Host: Paul Gordon

Host: Well the MSCI emerging markets index has tumbled more than 50 percent over the last year…hit worse than stocks in the US…Asian markets ahead of their worst weakly close ever this week. Our next guest says there could be more bad news to come…joined by Todd Everts, president and chief executive of Wall Street Global Investment…Good day! Thanks for joining us today. Much more bad news out there, you think? How much?

Todd G. Everts: Well there are a lot of systemic problems. First of all if we look at the market we break it down to 3 types of investors you have the guy in the street who’s bought a mutual fund or an investment trust, you’ve got the long only pension plans, the large super annuation type of funds and then you’ve got the hedge fund managers. The man on the street, especially in the US, just got their quarterly statement, that’s a 43 billion dollars of outflow just last week alone. So as they’re getting their statement they’re seeing how dramatically down and worse since last June and knowing that they have a few years to retirement, they can’t stomach it, they’re putting in this redemption which is continuing to affect the market. The second investor which is the large long only pension plans, they actually have some cash. They could come in to the market and we could see in the next couple of weeks, one or two days of those days where we have a dramatic uplift, so for many people it’s important to stay in the market so that they can participate in that. The third investor is the hedge fund and that’s what is really crippling the market. They’ve received their notification of their redemption request as of October 1st, they got to meet those redemptions by year end, the banks have reduced their leverage or terminated their leverage and many of them need massive amounts of leverage to find the arbitrage in their strategy. And lastly with LIBOR rates so high, although there’s a lot of liquidity in the market the banks aren’t ready to lend and hedge funds have to borrow money if they can borrow at very high rates.

Host: So bad news out there even the valuations as we note are very low, BHP Billiton, world’s biggest mining group trading at 4.3. We’ve got at the moment Singapore, Hong Kong and Australia all trading at a…of 9 or 9 and a half or so. Quite a lot higher for instance the NASDAQ still up at 15 but then there’s some growth stocks in there…I mean what would you do as an investor right now? Do you take advantage of these bargains if you got the cash or do you wait for the more bad news to come out?

Todd G. Everts: Well we certainly could see a support level somewhere at the Dow of about 7500 and certainly over the next couple of weeks there’s going to be a continued tremendous amount of volatility because not knowing the true direction of the US policy based on the election because we’re so close. But based on these valuations, absolutely if you have long term horizon these are fantastic buying opportunities.

Host: When you say long term horizon, I mean, it could be years before you get your money back.

Todd G. Everts: It could be years but we could be sitting. Especially if you’re investing in emerging markets – the markets you talked about not the US. In certain emerging markets they don’t have a one to one trading relationship with the US. These are the markets that can certainly provide an investor a good return. The other thing that we’re seeing happening, we call on financial institutions around the world and what we’re seeing is a pull back of money from other markets to their home market. If you’re an insurance company in Korea, if you’re a super annuation fund in Australia, if you’re a family office in Dubai, you have to report based on your own currency in your own market. So it’s much easier for them to pull money back into their own markets because that’s where their liabilities are.

Host: And this is what is partly behind the rise in the dollar over the last couple of weeks.

Todd G. Everts: Definitely.

Host: Is that what you do like most here in the emerging markets or would you say don’t take too much risk, go for a broad based fund EMS tracking the MSCI emerging markets index?

Todd G. Everts: The easiest way is to take a broad based approach to it because especially in Asia I think we’re going to see things rise and fall in similarity. What scares me is to see the failure of life insurance in Japan. From what I read they almost had a 30% exposure to alternative investments and so they’ll use those valuations and now they’re suddenly declaring bankruptcy and I think we could see more of that in Japan.

Host: I mean, Japan is an issue and bubbles come and bubbles go and people get used to the fact that stock markets hit near highs but Japan is proving that’s not the case. Here we have the Nikkei trading at around about 8,000…that’s 1/5 of its high two decades ago. Does Japan concern you in particular right now?

Todd G. Everts: Well this goes back to the case of the Japanese institutions which do have a lot of cash and could go in and start buying into the US. They were burned when they did that in the early 80s when the US came out of the recession before. So a lot of that money, I would hope, could trickle into the US and they could go on some bargain based on buying and help prop up confidence and help to increase the markets. But more likely, that money’s going to stay in Japan because they have their own issues in Japan and they are reporting in Japan.

Host: What about commodity market? Would you advocate any exposure to that? Prices have come down so far with the exception, of course, of gold.

Todd G. Everts: Yeah, yeah. Well, in the commodity market agriculture I think is going to perform well because if we do go into a global world recession, we’re going to go back to the defense of stocks, the same stocks of tobacco and alcohol, and obviously agriculture because people need to eat.

Host: Worth noting. Actually, 7 of 9 holdings in Japan just reported improved earnings on sales of cigarettes. People are still going out and puffing away. Thank you very much Todd Everts of Wall Street Global.