The signs are everywhere. The economies of the developed countries may be still in growth mode, but the emerging markets are drowning in recessions and uncontrollable inflation. Investors have been making huge profits from foreign assets for the last five years, but that is changing now. Investors like Jim Dondero, the president and co-founder of the Dallas-based management company, Highland Capital Management has enjoyed some of those returns.
Highland Capital has more than $26 million assets under management and a healthy share of those assets are foreign investment opportunities. Highland Capital executives like James Dondero like to invest in assets that produce long-term returns, but those assets are a little harder to find these days because of the recessions that are changing the dynamics of foreign investing.
When investors look for opportunities in other countries things like credit ratings and profits play a role in decision making, but government stability, and currency exchange also play a part in sound investment strategies. Right now, government stability in some emerging markets is non-existent, and the value of currency is being tampered with in other emerging countries. Those issues can spell financial disaster for foreign investors. When emerging markets are going through slow or no economic growth, the growth of the global economy suffers, and that is what is happening now, according to Dondero and other investors.
Even though economists predicted a 3 to 4 percent growth pattern for the United States in 2015, some investors say the GDP will only grow 2 to 3 percent this year. Those economists also say the economy of the United States will stay in that growth range for several years. One reason for the economic stagnation is the top emerging markets will not recover until 2017. That is the forecast and that bad news for some investors. China, for example, is trying to transition from an export economy to a consumer base economy and that will take time. If China is regrouping the rest of the world will feel the effects of those changes especially when it comes to imports. Another question mark is Brazil. Brazil must get its government issues resolved, and that may not happen for another two years. The only bright spot in emerging markets is India thanks to cheap oil and technology advancements. But India’s growth will not be enough to offset the slow economic growth of other nations, according to Dondero.
Investors like Dondero and the managers at Highland Capital say the best time to invest is when things look bleak. When countries and companies are trying to find a way to recover investment opportunities develop. That’s when deals are made in the investment world. Businesses and nations are more realistic when there is slow or no economic growth. There is a better chance that those investments will increase over a longer period. Downturns help investors that are willing to take risks and not worry about growth percentages. There are always great investments out there in good times as well as bad times, according to Dondero and other investors.