it’s really a stock picker’s market. But going forward, the question is whether it should be a stock picker’s market. Anytime you’ve got uncertainty, so much uncertainty from a macro and political standpoint, then you always want to go with trying to find the best companies. I’m a big believer that the trajectory of a company’s stock price only follows one thing—that’s the company’s earnings, period. As long as you get that right, in the long run, you’ll be correct about the stock that you own.
MPARE: In this environment, where we need to resolve whether we are in a bear market or a bull market, having the ability to pick the right stocks in the right sectors is the only way to make money. Indexing only applies, and is a winning strategy, when the market is one direction. That means mostly in a bull market where you can have the indexes do well. So, for the next couple of years, I think the only strategy that one can use to win in investing is stock picking.
BE: Where do you think investors should look for growth internationally next year and in coming years?
MPARE: The International Monetary Fund forecasts that gross domestic product on a global basis should be about 4.6% this year and next year about 4.4%. So global gross domestic product is healthy, which implies the global economy is going to continue to do well, with the U.S. leading, but with Japan also doing exceptionally well, given its exports to China. China has been the engine of growth. Latin America also continues to do relatively well.
There is a question whether Europe can continue to grow, or whether the soft economy in Germany is going to be a problem for the whole continent. But generally, the global economy looks healthy. There are three themes that are important when you look at the global economy and the global environment: technology, globalization, and competition.
China plays a very critical role in all three themes, es
pecially competition, with its cheaper products. China has had a great impact on the U.S. inflation picture, and that will continue to be the case. But we think it’s going to be positive as we move forward.
On a global basis, we’re OK, unless we have another terrorist attack like September 11, 2001, in the U.S. or the Madrid train bombings in March of this year.
In the only area that I concentrate on, Africa, there are two countries that I like: Ghana and South Africa. Their macroeconomic environment has improved dramatically over the last two or three years. Monetary policy has been very positive in Ghana. The inflation rate has gone from about 40% to about 10%. Interest rates have gone from 33% to 11%. There is dramatic performance in Ghana.
South Africa has also had some good performance. Inflation is down, and the rand has really rebounded from the collapse that it sustained a couple of years ago. So those are the two countries in one region that I like.