He talks, we listen.
Mr. Bernstein, an ex- Merrill Lynch strategist and currently chief executive at Richard Bernstein Advisors LLC was voted to Institutional Investor magazine’s annual “All-America Research Team” 18 times, including 10 as the top-ranked analyst in his category. He was recently inducted into the AART Hall of Fame – a recognition accorded to only 45 of the approximately 15,000 eligible analysts.
Having said that, overall, he is a US “bull” and an Emerging Markets “bear,” and he’s been saying that for some time already. In an April 30 interview to Advisor Perspectives he said the following about the US stock market, China and Brazil (this is an excerpt):
About the US and the world’s equity market…
“… people should be looking in the US for above-average returns. The US stock market is not expensive… we are still getting huge outflows from equity mutual funds.
The corporate sector in the US is the strongest corporate sector in the world by far; nothing else is even close. Where people should be worried is not in the United States. They should be worried around the rest of the world. Most investors still think our problems are just US problems, and that the rest of the world is fine. People are starting to realize Europe has some problems, but what people still don’t have an inkling of is that the biggest problems are yet to come, and they are in the emerging markets.
…People are underestimating the risk outside the US and overestimating the risk inside it.”
On China’s landing …
“… it makes no difference whether it is hard or soft [landing]… if you are talking about a landing, it implies a worse situation than you presently have. It is very hard to find a stock market that does well when things are getting worse. That’s what’s been going on in the Chinese market.
On top of that, China’s ongoing credit bubble makes the US credit bubble look downright amateurish… people are kidding themselves when they think China’s economy was just a normal event going on for the last three, four or five years… growth was predicated on a huge, huge, credit bubble.
They have been printing Renminbi like crazy… People are putting their head in the sand, hoping that China isn’t in a credit bubble. But it is the biggest one of my professional career.
[the landing] is already starting. Default rates are going up. Delinquency rates are going up. The Chinese government is assuming loans. It is already starting to deflate.”
“They [BRICs] are all very credit-induced economies. They can’t try to fight inflation, because their currencies would appreciate. They can’t really exist with inflation, but inflation expectations are rising. For example, the Brazilian real has been falling as inflation expectations go up in Brazil.
You’d think the Brazilian central bank would be like the Bundesbank, given its history of hyperinflation. You’d think they’d be one of the tightest central banks in the world. But nothing could be farther from the truth. They are now accepting inflation, and their currency is falling accordingly, and inflation expectations are going up.
I don’t see how that’s good for a dollar-based investor.”