
1:26
Speaker 1: tires you start to find out that hey, this isn't
1:30
Speaker 1: has presented. Um. This is just an absolutely tour to
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Speaker 1: force fascinating conversation. So, with no further ado, my interview
1:39
Speaker 1: with Dr Mark Mobius. This is Mesters in Business with
1:46
Speaker 1: very Results on Bluebird Radio this week. My extra special
1:52
Speaker 1: guest is Dr Mark Mobius. He is the founding partner
1:56
Speaker 1: of Mobius Capital Partners. Previously, he spent forty years working
2:00
Speaker 1: and traveling in emerging market and frontier markets. Before Mobius
2:05
Speaker 1: launched in twenty eighteen, he worked with Franklin Templeton Investments
2:10
Speaker 1: for more than thirty years, where he was executive Chairman
2:13
Speaker 1: of the Templeton Emerging Market Groups. During his tenure there,
2:17
Speaker 1: he helped to expand the assets under management from a
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Speaker 1: hundred million dollars to over fifty billion dollars throughout Asia,
2:25
Speaker 1: Latin America, Africa and Eastern Europe. UH he ran a
2:29
Speaker 1: series of open ends, closed ends and private uh e
2:33
Speaker 1: M funds, including private equity funds. He has also been
2:37
Speaker 1: on the World Banks Global Corporate Governance for him UH.
2:41
Speaker 1: Dr Mark Mobius welcome to Bloomberg. Thank you. It's great
2:46
Speaker 1: being we do so. That is quite a storied career.
2:50
Speaker 1: Let's start in the early parts of it. You you
2:52
Speaker 1: took a very different route than most people in finance.
2:57
Speaker 1: You worked at a talent agency. You were a community
3:00
Speaker 1: Asians teacher, a political consultant. And am I reading this right?
3:04
Speaker 1: Did did you actually market snoopy merchandise in Asia? Yeah?
3:09
Speaker 1: I did, that's right. Uh. When I was in Hong Kong,
3:12
Speaker 1: I had a consulting firm and one of my clients
3:15
Speaker 1: was looking for people to manufacture of products. So she
3:19
Speaker 1: had it was a company in San Francisco quoted Term Productions.
3:24
Speaker 1: They had the rights for all of the snoopy merchandise,
3:27
Speaker 1: all the penis missiondise and she asked me to look
3:30
Speaker 1: for manufacturers in Asia. And one day I said, why
3:34
Speaker 1: don't you start selling in Asia? And they didn't think
3:36
Speaker 1: about that, so they said why don't you do it?
3:38
Speaker 1: And of course that's how I got involved in distributing
3:41
Speaker 1: these products in Asia, or at least in Hong Kong
3:44
Speaker 1: and the greater China area. Is that how a kid
3:47
Speaker 1: from Hempstead you grew up like forty five minutes from
3:50
Speaker 1: where I'm I am right now? Is that how you
3:53
Speaker 1: got involved in international business and investing? That happened the
3:57
Speaker 1: way before that, because I got a scholarship to study
4:00
Speaker 1: in Japan after I got my master's degree at bu
4:05
Speaker 1: UM and that really changed my life because you know,
4:08
Speaker 1: the culture shock of being in Japan, completely different culture
4:13
Speaker 1: of an incredible country growing very rapidly at that time. Uh,
4:18
Speaker 1: that was really what changed me, and I decided to
4:21
Speaker 1: go back. I got my pH d and M I
4:24
Speaker 1: T and then went right back to Asian sat and
4:26
Speaker 1: working so Bu Masters Kyoto postgraduate work. M I T.
4:34
Speaker 1: pH d. You also studied at Wisconsin, Syracuse, New Mexico.
4:39
Speaker 1: That seems to be a very heavy focus on education.
4:43
Speaker 1: It was. I was a professional student. I really didn't
4:47
Speaker 1: want to leave a university UM and that's the reason
4:51
Speaker 1: why I did a sort of round robin of these
4:53
Speaker 1: different universities. But then finally when I got my pH d,
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Speaker 1: I said, Okay, let's let's get real, let's find out
5:00
Speaker 1: what I you know, what I should be doing in
5:02
Speaker 1: this world. And how did you end up at the
5:05
Speaker 1: Mega International Investment Trust in Taiwan? Oh? That was? Yeah?
5:11
Speaker 1: International Investment Trust was they Before that, I was working
5:16
Speaker 1: for a broker in Hong Kong, uh it was a
5:20
Speaker 1: British broker because DaCosta, and they sent me to Taiwan
5:24
Speaker 1: to open an office and also sit on the board
5:27
Speaker 1: of a joint venture they had with local banks and
5:30
Speaker 1: some other British firms, which was the very first investment
5:34
Speaker 1: management firm in Taiwan called International Investment Trust Um. And
5:40
Speaker 1: eventually the guy that was running it to a left
5:42
Speaker 1: and I took over. So I became the head of
5:44
Speaker 1: that company, which they launched the Taiwan r OC Fund,
5:48
Speaker 1: which I think the remnants of it are still listed
5:52
Speaker 1: in New York, I believe. So over the course of
5:56
Speaker 1: your career, you've traveled well over a million miles, You've
6:00
Speaker 1: into a hundred and twelve countries. I have to ask
6:03
Speaker 1: what are some of your favorite places to travel and
6:06
Speaker 1: what are some of the favorite foods you've eaten. You know,
6:09
Speaker 1: it's really interesting when I racked my brains and try
6:12
Speaker 1: to figure out where I like it the best, I
6:15
Speaker 1: really can't come up with an answer because every place
6:18
Speaker 1: I've been I've liked in some way or another. But
6:21
Speaker 1: probably if you ask me right now, where would you
6:26
Speaker 1: like to be, and probably would be the beach at
6:29
Speaker 1: Rio de Janeiro in Brazil that might be a place
6:34
Speaker 1: that would be nice to be, or a beach at
6:39
Speaker 1: Cape Town, South Africa. I love bout or life. I
6:43
Speaker 1: love beaches and that sort of thing. But frankly, I
6:46
Speaker 1: lived in Japan and Korea and Taiwan, Philippines. I love
6:51
Speaker 1: all these places. I really can't think of anyone that's
6:54
Speaker 1: particularly favorite. Let's let's talk about food, because I recall
6:57
Speaker 1: you hearing you once say that you eight scorpions on toast?
7:03
Speaker 1: Is that right? Right? Is that sort of like a
7:06
Speaker 1: soft shell crabs? What do they actually taste like? Actually
7:10
Speaker 1: that was in Singapore in a in a restaurant that
7:12
Speaker 1: specialized in special sort of medicinely beneficial foods, supposedly, and
7:20
Speaker 1: this is scorpion on toast. It was sort of like
7:23
Speaker 1: eating crispy shrimp. But it had a little bit of
7:27
Speaker 1: a bite to it, you know, a little bit of
7:29
Speaker 1: a speed taste to it. And I assume they removed
7:33
Speaker 1: the poison first, or is that is that just digest
7:37
Speaker 1: they do. They do remove most of the poison, but
7:40
Speaker 1: some of the sting was still there. It's it was
7:43
Speaker 1: very similar to in Japan if you have had fugu
7:47
Speaker 1: the blowfishes, it still has this tinging sensation on your lips,
7:52
Speaker 1: which is supposed to be part of the experience. I
7:56
Speaker 1: understand Singapore has become the food capital of Asia. What's
8:01
Speaker 1: it like there? It is true, that's the Singapore has
8:04
Speaker 1: an incredible variety of dishes because you've got not only
8:08
Speaker 1: all the Chinese cuisines, which as you know, very varied.
8:12
Speaker 1: I mean you've got cuisines in China that go from
8:16
Speaker 1: very very spicy, too very bland, and so forth. But
8:20
Speaker 1: then you have the Malaysian and Indonesian foods, and added
8:25
Speaker 1: to that, of course, you have the Indians of foods.
8:27
Speaker 1: So it is true. It's Singapore is quite buried in
8:33
Speaker 1: its menu. Huh. Quite mouth watering. So let's talk a
8:37
Speaker 1: little bit about Franklin's Tappleton. No less than Sir John
8:41
Speaker 1: Templeton asked you to run their Emerging Markets division in
8:47
Speaker 1: tell us what e M was like back then. I
8:49
Speaker 1: have to think the world has changed a lot in
8:51
Speaker 1: the ensuing thirty plus years. Oh, that's for sure. I
8:55
Speaker 1: mean in nineteen eight seven, I was sitting there in
8:58
Speaker 1: Taiwan running these that uh, the the fund management company
9:04
Speaker 1: that was doing the Taiwan Fund International Investment Trust, and
9:08
Speaker 1: I get a call from actually one of the deputies
9:11
Speaker 1: of John Templeton. I had made presentations to him in
9:15
Speaker 1: his space in Nasal Bahama's a number of times, and
9:18
Speaker 1: I guess he remembered me. And uh, as you know,
9:22
Speaker 1: at that time, emerging markets were just the term was
9:26
Speaker 1: coined by the International Finance Organization and they had they
9:33
Speaker 1: had launched the Emerging Markets Fund, and then Templeman said
9:37
Speaker 1: that he wanted to do the same thing. So he
9:39
Speaker 1: approached me and said, let's raise a hundred million dollars
9:43
Speaker 1: in New York, uh and do this Emerging Markets Fund um.
9:48
Speaker 1: And it was a great temptation for me because it
9:51
Speaker 1: enabled me to really expand out of Taiwan into something
9:55
Speaker 1: really exciting. But it was a tough decision as well,
9:58
Speaker 1: because we didn't really know what I was getting into.
10:02
Speaker 1: And we opened a small office in Hong Kong, had
10:06
Speaker 1: I hired two analysts to Chinese analysts, who, by the way,
10:10
Speaker 1: stayed with me for the thirty years I was in
10:12
Speaker 1: frank And Yeah, and we started with only six countries.
10:17
Speaker 1: You must remember in those days, most countries did not
10:20
Speaker 1: welcome fun investment. Uh, they were also either socialists or communists,
10:25
Speaker 1: like China and Proussia. Eastern Europe was out of the question,
10:29
Speaker 1: of course. So we had only six markets in which
10:32
Speaker 1: to invest, and then we started the expanding. Gradually markets
10:36
Speaker 1: opened up and eventually we were investing in something like
10:40
Speaker 1: seventy different countries around the world. Do you recall what
10:42
Speaker 1: the original six countries were. They were Hong Kong, of course,
10:47
Speaker 1: the Philippines, Malaysia, Singapore, Thailand, and Mexico. H No Japan,
10:55
Speaker 1: No South Korea, that's right, No Japan, No South they
10:58
Speaker 1: were considered they were no longer considered e M countries.
11:02
Speaker 1: You know, actually it's tore It was, but it was
11:04
Speaker 1: closed for one reason or another. There were difficulties in
11:07
Speaker 1: getting in it. Must remember, you know, the whole idea
11:09
Speaker 1: of getting a custodian they keep your securities. All of
11:14
Speaker 1: these technical issues were there. And Japan, of course, had
11:17
Speaker 1: it graduated into a developed country by that time. So
11:21
Speaker 1: back in the n I'm going to assume there was
11:24
Speaker 1: no remote access. It was always boots on the ground.
11:27
Speaker 1: Is that how research was done? Oh, that's for sure.
11:31
Speaker 1: Don't forget no internet no laptop, computer, no cell phones. Um.
11:39
Speaker 1: You know, the technology has to really change things tremendously.
11:44
Speaker 1: So tell us what do you learn from traveling as
11:46
Speaker 1: opposed to just a phone call, assuming you can actually
11:50
Speaker 1: call anybody. Well, you know, it's true that we're able
11:54
Speaker 1: to do a lot on the phone these days, and
11:56
Speaker 1: particularly with video conferencing, because you could see the people.
12:00
Speaker 1: But there's nothing like being in a country, smelling the
12:05
Speaker 1: smells that you get, looking at the people, getting a
12:09
Speaker 1: feeling for how people are living. Um. And then you
12:13
Speaker 1: walk into a company, you look around, you observe what
12:17
Speaker 1: the nature of the company is like, what is the
12:19
Speaker 1: morale of the staff, etcetera, etcetera. So there's nothing that
12:24
Speaker 1: beats that being on the ground and seeing for yourself
12:28
Speaker 1: what's going on. UM. So we always think that it's
12:31
Speaker 1: important to be traveling and visiting companies as much as possible.
12:36
Speaker 1: So let's talk a little bit about your process. Is
12:38
Speaker 1: it top down you start in a country and then
12:41
Speaker 1: dig into individual companies or do you go bottoms up,
12:45
Speaker 1: start with the company and then work your way through
12:48
Speaker 1: that local either country or region. Well, we like to
12:52
Speaker 1: say that we're bottom up invests in the sense that
12:55
Speaker 1: we look at the companies intensely, but that doesn't mean
12:59
Speaker 1: we ignore the macro the top down approach because obviously,
13:06
Speaker 1: you know, let's say, if we wanted to invest in
13:08
Speaker 1: Sri Lanka today, Uh, obviously you don't have to look
13:12
Speaker 1: at what's happened to the currency, what's happened to interest rates,
13:16
Speaker 1: what the government is doing, what kind of restrictions are
13:19
Speaker 1: taking place, uh for foreign investors to invest, that sort
13:22
Speaker 1: of thing. But after those critical issues currency ability to
13:30
Speaker 1: move money in and out, then we dig in to
13:33
Speaker 1: the individual company because that's the key. Because one of
13:37
Speaker 1: the things that I found over the years that a
13:40
Speaker 1: company can survive in a very difficult environment, and you
13:44
Speaker 1: shouldn't be afraid to go into a country where the
13:48
Speaker 1: environment is not ideal as long as you can get
13:51
Speaker 1: money in and out. That's really the key. Even the currency,
13:56
Speaker 1: if the currency is declining or getting very very weak
14:01
Speaker 1: for one reason another, there's still opportunities because, for example,
14:05
Speaker 1: an export oriented company can do very well in such
14:08
Speaker 1: an environment because they're earning in dollars and their courts
14:11
Speaker 1: are in local currency. So uh, I would say, yeah,
14:15
Speaker 1: we're more ground up and more fundamentally company oriented in
14:22
Speaker 1: the way we approach things. So today I could fly
14:25
Speaker 1: into a different country where I don't speak the local language,
14:29
Speaker 1: use my iPhone with Google Translate or any one of
14:32
Speaker 1: a dozen other translation apps, and be able to communicate
14:36
Speaker 1: with people. What did you do back in the eighties
14:39
Speaker 1: and nineties, I'm assuming you don't speak dozens and dozens
14:42
Speaker 1: of languages. What happens when you show up and you're
14:45
Speaker 1: not fluent? Well, that's what they very interesting and great
14:51
Speaker 1: good thing that we found when we travel and went
14:54
Speaker 1: to these countries is that you always found people who
14:57
Speaker 1: spoke English, particularly and you were visiting listed companies, companies
15:02
Speaker 1: listed on various stock exchanges, which is where we were looking. Um. Inevitably,
15:08
Speaker 1: in every company you would find somebody who's going to
15:11
Speaker 1: be able to translate for you. And more often than not,
15:15
Speaker 1: the top management were English speaking, English educated, um, you know,
15:21
Speaker 1: so they were. It was quite easy to get information
15:24
Speaker 1: and get face to face communications with these people. There's
15:28
Speaker 1: some exceptions, but not that often. It was quite good
15:32
Speaker 1: and quite easy to get people to communicate. Um. And
15:36
Speaker 1: even if a company uh officials did not speak English,
15:40
Speaker 1: we were able to find translators easily enough. And who
15:44
Speaker 1: else did you speak to. I mean, obviously you spoke
15:47
Speaker 1: with management, but but did you speak to local customers
15:51
Speaker 1: or or workers at at various places. How comprehensive was
15:56
Speaker 1: your boots on the ground due diligence. Well, that's one
16:01
Speaker 1: thing we found much too to our chagrin, that don't
16:05
Speaker 1: talk to just the top management. We made many mistakes
16:09
Speaker 1: by just talking top management. But you've got to talk
16:12
Speaker 1: to the staff, talk to the customers, talk to competitors.
16:16
Speaker 1: Competitors are great source of information because if you have
16:20
Speaker 1: a competitor who is speaking very highly of the company,
16:24
Speaker 1: that's a pretty good sign of the quality of the
16:27
Speaker 1: company you're talking about. Uh. And then we also talk
16:30
Speaker 1: to government officials. You know, are there any transit transgressions
16:35
Speaker 1: on the part of the company, or any problems in
16:37
Speaker 1: the industry. So you really have to open up the
16:42
Speaker 1: wide variety of sources. And by the way, that's one
16:45
Speaker 1: of the advantages of being on the ground as well,
16:48
Speaker 1: to say the least. So when we look at the
16:51
Speaker 1: environment today, active by side managers they use a lot
16:55
Speaker 1: of financial models, they use big data, they have the
16:58
Speaker 1: ability to crunch a lot of economic assumptions. What was
17:02
Speaker 1: it like in the eighties and nineties. I'm going to
17:04
Speaker 1: assume you didn't have access to all that modern technology
17:10
Speaker 1: and AI. That's right, they were not available. Of course,
17:14
Speaker 1: I don't forget. This was the age before miss it,
17:16
Speaker 1: the mith It program, where you had to separate brokerage
17:20
Speaker 1: fees and research. Uh, and in those days we were
17:25
Speaker 1: able to get an awful lot of information pre of
17:28
Speaker 1: charge from brokers who we were dealing with. But you
17:33
Speaker 1: might not say pre charge because we're paying them brokerage commission,
17:36
Speaker 1: but we were going to give them owners anyway. So
17:40
Speaker 1: UM it was very easy to get information, a lot
17:44
Speaker 1: of research from brokers we're doing research, and they were
17:47
Speaker 1: also local research institutions who produced research. So gradually the
17:57
Speaker 1: knowledge built up. Of course, at the beginning in eight seven,
17:59
Speaker 1: there is almost nothing available, but by at time there
18:06
Speaker 1: was a lot of information throwing out of these various firms,
18:11
Speaker 1: really quite fascinating. So let's talk a little bit about
18:14
Speaker 1: UM traveling to different countries and hunting down specific companies.
18:21
Speaker 1: What do you recall as a particularly spectacular investment that
18:25
Speaker 1: you discovered after traveling to a country, and we're just
18:29
Speaker 1: really surprised by what you found researching a company, probably
18:33
Speaker 1: The best example was in China. Um. That was when
18:39
Speaker 1: we discovered a company that in China that made the
18:43
Speaker 1: gears for wind power companies. That it's about fifteen years ago.
18:49
Speaker 1: That's when you know, the whole area of wind power
18:53
Speaker 1: was coming up strong and this company was doing incredible work.
18:57
Speaker 1: We visited the factory and I noticed that the machine
19:00
Speaker 1: tools they were making were top notch, you know, automated
19:05
Speaker 1: machine tools, and they were doing very high quality work
19:08
Speaker 1: according to their customers. So we decided to invest in
19:12
Speaker 1: that company, and that turned out to be an incredible investment.
19:16
Speaker 1: Was you know, the double triple price we paid. So
19:21
Speaker 1: that was probably one good example of you know, doing
19:25
Speaker 1: on the ground research and finding something that other people
19:29
Speaker 1: were not noticing. And by the way, I think that's
19:32
Speaker 1: one of the features of good investing is finding something
19:36
Speaker 1: that other people are not finding. In other words, try
19:41
Speaker 1: to discover a company that has not been yet so
19:44
Speaker 1: called discovered by the market. What what about the opposite.
19:48
Speaker 1: Did you ever show up somewhere excited about a specific
19:52
Speaker 1: company and owing to discover, hey, this isn't what we
19:55
Speaker 1: were hoping for. Oh many, many, many times. Uh, and
20:01
Speaker 1: of course many times we were fooled by uh, the
20:04
Speaker 1: information we were getting um and you know, very very
20:08
Speaker 1: missteps along the way. It's it's it's it is the
20:13
Speaker 1: feature of investing anyway, as you know, but in emerging
20:17
Speaker 1: markets you have to be special and be very, very
20:21
Speaker 1: extra careful. So so when you started doing this in
20:25
Speaker 1: the late eighties, was anyone else from the United States
20:29
Speaker 1: or other US investment firms actually traveling the world looking
20:33
Speaker 1: at companies you sort of the Indiana Jones of this.
20:37
Speaker 1: How long did it take for other investment firms to say, hey,
20:42
Speaker 1: we need an e M or a developed x U
20:44
Speaker 1: s UM fund and we need someone like Mobius out
20:48
Speaker 1: kicking the tires. Well, it took about five years for
20:52
Speaker 1: you know, the field to grow where you know, once
20:55
Speaker 1: they saw the results that we were getting, a lot
20:58
Speaker 1: of people began to jump in the aggreing. And you
21:00
Speaker 1: must remember that the pioneer on this was the i
21:04
Speaker 1: f C, the International Finance Corporation. They started emerging markets
21:09
Speaker 1: and social funds about it liter earlier than we we
21:12
Speaker 1: started our funds. So they were on there, as you know,
21:16
Speaker 1: they were the precursor the index of course, there's capital
21:20
Speaker 1: and national was the They were the people that were
21:23
Speaker 1: doing researchers of companies all around the world. So you
21:29
Speaker 1: started venturing into Africa way earlier than just about everybody else.
21:34
Speaker 1: What led you to discover that continent and how I
21:38
Speaker 1: have the results been? Well, you know, as the assets expanded,
21:43
Speaker 1: we really had to find new opportunities everywhere, and Africa
21:48
Speaker 1: was wide open. It was just there was so much there.
21:51
Speaker 1: And of course visits initial business there really excited us
21:56
Speaker 1: because we realized this is ground that has not been
22:00
Speaker 1: uh killed in any direction, lots of opportunities where there's
22:06
Speaker 1: no information, which is an advantage because if you're on
22:09
Speaker 1: the ground, if you're able to travel these places and
22:11
Speaker 1: get information, then you have an edge on any competitor
22:16
Speaker 1: that wants to come in. So I saw tremendous opportunities
22:20
Speaker 1: in places like South Africa, in Nigeria, uh in Kenya,
22:25
Speaker 1: and of course Africa is so huge, there's so many countries,
22:30
Speaker 1: there's tremendous opportunities. Of course, the big challenge was to
22:34
Speaker 1: find a equity market of stock market and liquidity. Of course,
22:39
Speaker 1: one of the biggest challenges you get, of course is liquidity,
22:43
Speaker 1: getting enough liquidity to be able to invest significant amounts
22:49
Speaker 1: of money you have to be able to move in
22:51
Speaker 1: and out and not completely disrupt the price or the
22:54
Speaker 1: market exactly. And by the way, that was one of
22:58
Speaker 1: the reasons why we got involved in private equity because
23:01
Speaker 1: we found so many of these opportunities, but some of them,
23:05
Speaker 1: of course we're not listed. Some of them were listed,
23:08
Speaker 1: but there was no liquidity at all, and we decided, hey,
23:11
Speaker 1: why don't we do a private equity fund where you know,
23:15
Speaker 1: the holding periods for the clients would be five or
23:18
Speaker 1: six seven years. Then we can develop these companies uh
23:22
Speaker 1: and bringing them to the market with more liquidity as
23:24
Speaker 1: we expand. So that that was a very very good
23:29
Speaker 1: move for us. And anything stands out as a particularly
23:34
Speaker 1: exceptional or shocking story that didn't involve finance or a company.
23:38
Speaker 1: When you were when you were traveling all over the world,
23:41
Speaker 1: I have to imagine there were some pretty memorable snaff
23:45
Speaker 1: foods along the way. Well, we got caught in the
23:48
Speaker 1: revolution in in Philippines where they're shooting at the hotel
23:52
Speaker 1: and we were able to get out luckily by helicopter
23:55
Speaker 1: for the roof of the hotel. That was one example.
23:58
Speaker 1: But they were few post calls like that, but never
24:03
Speaker 1: deterred US for some reason. Maybe we were too innocent,
24:06
Speaker 1: but you know, we have to roll with the punches,
24:10
Speaker 1: so to speak. But there's always some kind of tremoil
24:14
Speaker 1: going on us. You know. I was recently in Sri
24:17
Speaker 1: Lanka and uh, you know, you can still work and
24:21
Speaker 1: you can still visit companies, but meanwhile people are demonstrating
24:25
Speaker 1: on the street. Wow, that's that's pretty amazing. So let's
24:30
Speaker 1: talk a little bit about emerging markets versus the United States.
24:33
Speaker 1: This I think the twelve or thirteenth year prior to
24:37
Speaker 1: two where the US has outperformed emerging markets. I think
24:43
Speaker 1: that's the longest run we've seen in a number of decades.
24:46
Speaker 1: What's it gonna take for e M to make its
24:49
Speaker 1: comeback against the United States and two? Maybe this is
24:53
Speaker 1: the year. That's a great question. Uh. One thing you've
24:58
Speaker 1: got to realize is that the world has changed to
25:01
Speaker 1: the extent that a lot of the emerging markets growth
25:07
Speaker 1: is now in the United States because US companies are
25:11
Speaker 1: manufacturing and selling and buying from emerging countries. When we
25:17
Speaker 1: saw in the whole premise of going into emerging markets
25:22
Speaker 1: was to capture the growth because these countries were these
25:25
Speaker 1: were the low and middle income countries on a per
25:28
Speaker 1: capita basis, UH, they were growing at more than double
25:31
Speaker 1: that of the developed countries US, Japan, Europe, Australia, New Zealand. UH.
25:36
Speaker 1: Now what's happened is that a lot of these companies,
25:39
Speaker 1: this is in the US, might even be called emerging
25:42
Speaker 1: market companies. For example, let's take Apple, Now what percent
25:46
Speaker 1: of their manufacturing is done in Asia, let's say, or elsewhere,
25:52
Speaker 1: and what percent of their sales are in emerging countries
25:56
Speaker 1: like China. So it's become much more different called to
26:00
Speaker 1: define what is an emerging market And if you travel
26:06
Speaker 1: to some of these countries, you'll be amazed at the growth,
26:11
Speaker 1: at the way they've developed. UH. And you know, just
26:15
Speaker 1: just the infrastructure is just incredible. What's happened in many
26:19
Speaker 1: of these countries. So it's become more and more difficult
26:22
Speaker 1: to define specifically what is an emerging market company UM.
26:29
Speaker 1: And even the definition of country to more country is blurred.
26:33
Speaker 1: For example, let's say Korea. Korea was a very poor
26:36
Speaker 1: country when we started in Today it ranks as one
26:41
Speaker 1: of the on a per capita basis, one of the
26:43
Speaker 1: richer countries. So UH, the Koreans have also always been
26:48
Speaker 1: saying recently that they are not an emerging market country,
26:51
Speaker 1: They're more developed country, which I think rings true. So
26:55
Speaker 1: do you still do the same degree of traveling you
26:59
Speaker 1: were doing years ago? Are you, you know, on the
27:03
Speaker 1: road eight months a year. What's it like today? Well,
27:08
Speaker 1: I try to travel as much as I can, but
27:12
Speaker 1: with COVID it's been so difficult. Thankfully, things are loosening
27:16
Speaker 1: up and I'm able to travel. I based myself now
27:21
Speaker 1: in Dubai, and of course I have a place in Singapore,
27:24
Speaker 1: but Singapore has been so restrictive. Thankfully they're opening up,
27:28
Speaker 1: uh and other countries are beginning to open up recently.
27:31
Speaker 1: As I said, I've been in Sri Lanka, in Thailand, um,
27:36
Speaker 1: and I'm trying to get out to more countries as
27:39
Speaker 1: they open up and they get rid of these lockups.
27:43
Speaker 1: Of course, China is off the chart in terms of restrictions,
27:48
Speaker 1: so that's out of the question at the stage. But yes,
27:51
Speaker 1: I'm trying to travel as much as I can, so
27:54
Speaker 1: Dubai and Singapore. You know, if you're bicoastal, if you're
27:57
Speaker 1: in New York and London, or New York and in Francisco,
28:01
Speaker 1: l A that's what they would call it. What do
28:03
Speaker 1: you call have splinting your time between Dubai and Singapore.
28:07
Speaker 1: Those just base of operations for when you're UM shooting
28:12
Speaker 1: off to those parts of the world. Yeah, Singapore is
28:15
Speaker 1: great for visiting the rest of Asia. You know, they're great.
28:20
Speaker 1: A lot of it has to do with the airlines.
28:22
Speaker 1: Singapore Airlines. We've had great connections all over Asia, and
28:25
Speaker 1: it's a great airline, great airline, and Emirates is even
28:28
Speaker 1: a better airline in some ways. Uh, Emirates goes all
28:32
Speaker 1: over the world, and I'm able to come here to Europe.
28:35
Speaker 1: I'm now in London and to the US very easily.
28:39
Speaker 1: Uh excellent airlines. By the way, there's two good examples
28:43
Speaker 1: of companies in what were emerging markets or maybe you
28:48
Speaker 1: could still call them emerging markets that have really surpassed uh,
28:52
Speaker 1: the USA air lines in terms of service quality, etcetera, etcetera. So, yeah,
28:58
Speaker 1: these two bases are good, probably because of time zones.
29:02
Speaker 1: In in Dubai, the time zone is very convenient, but
29:06
Speaker 1: also because of the convenience of travel really quite quite interesting.
29:11
Speaker 1: So so let's talk about some of the bigger issues
29:14
Speaker 1: going on UM globally. Today, Russia has become a bit
29:18
Speaker 1: of an anathema uh internationally given the invasion of Ukraine.
29:24
Speaker 1: Do we just write down our Russian stocks to zero?
29:27
Speaker 1: Are they ever going to be investable again in our
29:30
Speaker 1: lifetimes or are they just a total pariah state at
29:34
Speaker 1: this point. Well, in our fund, we were out of
29:38
Speaker 1: Russia about a year ago because we didn't like the
29:42
Speaker 1: corporate governance issues that we're popping up, you know, the Oligoux,
29:47
Speaker 1: we're taking over a lot of the companies. But I'm
29:50
Speaker 1: not writing off Russia by no means. I think we will.
29:54
Speaker 1: There'll be a day when we're able to go back in.
29:56
Speaker 1: And in fact, I personally keep an account in RUSSI you,
30:00
Speaker 1: and of course the stocks is a very small account,
30:03
Speaker 1: but the stocks on that account away down. But I
30:06
Speaker 1: think eventually this will come back. But for Fund, we
30:11
Speaker 1: will not go in until things change dramatically in Russia.
30:15
Speaker 1: And is that going to require Putin to leave power
30:18
Speaker 1: in order for the country to be investable again or
30:22
Speaker 1: can something significantly change to rehabilitate their image in the world.
30:28
Speaker 1: It will probably mean put leaving, probably because it would
30:33
Speaker 1: require complete about face, and it would require all of
30:37
Speaker 1: the Western countries to UH stop these sanctions because rust. Remember,
30:43
Speaker 1: even if I wanted today to invest in the Russian stock,
30:47
Speaker 1: I couldn't do it because the custodians. I'm not operating there.
30:50
Speaker 1: You know, you talk about talking about being canceled. It
30:54
Speaker 1: looks like very much like Russia was now. Previously, you
30:57
Speaker 1: were on the board of directors of Luke Oil. I'm
31:00
Speaker 1: assuming that ended some time ago, if I recall reading correctly,
31:04
Speaker 1: and you were also involved with O m V Petrome
31:07
Speaker 1: in Romania, tell us a little bit about those experiences. Yeah,
31:11
Speaker 1: m B Petrome came out about that was about ten
31:15
Speaker 1: years ago. UM we got the contract to run the
31:20
Speaker 1: country fund for the Romanian government. It was quite an
31:22
Speaker 1: unusual situation where they wanted to compensate people who had
31:27
Speaker 1: lost their assets during the Chitsco period, and they put
31:32
Speaker 1: about all the government companies into a fund and UH
31:38
Speaker 1: we won the contract to run that and one of
31:41
Speaker 1: the companies was Petrom UH and omb the rush of
31:46
Speaker 1: the Austrian company H came in as a majority shareholder
31:51
Speaker 1: of that company and we were still holding it and
31:54
Speaker 1: they asked me to be on the board. So we
31:57
Speaker 1: were looking at and getting very d to be involved
32:00
Speaker 1: in many of these Romanian companies, and it's a great
32:04
Speaker 1: example of where a country, you know, took the decision
32:08
Speaker 1: to sort of privatize state owned companies that were previously
32:13
Speaker 1: very corrupt and made a tremendous success of it. And
32:17
Speaker 1: also kudos go to the European Union because being a
32:23
Speaker 1: member of the European Union, whenever we went to court,
32:26
Speaker 1: there were tremendous amounts of court battles. Uh, the judges
32:30
Speaker 1: would be looking over their shoulders to Brussels. So we
32:33
Speaker 1: were often treated much fairly then we would have been
32:37
Speaker 1: if they weren't the members of the European Union. Alright,
32:41
Speaker 1: so so let's talk a little bit about China. Last
32:44
Speaker 1: year they pretty much went after their own um tech sector.
32:49
Speaker 1: Do we first, do we still consider China an emerging market?
32:53
Speaker 1: And second, are they another country that's becoming increasingly uninvestable. Yes,
33:00
Speaker 1: it's still an emerging country defined there's a low and
33:04
Speaker 1: middle income country, so that's definitely there. The problem with China,
33:09
Speaker 1: of course, has gotten too big in the the spectrum
33:14
Speaker 1: of emerging market economies, because if you look at the
33:18
Speaker 1: Emerging Markets indexes, you will find that it's thirty or
33:22
Speaker 1: so China. So whenever China gets hit, emerging markets look terrible.
33:28
Speaker 1: And that's the reason why a lot of people have
33:31
Speaker 1: been sort of turned off because as you know, so
33:34
Speaker 1: many people are buying et f s and index funds um.
33:38
Speaker 1: But it's a good example of where government policy can
33:43
Speaker 1: have a very big impact on your companies. And the
33:48
Speaker 1: measures that China took against the large tech giants in
33:54
Speaker 1: China really damage the market dramatically because of the impact
33:59
Speaker 1: of those v companies on the China Index. So there
34:04
Speaker 1: are cases where you've got to pay attention to those
34:08
Speaker 1: macro moves by the governments, but you have to focus
34:13
Speaker 1: on the economic uh or financial aspect rather than purely
34:19
Speaker 1: political aspects unless and there is a very important point,
34:24
Speaker 1: unless the political structure begins to change against free enterprise,
34:30
Speaker 1: against companies. And a good example of that was in Venezuela.
34:35
Speaker 1: We were in Venezuela when Chavez came into power and
34:39
Speaker 1: he started talking about taking over companies, about nationalizing companies,
34:45
Speaker 1: and immediately we got out because we realized that this
34:47
Speaker 1: was not going to be very conducive. And it's good
34:51
Speaker 1: we did get out because companies that we owned of
34:56
Speaker 1: really crashed and there was a very bad situation. So,
35:00
Speaker 1: but that doesn't recently, that hasn't happened that often. But
35:04
Speaker 1: China is probably a good example where government policies can
35:07
Speaker 1: really have a very damaging effect on individual companies. What
35:12
Speaker 1: about inflation, It's been a giant topic here in the US,
35:16
Speaker 1: and we've seen numbers around the world have spiked up.
35:19
Speaker 1: How does inflation affect emerging markets? Well, you know, the
35:24
Speaker 1: great thing about inflation is that if you're equity investor
35:29
Speaker 1: in other ways, an investor in companies that can adjust
35:33
Speaker 1: their pricing in line with higher prices, then um inflation
35:39
Speaker 1: is not a problem. In fact, sometimes it's it's an
35:41
Speaker 1: advantage because you see prices moving and if you're in
35:45
Speaker 1: a company, as I mentioned, with that pricing power, you
35:49
Speaker 1: can do very very well because they're moving up prices
35:51
Speaker 1: that are rapid rate. It's interesting if you look at
35:54
Speaker 1: the correlation between inflation numbers and let's say the S
35:57
Speaker 1: and P five is very o correlation in those numbers,
36:02
Speaker 1: and that's probably one of the reasons because good companies,
36:06
Speaker 1: you know, that are adjusting their prices in line with
36:09
Speaker 1: the devaluation of the currency can do very well. By
36:13
Speaker 1: the way I pointed out in the book I just
36:15
Speaker 1: came out with about inflation. It's called the inflation myth.
36:20
Speaker 1: And I mentioned this this phenomenon, that that emerging market
36:24
Speaker 1: inflation is actually not a problem. That's great provided and
36:30
Speaker 1: this is the big proviso you're in companies that have
36:33
Speaker 1: pricing power. Really interesting, the inflation myth and the wonderful
36:37
Speaker 1: world of deflation. Yes, and you know I mentioned that.
36:41
Speaker 1: The reason why I put that in the Wonderful World
36:43
Speaker 1: bastion because most economists hate deflation. But I argue that
36:47
Speaker 1: deflation is a good thing because deflation means that costs
36:51
Speaker 1: are going down and people are benefiting from lower and
36:55
Speaker 1: lower costs. And what I point out in the book
36:57
Speaker 1: is that technology is taking things better and cheaper in
37:03
Speaker 1: terms of pricing power, in terms of earning power. Um.
37:07
Speaker 1: And I've seen that in my lifetime. You know, when
37:10
Speaker 1: I had my own research from I had to carry
37:13
Speaker 1: around a selectric typewriter. There were no laptops, you know,
37:17
Speaker 1: no Word, no Excel, nothing of that sort. Um. And
37:22
Speaker 1: when you know what I mentioned the young people, I
37:23
Speaker 1: had a selectric typewriter, They asked me, what is that so? Um?
37:29
Speaker 1: The technology has really made life so much easier and
37:33
Speaker 1: more affordable for so many people. I don't disagree. We've
37:36
Speaker 1: been in an era for the past I don't know,
37:38
Speaker 1: thirty years that's been primarily deflation. With these casual spikes
37:44
Speaker 1: of inflation. I find it kind of hard to understand
37:50
Speaker 1: how all of these older economists keep talking that we're
37:54
Speaker 1: going back in the nineties seventies, when the world today
37:58
Speaker 1: it seems so different than it was back then, exactly exactly.
38:02
Speaker 1: You talk to any young person, you realize that they
38:05
Speaker 1: are even benefiting more because they know how to use
38:08
Speaker 1: this technology better than old times like me. So before
38:13
Speaker 1: I get to my favorite questions, I have one last
38:16
Speaker 1: question for you, and it has to do with back
38:20
Speaker 1: in two thousand and nine, in the middle of the
38:22
Speaker 1: financial crisis, you pretty much called the start of the
38:26
Speaker 1: new bull market. Tell us about what you were seeing
38:29
Speaker 1: at the end of the Great Financial Crisis and what
38:33
Speaker 1: made you so confident that was a great time to
38:36
Speaker 1: jump back into equities. Well, you know, my studies showed
38:40
Speaker 1: that all of these bear markets are very short duration,
38:44
Speaker 1: maybe they're one or two years at most three years, um,
38:49
Speaker 1: you know, and unfortunately, uh many people measure a bear
38:54
Speaker 1: markets from the peak of the previous bull to the
38:57
Speaker 1: peak of the next. Uh. And that's the wrong way
39:01
Speaker 1: of measuring it. You should measure it from the peak
39:04
Speaker 1: to the bottom. And as soon as you get to
39:06
Speaker 1: the bottom and starts moving, you're in a new bull market.
39:10
Speaker 1: And it's a wonderful time to invest because you know
39:14
Speaker 1: the percentages are in your favor. So that's what I saw.
39:18
Speaker 1: I looked at the history and I forgured, hey, this
39:20
Speaker 1: is not gonna last forever. People are very pessimistic. Uh,
39:24
Speaker 1: it's a great time to be investing. And it turned
39:27
Speaker 1: out to be right. And by the way, that happened
39:30
Speaker 1: two years ago, three years ago. Now, um, you know,
39:33
Speaker 1: when we had the COVID situation, it was an incredible
39:38
Speaker 1: time to invest. And you know that was less than
39:41
Speaker 1: a year that the market crashed and then started recovering, right.
39:45
Speaker 1: That drop took place over six weeks, and I think
39:49
Speaker 1: by August we were back to break even. It was
39:51
Speaker 1: pretty pretty impressive. We only have you for another five minutes,
39:55
Speaker 1: so let me get to my five favorite questions I
39:57
Speaker 1: asked all my guests. You can think of this as
40:00
Speaker 1: a speed round. Let's quickly run through all five of these,
40:03
Speaker 1: starting with tell us what you've been streaming during the lockdown.
40:07
Speaker 1: What was keeping you entertained on either Netflix or Amazon
40:11
Speaker 1: Prime or or whatever you were doing to entertain yourself. Well,
40:15
Speaker 1: I found that YouTube is incredible educational media and incredible programs.
40:22
Speaker 1: And of course I also plick on Bloomberg and look
40:26
Speaker 1: at News. If I want to know something about a country,
40:29
Speaker 1: I put News and in the country and a lot
40:32
Speaker 1: of sub pops up. So those are the two sources
40:35
Speaker 1: that I found to be very very good. Tell us
40:39
Speaker 1: about your early mentors who helped to shape your career. Well,
40:44
Speaker 1: John Templeton was really that man. He was an incredible investor,
40:49
Speaker 1: a wonderful person. Um, he really was an inspiration. Uh
40:53
Speaker 1: and as you know, he lives on through his Templeton Prize.
40:57
Speaker 1: You know, Templeton Prize is larger than the Nobel Prizes because, yeah,
41:03
Speaker 1: he believed that a prize for religion, for you know,
41:06
Speaker 1: the science of religion was the most important. So he
41:10
Speaker 1: said he specified that his prize should be bigger than
41:14
Speaker 1: the Nobel Prize, and of course it still is. They've
41:17
Speaker 1: got an incredible foundation. Tell us about some of your
41:21
Speaker 1: favorite books and what you're reading right now. Well, I
41:25
Speaker 1: just finished a book called Double Entry, which is a
41:28
Speaker 1: wonderful book. You know, it sounds boring, sounds like bookkeeping,
41:31
Speaker 1: but it's not. It's about the history of the Double
41:34
Speaker 1: Entry accounting, but it goes into the whole revolution that
41:39
Speaker 1: took place in the Middle Ages and now people in
41:42
Speaker 1: the Middle Ages adopted the Arabic script um and and
41:46
Speaker 1: the calculations that came out of the ad world, and
41:51
Speaker 1: it was It's an incredible book. So I'm reading that.
41:54
Speaker 1: I love history. I'm also I started a book on Leopatra,
42:01
Speaker 1: not necessarily because I'm fascinated by the woman Cleopatra, but
42:06
Speaker 1: by the era. It tells about what kind of environment
42:10
Speaker 1: she lived in, which is fascinating. So I think Cleopatra, Cleopatra. Yeah,
42:18
Speaker 1: any others, any longtime favorites that you really want a reference. Well,
42:24
Speaker 1: I also like books about archaeology, so I've been reading
42:29
Speaker 1: a number of books on I think the Latin American archaeology,
42:34
Speaker 1: because I think it's a lot in Latin America has
42:37
Speaker 1: been overlooked. You know, there's so much emphasis on Egyptian archaeology,
42:42
Speaker 1: but I think Latin American archaeology is incredibly fascinating, really intriguing.
42:49
Speaker 1: What sort of advice would you give to a recent
42:51
Speaker 1: college graduate who is interested in a career in either
42:55
Speaker 1: investing or emerging market and frontier market investing. Well, first
43:02
Speaker 1: of all, travel, I mean, you're young, you can get out.
43:06
Speaker 1: You can travel to all these countries, and that's a
43:09
Speaker 1: tremendous learning experience to go these different countries and stay humble,
43:14
Speaker 1: you know, listen to what other people are saying, Read
43:17
Speaker 1: as much as you can, and keep on asking questions.
43:20
Speaker 1: Don't think you have all the answers. Remember John Tevilan
43:24
Speaker 1: once said, those people who think they have all the
43:27
Speaker 1: answers don't even know the questions. And I think young
43:30
Speaker 1: people should you know. Remember that it's very important. And
43:34
Speaker 1: our final question, what do you know about the world
43:36
Speaker 1: of investing today that you wish you knew thirty five
43:40
Speaker 1: years ago when you first started in the m investing.
43:44
Speaker 1: It's not all in the numbers. In other words, you don't.
43:47
Speaker 1: When we thought it, we looked at the balance sheet,
43:49
Speaker 1: the provent law statements, and we thought that was the
43:51
Speaker 1: most important thing. It's not the most important thing of
43:55
Speaker 1: the people who is running the company. Uh, one of
43:58
Speaker 1: the associates of that person doing it's very important to
44:03
Speaker 1: get to know the people, but people create well quite fascinating.
44:09
Speaker 1: Thank you Mark for being so generous with your time.
44:12
Speaker 1: We have been speaking with Dr Mark Mobius, now of
44:15
Speaker 1: Mobius Capital, previously with Franklin Templeton Investments. If you enjoy
44:20
Speaker 1: this conversation, and I do believe this is now the
44:23
Speaker 1: four hundred one that showed up on iTunes, be sure
44:27
Speaker 1: and check out any of our previous three hundred such discussions.
44:32
Speaker 1: You can find those at Spotify, iTunes wherever you get
44:36
Speaker 1: your podcasts from. We love your comments, feedback and suggestions
44:40
Speaker 1: right to us at m IB podcast at Bloomberg dot net.
44:45
Speaker 1: Follow me on Twitter at rid Halts. You can sign
44:47
Speaker 1: up for our daily reading list at dults dot com.
44:51
Speaker 1: I would be remiss if I did not thank the
44:53
Speaker 1: crack team that helps with these conversations together each week.
44:58
Speaker 1: Mohammed Ramaui is audio engineer. Batika val Brunn is our
45:03
Speaker 1: project manager, Paris Wald is my producer. Sean Russo is
45:08
Speaker 1: our head of research. I'm Barry Results. You've been listening
45:12
Speaker 1: to Masters in Business on Bloomberg Radio.