Eyeing the Upside in Emerging Markets

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Sept. 18 (Bloomberg) -- Sanibel Captiva Investment Advisers President Pat Dorsey previews today's markets and discusses his investment ideas with Betty Liu on Bloomberg Television's "In The Loop." (Source: Bloomberg)

Assets under management.

His call is not the u.s. buddy merging markets.

-- his call is not the u.s. but emerging markets.

Lex the world is filled with overvalued investment classes.

Or failure -- or fairly valued stocks.

Emerging markets are truly undervalued.

Down six percent year to date.

Granite the next decade will be slower in terms of gdp growth, are probably going to be 400-500 basis points higher than the developed world.

You say there is a special way you do this.

How do you do this?

I think the thing to avoid is cap-weighted.

The big companies are commodity companies.

Global exporters like samsung and hyundai.

They are not really tied to the rise of middle-class incomes.

You want to look at funds of smaller emerging companies.

Small cap.

Look for companies tied to the rising purchasing power of the middle class.

Looking at one area you have been studying quite closely, the slump in base metals.

That is right.

The supply response is just as important.

The projected surplus and copper and other metals could change if tight lending conditions persist.

Underinvestment and supply could catch up.

Metal reserve starting to use more capital.

That could lead to sustainable pricing increases in the metals.

Generally speaking you will see much less demand from china.

Partially the slower growth impartially the shift.

Generally speaking i prefer to own companies that control their own destiny.

The commodity sector is far less attractive than a paid tv producer or cope bottling market.

Turning back to hear.

This is a big event.

Everyone watching ben bernanke and the fed chairman.

Looking at how the fed is affecting earnings.

Earnings and volatility.

Emerging markets got hammered when the first thought of tapering came up the coast it was thought they would lose out on earning great differentials.

-- earning rate differentials.

Now you buy less volatility, and how does that affect emerging market figure?

Great question.

What a lot of people are doing is looking back to the late 1990s. what they are forgetting is most emerging markets are far less dependent on external capital flows today.

I'm achieved are much healthier.

Yes, you could see volatility, but i view that as noise.

Great to see you here in the studio.

Had dorsey -- pat dorsey.

Coming up, microsoft's message to gamers, you can do more than play halo.

Good for television and music as well.


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