Noted hedge fund manager, John Burbank of Passport Capital talks oil, investing in Saudi Arabia, stockpicking in 2012, and global macro in this recent Bloomberg TV interview.
A few key points from Burbank's interview:
1. Oil prices are up 16% YTD, which hurts the average oil-dependent consumer (chart). Burbank feels global QE operations and "liquidity" boosts are pushing up oil prices. If gold goes up 10-20%, it doesn't cause problems for consumers the way rising oil prices do.
2. Rising oil prices are benefiting Saudi Arabia. Passport now has 15% of its capital in the Saudi stock market, a country which is slowly opening up to foreign investors.
Passport started investing in Saudi Arabia in 2008 (through notes & swaps) and Burbank feels the potential there is similar to India in the 2003-2004 period. Here's a chart of India's SENSEX over the 1998-2012 period.
3. Liquidity is coming into the market because "things are really bad", not because things are good. Burbank feels that confidence in central banks is misplaced. The average Westerner's standard of living is not improving; rising prices and stagnant incomes are squeezing them.
4. 2012 is a stockpicker's market, a good year to be long or short certain sectors and individual names.
Burbank is not banking on a sustained global rally. Instead, he's looking to invest in stocks that can outperform regardless of growth rates in the overall economy. Biotech is one area that he finds promising at this time.
Enjoy the interview, and if you'd like to hear more from Burbank and other macro stars, check out the interviews in the related posts section below.
Related articles and posts:
1. Must hear interview with John Burbank of Passport Capital.
2. Michael Burry talks "Big Short", America's future at Vanderbilt.