Gone A.W.O.L. – London is calling

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awolI will find myself in London over the next week, visiting a number of fund managers, business partners Pimco and David Fuller (author of the daily FullerMoney newsletter who is regularly quoted on this site). This is my first visit to London in two years and I am looking forward to experiencing first-hand how the country, and the City specifically, is coping in the post-crisis environment.

Blog posting will be slow (and totally absent on some days) while I am on the road. The normal blogging service will be resumed on my return to Cape Town on May 24. You have my guarantee on this, as blogging (and running) provide me with a can’t-do-without adrenalin boost.

I have one request while traveling: please do not unsubscribe as readers so often do when I travel and don’t post for a few days. This is just a temporary reallocation of my time and not the end of my blogging efforts!

Drinks at the bar
For those Investment Postcards readers that have expressed an interest in joining me for drinks during an informal get-together in the West End on Friday, May 21, the details were e-mailed to you a few days ago. If you have not done so yet, please confirm as soon as possible whether you will be attending. It is always a treat to meet readers in person and I am keen to spend some leisure time with you.

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Back home again – some investment and other observations

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I finally made it back home to Cape Town by late last night after a very tiring 34-hour stretch of flying and transit time across nine time zones. Such is the nature of doing business across continents!

Below are some random observations of the trip.

• As mentioned a few days ago, the “airplane/airport barometer” has made an amazing recovery since only a few months ago when the numbers of passengers were way down on the pre-crisis days and upgrades were plentiful. Somewhat unexpectedly, airports everywhere were buzzing and there were no empty seats on any of the planes I took – inland in South America, between South America and North America, inland in North America and between North America and Africa.

• Additionally, the “taxi barometer” showed that cab drivers were again busy and no longer contemplating to pack up and return to the trouble spots they left in search of the American dream.

• It was excellent to again team up with good friends and business associates such as John Mauldin (Thoughts from the Frontline) and Paul McCulley (Pimco) at the annual get-together of Rob Arnott’s Research Affiliates Advisory Panel at Torrey Pines, La Jolla. It was as always frightfully insightful to be exposed to finance theory as conveyed by academics of the ilk of Harry Markowitz, Burt Malkiel, Jack Treynor, Richard Roll and John Cochrane. It is important for investment practitioners to regularly revisit finance theory in order to stay abreast of new developments and to critically analyze the investment philosophies they have adopted and whether there is a need for adjustment.

• Although I am not permitted to report on the presentations or discussions of conference, I want to re-emphasize that Research Affiliates is one of the classiest investment shops in the world and destined to capture increasingly large allocations for their highly innovative fundamental indexing approach. If you are not familiar with the concept, a brief description is provided here. (Disclosure: My investment management firm, Plexus Asset Management, exclusively represents Research Affiliates’ fundamental indexing methodology in the Pan-African region.)

• One of the speakers at the conference I met for the first time was James Montier, who has recently joined Jeremy Grantham’s GMO as a member of the asset allocation team after a long stint with Société Générale. Although often provocative with how he conveys his message, his investment views are backed by solid research and ignored at investors’ peril. I have just started reading his two books – Value investing – tools & techniques for intelligent investing and The Little Book of Behavioral Investing – How not to be your own worst enemy – and would highly recommend these to serious investors.

• On a slightly different topic, of all the countries I visited on this trip, Uruguay stands out as particularly attractive. I guess it’s a combination of factors that appealed to me, notably the quality of the people, the scenic beauty of the country (especially Punta del Este), the central location in the region, the quality of financial, legal and accounting services, Montevideo that serves as a gateway to the broader South American region, the proficiency of many people in English, and the relatively crime-free environment. I struck up a business relationship with Enrique Fynn, a very bright and knowledgeable investment professional of Fynn Capital, who will gladly provide guidance regarding investment, residency and most other Uruguayian issues. You can reach him through the “Contact” button in the top right-hand corner of the home page.

• The Dominican Republic (Haiti’s neighbor), described by Columbus as “the most beautiful place on earth”, offers a combination of attractions (scenic beauty in many parts, friendly people, cheapness and real estate investment potential) against a backdrop of third-world factors such as high unemployment, crime and Aids. On balance, the island is worth a visit, especially if one is interested in exploring its liberal residency and naturalization regime with the view of using the country as an affordable retirement destination (more information via “Contact” button).

That just about wraps it up. In my opinion, the US economy is recovering, but the convalescence of structural problems will be a multi-year process. However, there are many parts of the world, such as a number of South American countries, that hold very exciting potential and should be on investors’ radar screens.

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Year-end/new-year indicators: progress report

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An old stock market saw tells us if the month of January is higher, there is a good chance the year will end higher, i.e. the so-called “January Barometer”. On the other hand, with the exception of 2009, every down-January since 1950 has been followed by a new or continuing bear market or a flat year. “As January goes, so goes the year,” said Jeffrey Hirsch (Stock Trader’s Almanac).

The result for January is in, and it is not a good one: The Dow Jones Industrial Index closed 3.5% down on the month and the S&P 500 Index 3.7% lower.

Also, according to Hirsch, the “December Low Indicator” says that should the Dow Jones Industrial Index close below its December low anytime during the first quarter, it is frequently an excellent warning sign. The key number to watch was the low of 10,286 (December 8) – now history with the Dow down to 10,067.

Although this is not particularly scientific research, it is clear we are not seeing a good start to 2010 and should at least be mindful of these indicators.

Considering the short-term technical picture of the Nasdaq Composite Index, Adam Hewison (INO.com) provides a short analysis showing a rather negative downside break. Click here to access the presentation. (He also recently analyzed the Dow Jones Industrial Index and the S&P 500 Index. Click here and here.)

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Blogging – taking a break while visiting Europe

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I am traveling in Europe – Switzerland and Slovenia – at the moment, exploring business opportunities and gathering a feel for the economic climate in Western and Central Europe. (I also have a more official relationship with Slovenia as I represent this picture-pretty country diplomatically in South Africa – as Honorary Consul. Click here for the Consulate website and some amazing photographs.)

The downside is that blog posting will be slow (and totally absent on some days) for most of the time while I am on the road. The normal blogging service will be resumed on my return to Cape Town on October 16.

However, I will be “tweeting” regularly throughout my trip, posting short comments (maximum 140 characters) on topical market issues, and also on my personal whereabouts. You can “follow me” on Twitter by clicking here. You may also consider joining me as a friend on Facebook.

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Stuck in Washington D.C.

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Isabel (Ms Investment Postcards) and I have just heard what we were not bargaining on – our flight from Washington D.C. has been delayed by 15 hours! Indeed, news from hell.

Stuck at an airport hotel with only our small cabin bags (i.e. no clothing besides what we are wearing!) is not quite what we have had planned for the night, but I guess it could have been worse. Imagine the mechanical problem having occurred in mid-air, or our being stuck overnight in Dakar (where the South African Airways planes refuel).

I have pre-loaded a few snippets to be posted on the site over the next day or two, but I am afraid regular posting will now only get back on track by Wednesday. Please persevere and do not unsubscribe yet – this is not a “new normal” and the usual delivery will be restored later this week.

Meanwhile, we have wonderful memories of a great few days in Dallas and most enjoyable 60th birthday celebrations of friend John Mauldin. And a pair of cowboy boots in my checked luggage – whenever I may see the bag again.

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“Words from the Wise” – taking a break while visiting Texas

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I am visting Texas at the moment to, among others, attend John Mauldin’s 60th birthday celebrations in Dallas this weekend.

As you might have noticed, my blogging activity has been confined to republishing interesting snippets and guest posts while I am on the road. “Words from the Wise” will also be taking a break today (October 4) as I will not be able to put together the review as I tackle the long haul back to Cape Town. The normal blogging service will be resumed when I am home on October 6.

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