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Global Bargain Hunting: The Investor's Guide to Profits in Emerging Markets
by Burton G. Malkiel, J.P. Mei
Product Group: Book
Publisher: Touchstone (1999-07-09)
ISBN: 0684848082
EAN: 9780684848082
Dewy Decimal #: 332
Paperback: 240 pages
SKU: S070633-3768
Condition: Good
Comments: Good overall condition. Tight binding. Book has highlights/underlines. Ships same day or next in a bubble mailer. Enjoy.
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Editorial Reviews
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Product Description
A RANDOM WALK AROUND THE WORLD With the same clarity and insight that made Burton Malkiel's enormously popular A Random Walk Down Wall Street an influential bestseller, Global Bargain Hunting shows nonprofessional investors how to reap investment profits from the tremendous economic growth potential of developing countries. Describing a variety of strategies, Malkiel and Mei show you how to significantly reduce investment risk and increase profit from an expected recovery in emerging markets. In this book you will find out: * Why long-term investment is the key to financial success in emerging markets
* How to adjust asset allocation and risk exposure for a variety of life-cycle investment objectives (high growth, college expenses, retirement, etc.)
* Why low-cost, low-turnover index funds should be the core of a well-diversified international portfolio
* How emerging market bonds, real estate, and natural resource securities can help round out the portfolios of those with substantial assets
* The most up-to-date changes in the global financial landscape in a new introduction written especially for this edition
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Customer Reviews
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Volatility guarantees a bumpy ride!
Rating  (5)
Date: 2008-09-28
1. 85 percent of the worlds population produce a combined 21 percent of the world's production of goods and service.
2. In a ten year period, the economies of Asian and Latin America economies grown three times the rate of growth in the United States, encompassing, China, Japan, India, Indonesia, South Korea, and Thailand.
3. Malaysia, Indonesia, and Thailand have relied on free-market incentives, in the last twenty years, to produced economic miracles.
4. Since 1978, China has recorded an 10 percent growth rate and lifted 170 million rural farmers out of poverty and created 120 million new jobs.
5. China's leadership understands that their survival depends on the "elimination of revolutionary conditions."
6. China's capitalism has beat India's socialism, hands down, foreign investment is flowing in, state own business are being sold, and subsidies cut.
7. Chile market reform has been impressive, as it, adopts a free-market policy, privatized state-owned enterprise, moderated inflation, improved democracy replacing authoritarian oligarchy.
8. The Czech Republic, Hungary, and Poland have been successful in economic transition, with rapid output growth, and moderate inflation.
9. The global demographic trend is the decreasing size of the U.S consumer market relative to the rest of the world. Each US citizen has about $5,000 purchasing power per year.
10. In the mid-1990s, US institutional investors held close to 95 percent of their equity funds in domestic stocks. In 1997, the great majority of large institutional investors indicated their goal of increasing their portfolio share of non-us stocks to 10 percent or even higher.
11. Free markets are far more effective than government control in promoting growth.
12. By the mid-1990s, Chinese companies signed approximately six thousand technology transfer agreements with developed nations worth $50 billion.
13. Debt financing is more likely to be in the form of long-term bonds than short term borrowing. Emerging markets have experienced a ten fold increase in direct foreign investment since the 1990s. By 1996, the worldwide direct foreign investment reached $500 billion.
14. Emerging markets take a long time to reach the developed countries level of capitalization.
15. We do not expect Russia to reverse their economic reforms and return to planned economic systems.
16. Today's investors rely on the self-interest of developing countries to help guarantee returns.
17. In 1994, Mexico violent political development forced the withdrawal of foreign short-term capital. Large trade deficit drove the peso downward as it free falled against the dollar. Interest rates soared and Mexico was in recession. U.S. investors sold Mexican stock, in peso, and converted them into dollars. Pesos converted into few dollars. The Mexican stock market lost about 70 percent of its value in U.S dollar terms from 1994 to 1995.
18. In China, 1992, Happy Flying, a consumer electronics company traded at more than 1,000 times previous year's earnings. Most investors believed that the Chinese economy would take off and that the earnings of Happy Flying would rise like a rocket as a result of equipping 1.2 billion consumers with TVs and VCRs. This vision justified their belief and investor around the world would pay even higher prices.
19. Chinese government control over initial public offerings helped drive share prices. The average IPO profit was 150 percent. Some investment bankers would keep a large block of securities off the market when the IPO started trading, making the supply tight and the price higher. A considerable portion was sold to corporate managers, government officials, and other people of connections. They were told to hold on and sell at even higher prices.
20. Tight control of the Chinese stock market gave investors a false sense of security, stating, "with socialism, we have the tools to prevent the stock market from booming and crashing." 2008, the Chinese stock market has dropped 50 plus percent from the previous year.
21. In 1992, the Shangai stock market dropped 75 percent. Happy Flying dropped from 14.77 to 2.60 yuan. A second surge and bubble pop caused investors to loss money borrowed from friends and family. Loan sharks charged 20% per month equating to 800% per year to break even. The margin loans were called in an investors took huge losses.
22. In 1987 the Taiwan Stock Market index dropped almost 80 percent in less than nine months, wiping out $184 billion of investor wealth.
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A very good primer on EM
Rating  (4)
Date: 2005-05-19
4 out of 4 customers found this reveiw helpful
This is an interesting read, it presents a very bullish argument for investing in emerging markets based on the tremendous economic transformation that emerging markets are undergoing as a result of globalisation.
Overall this is a simple little book, not a particularly challenging read but worthwhile nonetheless. Its a very decent primer but doesn't seek to go into a huge amount of depth.
The author argues that index funds are overall the most effective way to gain exposure to EM, mainly on the basis of the high transaction costs and thin trading in emerging markets, which more than offset any potential gains that professional investors may make from stock picking and exploiting inefficiencies.
At the very least it does make a good argument for putting a proportion of your portfolio into emerging markets index funds and is a useful book to have in one's library, especially for financial advisors like myself who may find some of the passages in this book very quoteable and useful for explaining the asset class to clients.
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Don't Listen to the Naysayers
Rating (5)
Date: 2002-03-08
5 out of 8 customers found this reveiw helpful
This book was disparaged in several reviews. It is obvious the naysayers have an interest in the investing public avoiding index funds. They likely earn (used loosely) their living from the generation of fees. However, the record speaks for itself. Index funds beat the majority of actively managed funds a very high percentage of the time. The divergence is so great that active management of ones money should not even be considered by a thoughtful, prudent, odds appreciating investor. And the odds are the only thing that matters when investing money.This book will convince the intelligent reader there really is no argument anymore. All one has to do is look at the performance gap between indexed funds and actively managed funds over the intermediate to long term. It is amazing that anyone would make an argument for actively managed mutual funds given the hard facts. Actually, not amazing, but merely self serving at the expense of others. The emerging markets have recently awakened from a long slumber. Reading this book will help you understand the huge potential available overseas and the most efficient way to capture it.
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Book Misleads
Rating  (1)
Date: 2000-05-12
9 out of 18 customers found this reveiw helpful
As is well articulated in the book "Global Bargain Hunting": A noted economist named Markowitz has shown it is both prudent and profitable to diversify globally. He demonstrated that some degree of global diversification actually decreases overall portfolio risk. It is possible to combine securities in such a way that higher returns and less risk are obtained. And while a tendency exists for "short periods of stress to spread globally", research does not reveal a long term trend of increased correlation among world markets. The authors of this book then conclude advocating and clearly biasing index funds as the "simplest way in selecting emerging market shares". But Thaistocks.com disagrees. An index fund is an open-ended mutual fund (or an institution) that buys for their investors a pure and only representative sample of common stocks available. The bigger the stock of a select market the more these funds own their shares. The actual number of different kind of listed firms are held to a bare minimum. This portfolio is then simply held with no attempt to trade from security to security or country to country. The passive investment nature of index funds minimizes transaction costs and taxes they tell us, all true enough. Index funds have produced before tax, net returns on average two points higher than managed mutual funds, they inform us. Of course this was measured during the boom years prior to the Asian crises. Such large funds probably contributed to this crisis by increasingly paying irrational high stock valuations for pure liquidity and market capitalization, while ignoring rational valuations. The authors concede that index funds tend to increase the weight of the countries whose stocks have recently performed well and so increases an investor's exposure to markets experiencing some kind of non sustaining speculative craze. But they stop short on telling us the real wake-up call to individual investors around the world! We much disagree with the key punch line of this book. Index funds hold huge amounts of capital and are by any means very large investors when entering emerging markets. These funds by their very definition eliminate from possible ownership, all but the biggest shares in emerging markets. This has been our main point from the very beginning in April 1997: namely, index funds (and many other funds as well), are void of smaller often profitable and very undervalued and neglected export oriented, "value" shares. Index funds ignore the very segment of the SET market that since 1997 has by far outperformed the local index as we have documented frequently at our site. Further, this "valuation inefficiency" over many years has lead to huge stock pricing distortions. This I have witnessed here with my very eyes over the past 10 years. Fast growing smaller companies better think twice before listing on the Thai stock market as more often then not they get ignored by almost all institutions and traders alike. Hence they receive undeservingly so a huge valuation discount. Yet, from a rational individual investor's standpoint, it is "values and dividends galore" in Thailand's secondary export and niche market shares. The authors again and again tell us, "Transaction costs in emerging markets are so large that they will offset any advantage an active manager may gain". This is a terribly misleading statement as in Thailand the buy and then sell trip on SET shares, is a touch above 1% and set to drop to only 0.6% later this year. While the Authors Malkiel and Mei believe (and tell us so often) that index fund performance is superior performance, they tell us nothing about the forgotten deep values. The only qualifier is you cannot buy or sell large amounts of their shares quickly as they are illiquid. Illiquid, yes...but to whom? Institutional investors (like index funds) often have strict minimum investment mandates, which are in the millions of dollars worth (not Baht!), for each stock considered. More seasoned individual investors have a big advantage here over institutions. Malkiel & Mei, "remain skeptical that anyone -even the pros-can, over the long run, beat the returns from an emerging market index or from a diversified portfolio of closed-end funds selling at substantial discounts." Perhaps they should come take a look at our work? This book like so much other literature on this subject again and again fail to tell us the substantial and real advantages to individual investing.
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Save your money
Rating (1)
Date: 2000-05-01
4 out of 8 customers found this reveiw helpful
The book reads like a very bad Forbes article. Definitely not what you would expect from noted academics. The book is anecdotal with limited academic evidence presented to prove the authors' thesis that a well-diversified portfolio should include investments in international companies (and probably mutual funds or other indexed investments). Nothing you haven't seen before if you watch CNBC. Therefore, the book adds very little to an investor's understanding of international investing. With a large universe of literature written about investing and portfolio management, save your money and avoid this book like the plague!I wanted to add my 2 cents on the benefits and disbenefits of index investing (esp. vs. closed end funds). Benefits: 1) low transcations cost, 2) low tracking error (hopefully), 3) liquidity at NAV. Disbenefits: 1) vicious cycle of reinvesting in winners, 2) fails to take advantage of the asymmetries of information in these markets, 3) fails to use real information which analysts generate (e.g. shouldn't you pull out if you are predicting a currency crisis). I took a class with Prof. Mei and even he favored buying into "beat-up" markets after a crisis. That sounds like classic mean-reverting, market-timing investing to me and not buying an index. Don't beleive all the press you read on indexing.
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