Tim Seymour is a seminal voice on emerging market investing on Wall Street.
He is a fixture on CNBC‘s Fast Money and the founder of EmergingMoney, which provides daily investment insights for the developing world. He knows whereof he speaks, having lived in an emerging market, in Russia of all places, as a managing director at Troika Dialog, an investment bank. He began his career at UBS in a hedge fund group.
After his Russia stint, he launched his own hedge fund in New York that invests in emerging markets — and that’s where I met him, when I worked in the EM group at a global investment bank. Last week, I caught up with Seymour not only to get his latest view on emerging market investing but to learn about his life as an entrepreneur-and-artist outside of Wall Street.
The Allure of Emerging Market Investing
Emerging market investing is appealing to global thinkers, to those who can spot international trends and themes.
“Even though there is plenty of bottom-up stock picking, emerging markets are very macro driven,” Seymour says. These macro themes can be politically-driven like Prime Minister of Japan Shinzo Abe’s “Abenomics” or informed by demographics, like trying to invest in India’s growing middle class. “EM is like finance for dummies,” he jokes. “What matters is that you get the big macro picture right, and stay focused on it.”
He explains that currencies can drive as much as 50% of returns in these markets, and right now there is the largest discount on purchasing power since the beginning of the “golden era” of EM investing that began in 2002.
Where to Invest in Emerging Markets
“Deflation isn’t such a bad thing,” Seymour says.
Some 70% of emerging market economies import commodities, so the plunge in energy prices, for example, has helped several countries narrow their current account deficits. He highlights Korea, Taiwan, and India as commodity-importing countries in which there may be an opportunity (however, he notes that India looks overbought).
Even though fund flows out of emerging market has been extraordinary, he believes they will normalize, and one should look for countries in which currencies have weakened such as Mexico, Turkey, and possibly Brazil. Indeed, the Brazilian real has weakened considerably, and perhaps it has overshot. Rates in Brazil are some of the most attractive right now, but it’s probably too early to jump in, as negative news flow continues to weigh on the market.
What to Read on Emerging Markets
If you are looking to bone up on emerging market investing, it’s best to start with Ruchir Sharma’s Breakout Nations. Seymour also recommends reading about the histories of important corporations in these markets like Samsung.
When He’s Not Investing…
When he’s not investing, he’s also investing. Seymour owns a couple restaurants, the WXOU Radio bar in the West Village and the Georgetown Saloon in Georgetown, Conn. You can also find him jamming out on the drums at the upcoming Hedge Fund Rocktoberfest which benefits the charity A Leg to Stand On. Seymour admires legendary drummers Stewart Copeland and Keith Moon, the original drummer of the Who.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned. Kabir Sehgal is the author of New York Times bestseller Coined: The Rich Life of Money And How Its History Has Shaped Us. He is also a Grammy winning producer. Follow him on Facebook and Twitter.