It’s not the first time Canadian investors have found themselves whipsawed by a global markets mega-trend. Mr. Bousada pointed to the “new economy” that emerged in the late 1990s, which celebrated the rise of high-growth service industries and technology as drivers of the economy, and caused Nortel Networks Corp. to gain outsized importance in portfolios.
“People believed a dozen years ago that if they owned the TSX, they were owning a broadly diversified index. But the reality was, half their money was invested in one idea, and that one idea was called the new economy. And it was fine to believe the new economy was going to change the world and have investments in that, but the issue was, when it went wrong you essentially went wrong on half your money.”
His firm doesn’t expressly have a macro-view on China or what might happen there, because it is focused on picking businesses, not sectors. But it’s being selective about commodity stocks.
“We have some exposure to the energy sector, and none to base metals or gold,” he said. Lately, the firm has started to sniff around miners of the yellow metal, but only at companies that can exist at $800-an-ounce gold prices. And there aren’t many of those.
‘I would say buy the Swiss franc’
Singapore-based investor Jim Rogers says China’s slowdown shouldn’t be a surprise to anyone paying attention – especially considering the government’s attempts to keep inflation under control and manage what many consider a property bubble.
“It’s been announced over, and over, and over again. I would suspect that it will continue, at least for a while, given the state of the world,” he said in an interview.
“China doesn’t sit there in an empty vacuum,” he said. “China’s problems will contribute to what’s going on in the rest of the world, and the rest of the world contributes to China’s problems too. They work together.”
At the same time, the Alabama-raised Mr. Rogers believes the commodities “supercycle” is far from over. He said there are significant ups and downs in any market run, and the supercycle won’t truly be done until significant new supplies come on stream.
“Commodities are down right now but I would remind you that we had a bull market in stocks from 1982 until 2000, 18 years. And during those 18 years, at one point stocks – in 1987 – went down 40 to 80 per cent,” he said. (The Dow Jones industrial average fell 36 per cent between Aug. 25 and Oct. 19 that year, although it rebounded and ended the year in positive territory.)
Mr. Rogers said an aggressive investor today should put money into Russian government bonds. He also said the Russian ruble is a relatively safe currency, even for a more cautious investor.
Previously a critic of Russia, Mr. Rogers surprised many last year when he became an adviser to the agricultural fund run by VTB Capital, a Russian state-controlled investment bank. While he once argued that Russia was unworthy of investment, as it was overly reliant on oil production, it had weak public institutions and people were leaving, in 2012 he said Russia had all the ingredients needed “to become the world’s agriculture powerhouse.”
But he said that in general, investors need to use caution right now: “My top idea for aggressive investors is to be very careful, because these are perilous times. And we’re probably going to see more declines of things.”
While an investor looking for a safer place to stash their money should look to currencies, that strategy, too, has its pitfalls.
“What kind of cash? That’s a problem too. If you put it into the wrong currency, you can lose your shirt. A lot of people put their money in the Icelandic krona, thinking ‘I’m safe. I have nothing but cash.’ And then the currency collapsed,” he said.
“I guess I would say buy the Swiss franc. Put your money in cash in Swiss francs.”
Bullish on the future of natural gas
Gold magnate Seymour Schulich says everyone his age is worried about the global economy, especially when it comes to the central banks printing money, or national governments running up massive public debt.
“The people in my peer group are scared to death,” the 73-year-old investor and philanthropist said in an interview.
“The rate of paper printing going on in the world is humungous. The amount of debt being taken on by the governments to stimulate their economies is humungous,” Mr. Schulich said.
“When exactly the chickens come home to roost, nobody is smart enough to know – except those of us that are old and have seen the playing field for a long time know it will happen.”
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- Updated February 5 4:00 PM EST. Delayed by at least 15 minutes.