Don’t Get Distracted When Investing In Emerging Markets


Whether he likes to admit it or not, the crowd love to hear Kris Sayce talk.

Monday afternoon, he entered the stage at the World War D conference to a loud applause.

Kris loves to be controversial. And that’s what he delivered yesterday…

He started his event with a story called the Gift of the Magi. A story of a woman who sold her hair, her most precious possession, to buy her husband a chain for his watch. However, as she sold her hair, her husband was out selling his watch, his most prized possession, to buy combs for her hair.

The point of the story? Nothing. In Kris words, ‘…it was a red herring.’

In fact, so was the title of his presentation.

All Kris was doing was diverting the crowd’s attention. But they couldn’t work out why.

And this is exactly the point he was trying to make.

Over the past six years, you’ve faced tens or hundreds of investment red herrings. All this has done is distract you, or stop you from making money.

As Kris told the crowd, by all means, don’t ignore the crises as they come and go, but don’t let it consume you. Which is, in Kris’s words, ‘the message I want you to take from here today’.

The current crisis, Crimea, is just another distraction you face.

After demonstrating to the crowd how easy it is to get distracted by macro events, he declared war…on contrarians! At this point, I thought the crowd was getting ready to boo Kris.

However, the reason why he was attacking contrarians is because he reckons they simply don’t know what it means to be one anymore.

Being a contrarian investor isn’t doing the opposite of everyone else. That view is wrong. Because if you think that’s what contrarian investing is all about, then you’re a seller in a rising market, and a buyer in a falling market. Investing this way will just mean you blow your capital quicker than other investors.

But the real art to contrarian investing, as Kris explained, is getting behind an idea before the rest of the market does.

He went on to add that too many so-called contrarian investors get caught up in the little things.

Economic data detailing a half a percentage point drop in China’s economic growth…or one nation state fighting with another nation state.  Yes these events are important, Kris reasoned. But they should not be the sole analysis behind your investments:

‘Investors spend too long focusing on charts and meaningless statistics,’ Kris told the audience.  ‘Paralysis by macro-analysis.’

‘Contrarians have lost the plot in searching for the charts.’ Kris told the crowd. Adding that it’s made worse by the mainstream media constantly discussing what could be the next crisis or ‘black swan’ event.

‘Had you heard of SHIBOR, before it threatened to take the market down?’ Kris asked the audience. No one answered. Yet, we all knew the answer. No, we hadn’t heard of it. And no one has heard of it since.

In fact, Kris said there had been over 20 ‘crises’ since 2008, and each one has seen the market rally. Not crash like the mainstream try to predict.

Instead stocks keep going up.

The audience were transfixed at this point, taking it all in. Kris continued:

The trouble is when you’re constantly trying to pick bubbles and crashes you’ll inevitably pick a whole bunch of stuff that will only have a minor impact on the broader market.

Contrarian investors and advisors are partly to blame for this. Contrarians have allowed themselves to become crash predictors rather than investing opportunists.

After his attack on fake contrarians, Kris moved on to what he thought was the biggest threat to your wealth today.

Two types of criminals. Cyber criminals and government criminals. The crowd laughed and nodded in agreement about the government being crooks.

Cyber criminals cost Australians $4.8 billion in 2011. Whereas the government managed to take $329 billion from Australians in either direct or indirect taxes in 2012. As Kris said, ‘Even the smartest private sector criminals haven’t yet found a way to take your money before you’ve taken possession of it.’

After making sure the crowd was on side, Kris then offered some investing tips.

Emerging markets are presenting a great investment opportunity, Kris reckons.  China’s economy, still classed as one, still has potential. The Chinese government aims to lodge two million patents by 2015. This could be the catalyst to shift them from a manufacturing hub into an innovation hub.

As Kris said:

‘[China] hasn’t innovated in one damn way over the last 1,000 years. China’s most recent innovations are paper and gunpowder. That tells you something about the lack of innovation. But that’s about to change.

The problem is there are red herrings all over the place when it comes to emerging markets.

But don’t let this put you off, because there’s big future for this speculative but growing sector.

Shae Smith+
Roving Reporter for Money Morning Australia at World War D

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