Tweedy Browne On The Flux In EM, Europe And Elsewhere

Tweedy BrowneSource: Made with Photoshop

The above quote would certainly seem to contain a modicum of truth, and if your basis for subscribing to this adage rested on reading the financial press, you might well conclude it contains a healthy dollop rather than just a modicum. For example, Japan, which has been off the radar screen of investor attention for many years, reemerged with Prime Minister Abe’s plan to breathe new life into an economy which has been moribund for years.

Investors including Mrs. Watanabe (a Japanese term for stock and currency speculators) decided not to wait for hard evidence that Prime Minister Abe’s “three arrows agenda” for turning around the economy would succeed, and have bid up the Nikkei Index 65% over the last twelve months. We will comment a bit more on this later but, briefly, we are not yet convinced that a new day has dawned in Japan and have on balance sold down some of our Japanese holdings based on some very full if not overly generous individual company valuations.

Japan is walking a tightrope as it tries to emerge from a prolonged period of almost non-existent economic growth while managing a public debt over twice the size of the economy and at the same time not triggering a large rise in the government cost of borrowing, which is currently well less than one percent for a ten-year bond.

A second example of flux might be the “about face” on emerging markets. We all remember the acronym, the “BRICS,” which stands for Brazil, Russia, India, China and South Africa, as symbolizing the economic future of the world. In contrast, Morgan Stanley recently created the
“Fragile Five” (Brazil, Indonesia, South Africa, India and Turkey) to capture all of the attendant worries and structural impediments these economies and their currencies currently face, which, previously latent if not present, were not the focus of much attention on the part of those intent on getting into these markets.


Tb Funds Semiannual Report Sept 2013 by


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Sheeraz Raza
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