By far, the most substantial addition to the Baupost portfolio during the quarter was Twenty-First Century Fox (NASDAQ:FOXA). Klarman boosted his holding of the stock by 48% during the quarter to 39.4 million shares. This holding is now worth $2 billion, making it the firm's largest position.
The second-largest holding, Synchrony Financial (NYSE:SYF), only accounts for 8.8% of the equity portfolio (compared to 17.6% for Fox), amounting to just under $1 billion.
It looks as if Twenty-First Century is a merger arbitrage trade. The company was being fought over by Disney (NYSE:DIS) and Comcast (NASDAQ:CMCSA) before the latter dropped its bid last month. At this point, it looks like a reasonably risk-free trade for what could be an attractive risk-adjusted return.
US influence on the global economy has been gradually falling, and emerging economies like China and India can overtake the US as global leaders, according to Marc Faber, editor and publisher of The Gloom, Boom & Doom Report.
“The US as an empire against the rest of the world peaked in 1950s or 1960s. Then, there have been other countries that have become more powerful, in particular China and now increasingly India. The US empire and its influence on the world is diminishing and has been diminishing for quite some time,” he told RT. The trade war may accelerate this “mutation” in the global economic balance “with other countries becoming more important and the US less important,”Faber said.
According to Faber, the US is likely to be the biggest loser from the trade war it started. “The winners in a real trade war would be everyone except the US. The Europeans would trade more with Asia, and the Asians would trade more with Europe than the US. There would be more trade between the emerging economies and China and vice versa,” Faber said.
The US stock market has thus far ignored the news about the global trade war, Faber notes. “But if there is trade war, it is not good for the global economic growth. The global economy is slowing down already. I think it would be a big mistake to go ahead with the trade war.”
The countries most exposed to the trade war in emerging markets are Brazil, Turkey, and Argentina, due to their fiscal problems, growing deficits, and weak currencies amid large amounts of foreign debt, Faber said.
Despite the recent strength of the US dollar, especially against the currencies of emerging economies, Faber says the trend will not continue in the long run. He says the best way to protect individual investments in times of turmoil is to diversify the portfolio with cash, bonds, precious metals, and real estate.
Marc Faber on the possibility of stock market prices adjusting downwards Marc Faber reflects in his latest Gloomboomdoom post on the possibility of stock market prices adjusting downwards
"If in an economic system prices in one or several sectors increase over an extended period of time far more than the overall price level, a reversion to the mean will sooner or later take place. The adjustment in prices can take place in two different ways. Prices in the inflated sector can stagnate for a while or increase more slowly than the overall price level.
Another possibility which is more likely is that grossly inflated sectors and assets revert to the mean by crashing altogether.
I believe that stock markets around the world are at an important crossroad: Growth (represented by the NASDAQ 100) is out and Value (real estate, REITs, Telecoms, food, consumer staples, financials, and energy (as represented by the Russell 1000 Value ETF – IWD) is beginning to outperform."
Emerging equities are more volatile than developed market equities. This owes little to the volatility of emerging stock markets in local terms and much more to the strong positive correlation between their local stock markets and movements in their currencies. The spring of 2018 was a classic example of this, with USD strength driving significant emerging weakness. Emerging markets do exhibit momentum, so it would not be odd for the weakness to persist for another quarter, although after transaction costs the momentum effect is probably not capturable. Our analysis of the underlying fundamentals for emerging markets, on the other hand, gives us confidence that the assumptions behind our forecasts are sound and emerging value stocks represent the most attractive asset we can find by a large margin, and in the longer term we believe valuation is much more predictive of returns for emerging than momentum is.