Episode 4: Mark Mobius - a life in emerging markets

Catherine: [00:00:00] Welcome to The Signal, a podcast presented to you by Third Bridge, the world’s leading independent research provider, exploring how some of the globe’s most investable industries are facing upheaval and reviewing key market developments with some of Third Bridge’s most eminent clients. My name is Catherine Ford, and I’m a journalist with a 20 year track record of reporting on a wide range of financial topics such as capital markets developments and M&A. Today I am talking to Mark Mobius, founder of Mobius Capital Partners and a veteran of emerging market investing who will give us an insight into his career and share his expertise when it comes to emerging markets. Hi, Mark. I’m so happy to have you here with me today and to have the opportunity to talk to you about your area of expertise. Let’s start with a quick introduction to yourself and what you do.

Mark: [00:00:47] Well, right now we’re running two funds. On a seedcamp in Luxembourg and the other one is a investment trust in the UK. And what we’re doing now or have been doing for the last four years is entirely different to what I was doing before. We have a much, much smaller assets under management and we’re focusing on medium and small sized companies in emerging markets with a specific emphasis on ESG plus C, the C stands for culture. We’ve added that to the ESG initials.

Catherine: [00:01:20] And I’m going to come back and really grill you on the issue of ESG. But before we get into that, talk to me a little bit about how you got to setting up your fund, what’s sort of career path that you’ve gone through.

Mark: [00:01:32] Well, you must remember that I started in 1987 with the first listed emerging markets fund on the New York Stock Exchange. And that was quite an adventure because at that time we only had six markets in which we could invest. China was closed. Of course, Eastern Europe closed. Russia closed. Most countries were either socialist or were not willing to allow foreign investors to come in. So then of course, after 20 years, things really opened up and we were investing in 70 countries. We started out with $100 million. We went up to $60 billion in emerging markets.

Catherine: [00:02:10] Wow. Quite, quite a journey that you’ve been on. What does your work involve on a day to day basis? And talk to us about the team that you’ve gathered around you that you work with, because I know that there’s one person that you’ve been working with for a very, very long time. And I’m very curious to hear a little bit about the relationship that you two have and how you work together, because I would imagine that it’s almost, you two work in sync with each other, I would imagine, after all these years.

Mark: [00:02:34] That’s right. Carlos Hardenberg, who started working with me when I was with Franklin Templeton. That was 20 plus years ago. He now is my partner in this new enterprise, Mobius Capital Partners, and we work very closely together to run these two funds and to select stocks to put into the fund. And of course, the emphasis is to get into high quality companies where we can engage those, engage with management as regards to ESG plus C.

Catherine: [00:03:05] Talk to me about the highlights and the lowlights of your everyday work life. What are some of things that you like, Yes, I’m really looking forward to that. And what are the things that you think, oh, do I really have to deal and engage with that again?

Mark: [00:03:12] Well, believe it or not, we love bear markets. We love to see crashes in the markets. We love to see big, big downturns in the market, big bear markets, because…

Catherine: [00:03:22] You must be having lots of fun at the moment then?

Mark: [00:03:24] That gives an opportunity to buy good bargains. But of course, our clients don’t like it because, just like everybody else, our funds are also affected because when there’s a bear market, everybody, even the good and bad, get turned down, generally speaking. So that’s something we have to suffer through.

Catherine: [00:03:42] Ok, and the highlights?

Mark: [00:03:43] And the highlights are when we see an incredible result. Like last year, we were the top performing emerging markets fund of all, something like 3000 funds. So that’s a hell of a highlight, but you can’t expect that every year, of course.

Catherine: [00:04:01] Talk to us about what drove you into emerging markets. I mean, when, as you said in your introductory remarks, when you got into emerging markets, emerging markets was a very, very small, select group of countries that you could invest in, and there weren’t that many players. What made you look at the globe and all the different areas of investment that you could go into and say, Do you know what, emerging markets, that’s the place for me to be?

Mark: [00:04:2] Well, I was sent to Japan as a graduate student in the sixties, actually a long time ago, and Japan was an emerging market. You could see what happens in Japan. They had an incredible boom. It was very poor at that time. And now, of course, it’s become rich and it was an example of what could happen. So I started looking at Asia, I looked at Korea, I looked at Thailand. I lived in these places. And I began to get so excited about the fact these trees were growing very fast, double the rate of the developed countries, and more importantly, they had a very young population, which meant they had the opportunity to really grow.

Catherine: [00:04:55] Did you also look at places like Africa and Latin America?

Mark: [00:04:58] Oh, yes. In fact, we’re now invested in South Africa and Kenya, in Latin America, we’re in Brazil. And over the years, I’ve invested in almost every country in Latin America and many, many countries in Africa.

Catherine: [00:05:10] And I’m sure we’ll get on to sort of where you see opportunities going forward when it comes to emerging markets investing. Talk to me about what enhances your productivity. What keeps you going? Because there are lots of people and I hope you don’t mind me saying that, who at your age would have said, you know what, I’ve done it, I’ve been everywhere, I’ve invested in everything, and now I’m just going to sit and enjoy myself. But you’ve decided to keep going. Why?

Mark: [00:05:32] Reason is, I’m a very curious guy, first of all. I love to travel. I love to see what other people are doing. And, you know, things are changing so rapidly in the world today because technology is incredible. You know, I remember doing my PhD thesis on a Selectric typewriter and people ask me, what is this library typewriter? And now you have Word, you have laptops, you have all these facilities, and they’re getting better and better every day. To me, that’s exciting. So I want to learn more about that.

Catherine: [00:06:03] They’ll still be asking you, what’s the typewriter nowadays? If my children were to see a typewriter they’d be like, well, this is curious, what’s that all about? You spoke about your love of travel. The last few years have obviously been incredibly difficult for anyone to travel, let alone to travel for work purposes. How has that impacted your ability to identify attractive companies to invest in, to talk to your partners in different regions?

Mark: [00:06:26] Well, thank God for Zoom and for the Internet, because with that we’ve been able to communicate somewhat face to face like we’re doing now, you know, looking at each other and speaking with each other. But there’s nothing, of course, like being on the ground and speaking face to face. Luckily I’ve been able to do some traveling. I’ve been to Oman, I’ve been to Saudi Arabia. I just came back from London. I was in Turkey during these periods and I was in India, of course, as well. So it hasn’t been total blackout in terms of travel, but it has been very restrictive and I’m looking forward to it all and so I can really travel freely.

Catherine: [00:07:08] Well, I think we’re all looking very much forward to that. If you don’t mind, I’d like to get a little bit personal. Talk to me about a time when your work life has really tested you, really pushed you to the edge. I know that risk is something that is obviously, something that you’re very happy to take, given that you’ve been investing in emerging markets for such a long time. But when was there a time when you thought, actually, I’ve maybe pushed it a little bit too far?

Mark: [00:07:30] Yeah. I mean, the real difficult times come when you have a situation where money is coming in to the funds and you really don’t want to invest. And unfortunately, people tend to give you money at the top of the markets when everybody’s optimistic. And that’s the most difficult thing because you really don’t want to be invested. And of course, when people give you money, the first thing they ask is when are you going to be fully invested? And we really don’t want to be fully invested at that stage. I would say that’s the most difficult thing.

Catherine: [00:08:04] Anything that you do differently in hindsight, looking back over, over your extensive and very successful career, but any point where you think you could have done something differently there?

Mark: [00:08:13] I would have paid a lot more attention to the people behind the companies in which we invest. Who are the owners? Who are the people that are really controlling the company and what’s their background?

Catherine: [00:08:23] Has that informed your decision on this, this approach, ESG plus C, the culture?

Mark: [00:08:28] Yes, because if you look at E – environment, you can see something about the character of the people in the company. S, of course, social, their social environment in the company is very important. And then G – governance, how are they treating shareholders? And the cultural side is again the morale in the company because that all speaks for the personality of the people that are running the company.

Catherine: [00:08:53] Finally, there’ll be lots of people, younger people in there, or people who are at the start of their career who are only just getting into the investment world. What’s your one piece of advice that you’d give them when it comes to a career in investing?

Mark: [00:09:06] First of all, travel, get out, get out of your own environment. That’s the first thing. Second thing, don’t listen to the advice of others in regards of where best and how to invest and think independently. And thirdly, be optimistic. I mean, at the end of the day the beautiful thing about stock markets is that they go up, they go up more than they go down and companies can continue to grow. So there’s a great opportunity out there for young people. And also, last word of advice is don’t think about the money. Think about what you like to do, what you enjoy. The money will come easily after that.

Catherine: [00:09:43] That’s very nice advice to keep in mind. Let’s move on now. And I’d like to pick your brain when it comes to the overall market conditions before I then get to really grill you on emerging markets. Talk to me, first of all, how do you characterize the current market conditions overall?

Mark: [00:10:00] Well, overall, we’re in a bear market. We’re beginning a bear market. I don’t think we’re totally in a bear market as regards to the overall market, because let’s say the S&P 500 is down about 20%. It would be 30% to have a bear market. But if you look at Nasdaq and some of the other indices, you’ll see they’ve already passed 30%. So we’re now in the beginning of a bear market, but we have not reached the point of, how can we say, despondency, where people are really despondent.

Catherine: [00:10:34] How far down do we need to go to get despondent?

Mark: [00:10:37] Well, you know, I remember John Templeton, my mentor, used to say the best time to buy is when everyone is despondently selling. And I don’t think we’ve reached that yet.

Catherine: [00:10:50] It gives me hope. That gives me hope. Talk to me about the impact that you see the conflict in Ukraine having on stock markets and the general global economy.

Mark: [00:11:00] Well, it’s having a big, big impact, obviously, because everyone, if they look at the problem with inflation, the problem with money devaluation, and then they put that against what’s happening in Europe, they can become very, very negative as regards what’s happened in the world. And of course, the risk is tremendous for the world, particularly for Europe. It’s very, very big risk that we’re facing. So, yes, it’s having a considerable impact.

Catherine: [00:11:26] Talk to me about interest rates, inflation and the looming recession. How much are these concerns factored into the pricing that we’re seeing in the market at the moment? How much wiggle room is there and where are your expectations when it comes to the direction of travel?

Mark: [00:11:42] This gives me a chance to do a plug for my book, The Inflation Myth.

Catherine: [00:11:46] Plug away.

Mark: [00:11:47] In the book, basically, I say, look, inflation measures are not accurate. The CPI is not an accurate measurement. What you really should look at is money supply and with increasing money supply, you get devaluation of currencies. And that’s what we’re facing right now. Huge devaluation of currencies around the world, including the US dollar. So when you’re in that kind of situation, then of course prices look like they’re going up very, very high. But people forget that wages are also going to go up so people will be able to pay those higher prices. Takes time, but it happens. But the beauty of this situation, of course, if you’re an equity investor, is that you can keep up with this devaluation of the currency because companies, good companies with pricing power can raise their prices in line with these higher prices.

Catherine: [00:12:37] So Mark we’ve talked about the conflict in Ukraine and we’ve talked about interest rates, inflation and the looming recession. But one thing that we haven’t talked about so far is the climate crisis and how much of a role that is playing in investment decisions and challenges that some of the key players in the markets are facing. Can you give us your thoughts on that, please?

Mark: [00:12:57] Well, I would say every one of our investors is concerned about climate and really wants us to be focused on that as well. ESG is very much in everyone’s mind, so that’s number one. Number two, the problem we face is that although the developed world is doing a lot with regards to climate, the emerging world is having a great difficulty because let’s just take power. 70/80% of India’s and China’s power is coal fired plants, highly polluting plants. They need power. So what is the alternative? They’re trying to move into the alternative, but it’s going to be very, very difficult. So the emphasis, I believe, should be on technology, which can turn coal fired plants into clean energy. That, I think, is the big challenge.

Catherine: [00:13:48] Let’s move on to your pet area of expertise: emerging markets. First off, define for me what you see as emerging markets.

Mark: [00:13:56] That’s a very important question because it’s changing. When we started in 1987, it was very easy: emerging countries were all the middle and low income countries based on per capita incomes. And if you look at those countries, you’ll see that included all of Latin America, included all of Africa. It included all of Asia, except Japan and Australia, New Zealand and the Middle East was sort of no one know where to put them, but anyway, but it was very easily defined. Today, many of these emerging countries have emerged. For example, Korea has now per capita income that is equal to many of the rich, richer countries. What we’ve done is said, okay, let’s not focus on the country, but let’s focus on the company, because we would like to see emerging companies that are in a high growth environment. So the way we’re now defining the emerging markets are those markets that are growing very fast and those companies that are growing very fast and have the opportunity to grow. So it’s pretty strange. You know, very often if you go to the London market or if you go to the US market, you’ll find many companies that have a majority of their earnings or production in the so called emerging countries. So they may even be considered emerging companies. So the definition is definitely changing.

Catherine: [00:15:21] And how crowded is that space? Because, I mean, I think most people, if you say to them, what is an emerging market, they will talk very much about specific countries rather than specific companies and the way that a company is being run. So as you’re out there looking for investable companies, how crowded is the space? How much competition is there for you?

Mark: [00:15:40 Of course, there’s competition and many, many more emerging market investors than before. I mean, as I mentioned, 1987, it was us and there was an institutional fund run by Capital Markets International, but that was it, just the two of us. Now, of course, there are thousands of emerging market managers. But don’t forget, the market is also moved. Don’t forget, in those days there was no China, there was no Russia. Now, China is one of the largest markets in the world. Russia, hopefully, when they open up again, will take its place. If you look at the indices, for example, that are based on market cap, Russia was 7%, China something like 30%. These are big, big markets. So the situation is really changed. There’s plenty of room, plenty of opportunity.

Catherine: [00:16:29] You’ve obviously been investing in emerging markets for a very, very long time. Talk to me about how it’s changed, some of the trials and tribulations that you need to go through to be successful, because not everyone is as successful when it comes to investing in those markets as you are. Is it something where experience is crucial? People on the ground is crucial? What gives you the edge when it comes to investing in those markets?

Mark: [00:16:51] I would say experience is really very helpful. I mean, once you’ve dealt with certain families, certain managements, and you come across them again five, ten, 15 years later, you know what to watch for. We’ve had many experiences like that.

Catherine: [00:17:08] What are the things that you need to watch for? What’s the red flag that makes you run for the hills? 

Mark: [00:17:12] Well the red flag is the money you lost in the past off these people. We had a number of instances where we were completely wiped out, where all the assets were stolen. Stolen by the management. Of course, on paper it looked great, it looked fine. But that’s the reason why I emphasize the need to look at the management very closely. But nowadays, some of the young analysts come up to us and say, Hey, I got this great bargain. I said, wait a minute, this is run by a group that cheated us ten years ago. Do we really want to go into this? So it’s really helpful to have that experience.

Catherine: [00:17:48] I can imagine that that is helpful to have those experience. What is still out there where you say that’s where the money is still on the table to be had? That is where support when it comes to operational development, accessing new markets could be really helpful. Where do you see the greatest opportunities, both when it comes to geographies, but also when it comes to the type of businesses and maybe sectors that are that are most attractive to you?

Mark: [00:18:10] Well, let’s start with geographies. In Asia, for example, Vietnam is a great new opportunity. It’s growing fast, great opportunities there. India, of course, is now coming into its own, great opportunities there. Indonesia would be another example. And then in Africa, oh boy, the field is wide open. There’s so much to be done. So many countries to look at, lots of difficulties, lots of challenges, but you know, that goes with the territory. But when it comes to companies, we focus on those companies that are not in the index. There are thousands of companies that are not in any index that have not been followed by anyone else. That’s where the opportunity is because you want to go into a place where nobody has the information. So you can have an information advantage, number one. And number two, nobody else has noticed the bargain. And you can get in there first.

Catherine: [00:19:02] I mean, is it a case of, you know, you fly to a country, you talk to your network, do you have a network that’s permanently on the ground scouring for investment opportunities for you? Give me a bit of an insight behind the curtain. How do you find these little gems?

Mark: [00:19:14] There’s so much information available about markets around the world. Every company that’s listed has information available. People may not pay attention to that information, but it’s there. So what we do is we do a scan, we say, look, I want a company that has earnings growth of 10%, a company that has low debt, a company that’s high return on capital, a company that is in a very good industry, a growing industry. So once we have these parameters, then we scan all the markets, thousands of companies in countries around the world. Then we, unfortunately, the problem is our criteria sometimes are too strict that we end up with maybe 50 or 60 companies that meet the criteria. Then we zero in on those companies. We make a telephone call. We find out what the management is like, et cetera and so forth. So that’s the way we do it. It’s sort of a two stage process scanning and then very deep insights.

Catherine: [00:20:14] So how long from the point where you identify a company to when you possibly make an investment in it?

Mark: [00:20:19] I would say at least three months, maybe longer, because, you know, you’ve got to have a few conversations with the management. You’ve got to look at the industry, you’ve got to understand the business. So it takes at least three months.

Catherine: [00:20:32] And before we get to talking about ESG and the increasingly important role that ESG plays, moving from a mere box ticking exercise to real value creation. Let me get you just to take a step back and talk to me about how those emerging markets are actually performing right now.

Mark: [00:20:50] It’s really interesting to see that some of these markets like Brazil, are really doing very well. They’ve been moving up in the face of downturns in the S&P 500 and other places. So it’s a very mixed bag. Some countries are moving sideways like Taiwan. Some of the companies in Taiwan are doing very, very well because of technology but also some countries are moving down in US dollar terms. So it’s a mixed picture at this stage of the game. But there are lots of opportunities nevertheless.

Catherine: [00:21:22] Let’s talk now about ESG. On your website, you say that the focus of your fund is on improving governance standards in emerging market companies. Can you expand on that for me and talk to me about how you actually go about   achieving that goal?

Mark: [00:21:38] Well, what we do is when we decide to look at a company, in the process of research, we interview the management and we ask them, Are you willing to work with us to improve your governance? If they say no, then we drop the company, we don’t want to invest. So that’s the first criteria.

Catherine: [00:23:07] How often do they say That’s a hard no, thank you very much?

Mark: [00:23:10] Believe it or not, it’s amazing. I would say 70% of the companies have said yes. We’re not a big firm, you know, we’re not taking 20% of the shares of the company. We maybe have three or 4%. But still, companies are interested in improving their share price. By the way, that is the hook. We tell them, look, if you want to improve your share price, you’ve got to think about ESG plus C. So then we start working with them. We look to see, do they have independent directors, do they have any women on the board? What are they doing about client relations? Do they have an IR person, so forth and so on? So we work with each company on an individual basis and they really appreciate what we’re doing. It’s very, very encouraging, actually.

Catherine: [00:22:48] ESG is one of those topics that I personally find incredibly interesting because, as I said, it’s moved from something that everybody has said, Oh, yes, it’s very, very important and we’re very concerned about it and obviously, we want to do something to actually companies being forced and also being rated on those kind of things. Investors are paying much, much closer attention to the ESG credentials. But I think it’s interesting that there are some areas that people seem to find much easier to tackle. Then there are other areas. Now, from your perspective, where do you place the greatest emphasis, the E, so the environmental, the S, the social or the G, the governance aspect.

Mark: [00:23:23] It really depends on the company. It varies from company to company. But I would say the frontier is the G, governance because if you don’t have independent directors, for example, or if you don’t have management that’s listening to shareholders and really paying attention to what the public is saying, then you have a real barrier, a real problem in looking at social and governance and cultural issues. So I would say that’s the first frontier.

Catherine: [00:23:51] And how often in emerging markets are you confronted with a criticism: well, this is all fun and games for you from the West, coming here to tell us how to run our business, but you’re developmentally at a completely different stage. I remember a mentor of mine always saying that environmental and social and governance issues are things that we in the West can afford to be concerned about. In other countries, in other companies, they’re at a completely different point of view. How do you counter that criticism?

Mark: [00:24:16] Well, what we’ve found, if we look at each one of those factors, we found that it’s a win win situation. First of all, what we try to explain to these companies and of course, we look at ourselves, is lowering risk. Let’s say you’re in the mining business. If there’s a spill in your mining situation, you’re going to have a big, big risk, a big fine, and you’re going to have the public up against you. That’s the way we try to explain it to companies, is that this is a way to lower your risk. And that’s true with the social side of things. It’s true with the governance side. You’re lowering your risk. It’s a win win situation. And unless there is a win win environment, it’s not going to work. In other words, ESG is not going to really be popularize and grow. So that’s what we try to explain to people. We are lowering risk. And by the way, as fund managers, we’re also lowering risk by paying attention to those things.

Catherine: [00:25:13] That’s a wonderful statement to be made by someone who is clearly in the habit of taking risk. Because when you say that you started investing in emerging markets in the eighties, that was a huge risk at the time. How do you reconcile that? I’m clearly taking a huge risk here, but I want you to actually reduce your risks.

Mark: [00:25:29] The bottom line is that there’s enough risk to go around. Even if you solve the ESG problem, you still have an incredible amount of risk because anything can happen at any time. And by the way, that also speaks to the need for being individualistic. In other words, every company is different. Every management is different. A solution for one management is not going to be a solution for another one. So…

Catherine: [00:25:56] So no blueprint.

Mark: [00:25:57] Yeah, you got it. No free lunch here.

Catherine: [00:26:01] Yeah, I think we’ve established that there’s no free lunch to be had. Talk to me about what has surprised you when it comes to market developments, be it in the emerging markets or the market in general over the past six months, anything where with your experience having gone through different cycles and different crises, anything where you’ve gone, hmmm didn’t see that one coming?

Mark: [00:26:19] I would say cryptocurrencies. You know, everybody asked me about cryptocurrencies and I tell them, look, I don’t like to talk about religion in public, but to me this has been the most incredible development. And if you talk to young people, you know, I have young interns. They’ve grown up with the Internet. They trust the Internet. They trust when someone comes up with an idea like this and you try to explain to them, hey, okay, you talk about blockchain, who is on the chain? Do you know everybody on the chain? What happens if something goes wrong? No, they say nothing will go wrong. That’s the Internet. So I’ve got to get my head around this. I haven’t quite been able to really understand this mentality, but I think that’s been the most exciting, revealing and maybe dangerous development that I see.

Catherine: [00:27:10] Is it something that you would consider investing in?

Mark: [00:27:12] No, no. I mean, that’s maybe another pointer for a young graduate is don’t invest in something you don’t understand.

Catherine: [00:27:22] Fair enough. Give me one to watch. One market, one industry, one company out there. With all the things that you’ve seen in your career, what’s the one thing that you’re like, Yeah, keep an eye on that.

Mark: [00:27:33] Well, I would say, first of all, keep an eye on India. India is really coming in its own. Reason why I mentioned India is not only, because there are other countries that are also coming into their own, but India is big. It’s 1 billion people plus and they have tremendous smart people in the country as well. And I think this is very, very exciting. In terms of industries, you have to look at technology because technology is expanding around the world, whether it be hardware, software, whether it be any kind of computer chips. So you’ve got to pay attention to that.

Catherine: [00:28:10] Thank you very much. Let’s wrap up our conversation with a little crystal ball gazing exercise. Give me your thoughts on the direction of travel. I think we can all agree there’s storm clouds on the horizon. Where do you think things are going? Given that background, both for industry overall and emerging markets specifically?

Mark: [00:28:31] Well, given the fact, again, we have to make some predictions, which could be wrong, of course. But first of all, interest rates in America will go through the roof. Inflation is now eight and a half percent. That means interest rates must go above that in order to conquer the inflation according to central banks. Unfortunately, central banks are calling the shots now as that happens. Of course, the markets will go down further. So we’ll enter a real, severe bear market. The crypto world will really be in trouble, as you have already seen. We’ve seen a big crash in that. So we’re looking at quite a financial crisis. But again, I must underline, in every crisis, there’s an opportunity. There will be great, great opportunities. If you look at defence stocks, if you look at Lockheed Martin or Grumman, stock price has gone through the roof. So in any environment, you’ll see these opportunities. 

Catherine: [00:29:25] And who do you think is best placed to deal with some of the challenges that might be coming, our direction? Companies, industries, countries that really stand out where you think, you know what, I think they’re actually going to be fine that you can name to me.

Mark: [00:29:37] Well, I would say the companies that have low debt to begin with, because obviously this is going to be a big, big barrier for many, many companies. So low debt is one thing. And companies that have pricing power that can raise prices with no restraint. Those that I would say the two criteria you have to look at and obviously the defence industry would be sat in that category and technology companies would be in the category. You can name any sector, it could be consumer, but focus on those companies that have the pricing power. Those are the guys that are going to be surviving.

Catherine: [00:30:11] Any geographies that really stand out. Your thoughts on China, India, how are they going to cope?

Mark: [00:30:17] Well, as I mentioned, India, of course, Asia still is really coming up. And now at the end of COVID, you’ll see a big revival in Asia generally. 

Catherine: [00:30:27] Okay. Your thoughts on Latin America?

Mark: [00:30:29] Latin America has really been very, very interesting situation because there’s always crisis in Latin America. But as I mentioned, Brazil is doing quite well. Lula, the previous president, used to come in. There’ll be a big spending spree. But in Latin America, they tend to go through a euphoria and depression. In other words, they have incredible spending, but everybody’s partying. It’s a great celebration. And then the reality sets in. So you’ve got to watch for those opportunities. And by the way, Mexico is doing very well.

Catherine: [00:31:02] What do you think investors need to be particularly mindful of?

Mark: [00:31:06] I think they have to be very mindful of surprises in the markets generally and mindful of what the index is doing. Most investors today look at the index. I would say half of the investors buy ETFs, index funds. So they’ve got to be mindful that that is not the market. The market is the individual stocks. So you have to pay attention to those stocks that are not in the index necessarily or at least not following the index. Very important.

Catherine: [00:31:37] Now, there are obviously,and we talked about some of the storm clouds that we’re aware of brewing on the horizon, challenges that are coming down the pipeline for investors. Are there any other things aside from that where you think to yourself, okay, that’s not something that we need to worry about right now, but I’m going to keep a really, really close eye on that because I think that could be a problem for us in 5 to 10 years time.

Mark: [00:31:59] I would say, you know, they whole development, the political development globally. In other words, what kind of political environment are people going to choose? Are they going to choose the open society model or are they going to choose the closed society model where the government rules and where the government decides what everybody is going to do? And I think that’s one thing you have to pay a lot of attention to. America is an open society. And one of the reasons why America has been so successful is because it’s an open society. Question now is what’s going to happen in those countries that have closed societies?

Catherine: [00:32:38] Where do you think things are going to fall? If I can be so mean as to put you on the spot like that.

Mark: [00:32:42] It’s too early to say. You know, it’s interesting. A lot of people think of China as a closed society, but not necessarily because they’ve opened up quite a lot. They’ve adopted a market economy model and a market economy model requires an open society to some extent. But recently we’ve seen they have closed to some extent because of various crackdowns on companies, etc.. So that remains to be seen. Some obvious problems. Zimbabwe would be one, Venezuela would be another. These are definitely basket cases, let’s say. There’s room for change, so let’s put it that way.

Catherine: [00:33:19] Okay. I’d like to wrap up with getting your final thoughts on when it comes to investing right now. Is there one thing, one piece of advice that you can give to investors out there, something that they have to absolutely keep at the front of their mind when it comes to where to put their money.

Mark: [00:33:36] Look at earnings. Don’t buy companies that have negative earnings or are not earning at all. Unfortunately, a lot of tech companies went to the market with no earnings. Get out of those companies now. And get into companies that are actually earning money and increasing earnings.

Catherine: [00:33:52] That’s a very nice, succinct answer from you there, Mark. Thank you so, so much, Mark. It’s been absolutely wonderful talking to you and thank you so much for allowing me the opportunity to really pick your brain when it comes to emerging markets investing. Unfortunately, that’s all that we have time for on this episode of The Signal presented to you by Third Bridge, the world’s leading independent research provider. Join us again for the next episode when we will be discussing more upheaval in one of the world’s most investable industries. Please rate review and follow our podcasts. Indeed, if you like it, tell a friend. Find us on Spotify, Apple Podcasts and wherever else you get your podcasts from. Plus thirdbridge.com/signal. From me, Catherine Ford, that’s goodbye and until next time.