Fareed Zakharia: Emerging Markets Will Outperform

Courtesy of the folks from iShares I attended a presentation that included a lunch talk by Fareed Zakharia of Newsweek and CNN. I have heard many speakers at occasions of this type and never have I heard anything close in terms of clarity intelligence and content.

The theme was the growth of the developing (emerging market world). While he certainly is not an investment strategist, he was asked by a questioner what investing strategy he would recommend. To my surprise he didn't bow out of answering the question.

He mentioned that he is on the board of the Yale Endowment and certainly thinks their strategy over the last 15 years was well chosen and phenomenally successful. He also said that the strategy benefited tremendously from access to cheap borrowing, something which will not continue.

Noting that, he agreed with Swensen that asset allocation is 90% of the game in investing. US investors have too much of a home country bias in his view and those that raise their allocation to emerging markets will outperform and achieve superior returns. The specific investments are less important than making this allocation choice.

Unfortunately for the hosts, he did not specifically implementing this approach using isShares ETFs.

Typical of his interesting data with regard to developing markets: auto sales in India rose 25% year on year in 2008.

Obviously I think all this is advice that merits great consideration.

Comments

[macro -N- i...:]

Many opinions belabor the point that investing in America is primary because of the access to information. Did that prevent losses last year? No. This could be an outstanding turning point for those who realize that the American economy is swamped with debt and going outside the U.S. starts (or expands to a greater portfolio %) this year. The information hurdle is now only a step up instead and the exploding number of other country funds wouldn't be happening unless the needed information was available. Asset allocation would also promote this choice. It could be prudent to wait for a possible bigger pullback since most of them have doubled without an expected model correction to a new base, for those who didn't get in this summer.

Oct 30 11:11 PM