With several countries in
What is the current outlook for investing in
We've been talking about the theme of divergence for probably a couple of years now. Clearly, there has been a lot of divergence between the developed markets and the emerging markets. But we've also been talking about the divergence within
What do you mean by high-sovereign quality?
We look at a combination of things. We look at public debt-to-GDP. We look at budget balances and GDP. We also look at current account balances, trying to figure out essentially, is there cash coming in or cash coming out? How are exports growing? We also look at foreign currency reserves as a percentage of GDP. We look at all of these things together to look at the sovereign health of the economy. Those things have led us away from most of the peripheral economies.
Do you think the PIIGS designation is accurate?
Yes and no. Clearly, there are some similarities between them, but we see some distinctions amongst them as well. Clearly,
What's next for
We tend to think there is going to be some sort of a [debt] haircut coming. [There is] the
What about the bright spots in
They're both relatively small markets. Everybody focuses on core
If you look at the UK, they have a very strong austerity program in place. When the government is cutting, it makes it difficult for companies to expand. I think if you're in a healthier environment, it gives your companies and consumers some breathing room to take the weight from government and from government spending in order to get the recovering going or continuing. We think they've definitely benefited from being in strong sovereign positions. The governments were definitely able to stimulate the economy coming out of 2008 and early 2009 and kick-start the recovery. And that's now being transitioned into more a private-sector recovery.
Explain your case for
The biggest thing that distinguishes the Norwegian economy is its exposure to energy. Clearly, that is in part why they barely went into a recession to begin with. [GDP fell by] about 1.5 percent in 2009, and they came out of it pretty quickly as oil prices starting moving up again. Energy ... is about 50 percent of exports, so it's a pretty significant part of the economy. ... They have a budget surplus of around 10 percent. That gives you a lot of wiggle room in terms of tackling any kind of a slowdown. They were able to pump a lot of money into the system. Their unemployment rate never rose significantly, certainly not to where ours did in the U.S., and their unemployment rate is back down to 3 or 4 percent.
What other sectors stand out?
There are some materials companies like
What concerns do you have?
One of the things we are concerned about is valuation. The stocks have performed really well. Both
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