There is no global market any more: Andrew Freris, Ecognosis Advisory

In a chat with ET Now, Andrew Freris, CEO, Ecognosis Advisory, says I am looking very selectively at property, at some aspects of shipping and at mining

ET Now: The market seems a little calm but oil continues to be a worry. What is the global opinion on which way oil is likely to head? Is CLSA target of 20 going to be the new normal?


Andrew Freris: There is no such thing as global markets anymore. There are three major markets and that is United States, European Union and Japan where both in terms of cycles and in terms of policies they are going completely different ways. There are other economies such as China and India where the cyclical downturn - or in case of India a slant and in case of China, a slow deceleration - is leaving them in absolute terms astronomically high compared to everybody else. China is still growing at 6.9-7 per cent and India is growing at 7.5 per cent. So I stopped talking about global markets. These are not global markets, there are individual markets with very autonomous trends and the nonsense that China drives the global economy is slowly being put to bed, and hopefully, it is being put to the cemetery. On oil, the bad news is that Iran and Iraq are not going to play with Russia and Saudi. So I just cannot see the price of oil going up from the sort of $30 trading range. It may go down to $20 if both Iran and Iraq decide significantly accelerate production. Iran is talking in terms of one million barrels a day. So the downside is very much in place, upside effectively zero.

ET Now: So what does one do in this kind of an environment? Gold is moving up, emerging markets stocks continue to remain volatile, deflation concerns are real and everybody is looking to central banks which clearly have no bullets left in their arsenal?

Andrew Freris: Yes, I am advising my clients to forget the paper assets and to look at real assets. Of course, some of the real assets have to be bought through paper, so I am looking very selectively at property, at some aspects of shipping and at mining. With the Chinese now beginning to buy up iron ore, the prices of iron ore are firming up. So mines might be something interesting to look at. I am really not interested in equity markets. Fixed income markets I am not interested in because with negative interest rates in the two banks and the Fed clearing its throat about looking at negative interest rates in United States, yields are ridiculous so that I have to rely on further acceleration in the nominal prices of bonds to make even some kind of a mild capital return. It is not really worth spending sleepless nights and it is not as if the equity markets are concerned. I do not advice clients to sell and I do not advice clients to buy paper assets but I do advice them to look at some of the real asset pack, real asset backed investment and sometimes even directly buying bricks and mortar.