tag:blogger.com,1999:blog-6798074091942701235.post6858407618270435502..comments2024-03-27T11:08:31.557-04:00Comments on Can Turtles Fly?: Everyone needs to know the game they are playing - P/E vs EPS growthSivaram Vhttp://www.blogger.com/profile/06361276466660862882noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-6798074091942701235.post-56183071841494120512009-07-21T10:14:25.000-04:002009-07-21T10:14:25.000-04:00I think your strategy is what I call sector rotati...I think your strategy is what I call sector rotation. Technically you are rotating across countries but it is similar to rotating sectors. I tried doing a bit of that early on and felt I wasn't really skilled in it. The difficulty I had was figuring out what was "cheap". A P/E of 10 may look cheap but pre-2004 or thereabouts (before the current boom and bust), a lot of countries with low P/Es went nowhere. Keep me posted on how you are doing. I'm curious to see how well this works out if the synchronized world boom has indeed ended.<br /><br /><br />I thought about the Brazilian currency issue yesterday night and I'm not sure what the answer is... I was thinking the Real may be tracking commodities but the huge moves pre-2004 does not seem consistent with either the crude price moves or the CRB index moves...<br /><br />Brazil had political uncertainty and high inflation in the early 2000's so I wonder if that had something to do with that. (One of the risks with Brazil is that I'm not sure future governments will behave similar to the Lula government or if they will go back to their "old ways" of inflating their way through everything.)<br /><br />Anyway, if I ever decide to do anything serious with Brazil--I was thinking of investing in their bonds believe it or not, assuming small investors have access--I will research the currency issue much further. Inflation, past as well as future, is something one needs to get a handle on.Sivaram Velauthapillainoreply@blogger.comtag:blogger.com,1999:blog-6798074091942701235.post-74219540457204544652009-07-20T19:47:26.000-04:002009-07-20T19:47:26.000-04:00On Brazil:
I hesitate on this one because I don&#...On Brazil:<br /><br />I hesitate on this one because I don't understand what's going on with their currency.<br /><br />From 2000-2003, BRL dropped 50% vs USD<br />From 2003-late 2008, BRL rose 240% vs USD<br />In a 3 month period in late 2008, BRL dropped 40% vs USD<br />In the last 5 months, BRL has risen 23% vs USD.<br /><br />WTF is going on with their currency? I know emerging market currencies are unstable, but this is extreme.<br /><br />My historical currency graphing resource:<br />http://www.oanda.com/products/fxp/playground.shtmlMrParkerBohnnoreply@blogger.comtag:blogger.com,1999:blog-6798074091942701235.post-52905353776031419512009-07-20T19:30:27.000-04:002009-07-20T19:30:27.000-04:00Correction:
Make that 8-9% real return for China
...Correction:<br />Make that 8-9% real return for China<br /><br />5% real growth<br />1-2% currency appreciation<br />2% dividendsMrParkerBohnnoreply@blogger.comtag:blogger.com,1999:blog-6798074091942701235.post-41240820789075656072009-07-20T19:27:52.000-04:002009-07-20T19:27:52.000-04:00Thanks for the response.
One of my strategies is ...Thanks for the response.<br /><br />One of my strategies is basically country rotation based on PE and growth rates. At one point I had almost no money in this strategy, but after the crash last October I put about 25% of my money into emerging markets based on similar data to the chart you displayed.<br /><br />About half of that went into broad emerging markets ETFs, and the rest into China and India. I missed some other oppurtunities, such as Brazil and Mexico, simply because I wasn't paying enough attention to notice the single digit PEs. Others, such as Russia, never interested me for political reasons (though I suppose if the price was right...)<br /><br />At the time I bought India, its PE was around 10, which looked like a no-brainer. I've sold India a few weeks ago. At a PE of 18, India looks fairly valued or even a bit cheap, if you believe the rosy growth projections. If like me you are a skeptic, then India looks a bit expensive (but not bubbly), which is why I sold it.<br /><br />I also bought China at a PE of around 10 (in February 2009), which looked like a bargain to me. Its PE is around 15 now, which I consider to be fairly valued. This is close to the long-term average PE for the US, and the demographics in China suggest long-term economic growth.<br /><br />If China can grow at 5% real (I agree with you that 10% real growth is absurd), plus 1-2% currency appreciation per year, plus 2% in dividends, then I'm riding 6-7% real return. This is quite satisfactory to me, and in the long run will matter more than short-term PE fluctuations. That said, if China will drop back to a PE of 10, I'll probably pick up some more shares, and if it rises to a PE of 20, I'll be pretty tempted to sell.<br /><br />Some of this shows my philosophy of investing. If I think China is fairly valued, I could sell it and buy into a country I think looks cheaper, such as Brazil. But I like to see myself as a long-term investor, and for some reason I still have the belief that most of my profits will come from riding long-term economic growth, and not from trading in and out.<br /><br />I tend to only buy when the valuation screams at me (such as China at PE 10). For the same reason, I tend to only sell when a security exceeds fair value, unless I see it as a especially risky asset, in which case I will sell at fair value.<br /><br />I also have a bid in on GULF, which on your chart most closely resembles GCC ex Saudi.MrParkerBohnnoreply@blogger.com