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Ron Muhlenkamp December 2014 Market Letter

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On November 12, 2014 we hosted an investment seminar/webcast for our clients and other interested parties. You may view the presentation video via YouTube.

  1. Market Observations, by Ron Muhlenkamp, Portfolio Manager.
  2. Game Changers in Biomedical Science, by Tammy Neff, Investment Analyst.
  3. Europe and Japan: An Update, by Jeff Muhlenkamp, Investment Analyst and Co-Manager.

There’s a lot to absorb in the presentation on biomedical science, so I would suggest that you also read the booklet we have produced on the subject. If you would like a printed copy mailed to you, just call us at the number listed below.

The presentation on Europe and Japan fueled subsequent discussion about currencies (“strong” versus “weak” dollars, yen, etc.). Anytime we talk about currencies being devalued, or getting stronger, we have to include the question, “relative to what?” (as in, the U.S. dollar is stronger relative to the Japanese yen, or the Chinese renminbi is stronger relative to the euro, etc.). We also have to remember that a strong dollar is good for some, bad for others. A strong dollar versus the yen is good for U.S. Consumers buying goods and services from Japan, and bad for U.S. Exporters trying to sell goods and services to Japan. There are ALWAYS at least two sides to the transaction


This becomes problematic if the governments and central banks of England, China, Japan, Europe, or the U.S. decide to try and spur economic growth of their respective countries by devaluing their own currencies to help their own exports. If one country does it in isolation, the global consequences are manageable, but if several countries, or the largest economies, ALL engage in successive rounds of currency devaluation, then the consumers in each of those countries get hit pretty hard. And if the consumers across the globe ALL get hit hard at the same time, then global recession/depression could result.

…Which is why we continue to monitor Europe, Japan, and China very carefully. We aren’t predicting what will happen, but we are paying close attention to what IS happening and thinking about what COULD happen. And we will keep you posted on what we are seeing and doing as a result.

If interested, an excellent resource for thinking about global growth, central banks, and currencies is the book Code Red: How to Protect Your Assets from the Coming Crisis by John Mauldin and Jonathan Tepper. What we highlighted in 30 minutes at the investment seminar, they cover at great length in 350 pages and they do a fair job of presenting facts without speculating on predictions. We have also published our thoughts on the problems facing the global economies at past seminars (see “Are we on the Road to Japan and a Lost Decade?” from November 2010 and “U.S. Politics, Europe, and China – Why Do We care? from November 2011.) We personally review these booklets as a way of checking on what has changed and, more importantly, why; and we encourage our clients to do the same.

We hope you find this information useful. Let us know what you think-and if you have questions, please call us at (877) 935-5520 extension 4.

Best regards,

Anthony Muhlenkamp

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