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Crisis Bargains In Today's Investment Markets

Jul. 12, 2017 4:33 AM ETNORW, GXG, ERUS, RSX, RSXJ5 Comments
Rob Marstrand profile picture
Rob Marstrand

This week OfWealth is looking at the idea of taking some of your investments on a “crisis vacation” from time to time. It’s all about scooping up bargains shortly after some kind of crisis, and then enjoying substantial profits as things improve and markets recover. Last time I looked at what it’s all about, and some past examples (see here). Today I’ll see what’s available right now, or what to keep an eye on.

Wars in Syria, Iraq and Yemen. An ongoing political crisis in Brazil. Venezuela in political and economic meltdown. Rising tensions on the Korean peninsula. Political uncertainty in the UK and an ongoing dogfight in the USA. Qatar blockaded by its neighbours.

You’d think that there’s plenty going on that would unsettle the markets. But few investors seem to care. Instead, everyone’s much more interested in the moods of the heads of the world’s central banks. Apparently, nothing else matters.

Which is strange if you own, say, South Korean stocks. Would it be fair to say things are more than a little, er, “tetchy” between North Korea and the US and its ally in South Korea?

A country on the cusp of crisis

North Korea’s “Supreme leader” Kim Jong-un and comrades recently test-fired an intercontinental ballistic missile (ICBM). They’ve claimed it could reach the US state of Alaska if needed. In response – although denying any connection – the US did a successful test over Alaska of its “THAAD” anti-missile system.

With Fatboy Kim and The Donald shouting ever louder, and now starting to chuck toys at each other, you may be surprised to know that South Korean stocks are up 28% so far this year. That’s the performance of the MSCI Korea index, measured in US dollars. It’s certainly got me scratching my head.

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This article was written by

Rob Marstrand profile picture
I’m Rob Marstrand, the founder of OfWealth. I publish investment newsletters for private investors, always written in clear, non-technical language. I spent 15 years at UBS Group, the global investment bank, based in London, Zurich and Hong Kong. Then, for five years, I was Chief Investment Strategist at the US-based Bonner & Partners Family Office. Now I live in Buenos Aires, Argentina. Given its chaotic history, Argentina is the perfect place to learn how to survive and thrive in times of crisis.

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Comments (5)

rodness profile picture
How are the crises in Brazil and Turkey not already priced in, as in Russia?
Turkeys stocks are cheap.
Surrounding areas might be in wars, but Turkeys Government is stable in comparison and perhaps because of it.
Idk how Turkey treats their currency ? but they need to ( imo ) devalue slightly and perform a QE to mimic the ECB even if they are rightfully avoiding the EU.

Brazil is chaotic. Impossible to evaluate.
No major wars in sight and yet the economy is dangerous and deceptive beyond all calculations.
rodness profile picture
Brazil is chaotic, but Wall Street is pouring money in. What gives?
Rob Marstrand profile picture
Brazil makes no sense to me given the political turmoil. Even less before recent falls. Personally I'd stay away until there's more clarity.

Turkey is cheap on the face of it, but the combination of local politics (becoming more authoritarian), insecurity, and playing off all sides in Iraq and Syria (NATO member, fighting the Kurds, previously buying oil from ISIS, etc) makes it look high risk still. Not mentioned in the article is inflation at 11%, which on it's own justifies the low valuations. Add in the other issues and I'd encourage caution.
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