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Templeton’s Mobius: Another Financial Crisis is Inevitable

Friday, 10 Jun 2011 03:18 PM

Another financial crisis is just around the corner because the country hasn't yet solved the problems that threw the economy into the subprime-fueled recession in the first place, says Mark Mobius, executive chairman of Templeton Asset Management's Emerging  Markets Group.

"Banks that are too big to fail have gotten bigger, derivatives are not really regulated yet and the fact is that bank balance sheets around the world are not really that healthy. So you have a situation which, if not corrected, will result in another crisis," Mobius tells CNBC.

The crisis, however, won't be a disaster and will actually unveil good buying opportunities when it arrives.

"It could be an opportunity, particularly in emerging markets, to buy cheap stocks again," Mobius says, adding "so I don’t consider it a very bad thing to happen."

The timing of the next equities selloff is anyone's guess.

"It could happen next year, it could happen five years from now."

Stocks that can "survive" such a crisis include consumer stocks, such as car companies and department stores poised for growth, as well as commodities plays, Mobius says.

The mortgage meltdown not only threw markets into crisis but also sent the U.S. economy into the worst recession since the Great Depression.

Mobius is the latest in a long line of experts who are warning that the U.S. is economy is headed for disaster yet again.

Economist, author and Yale University Professor Robert Shiller on Thursday warned that dismal housing and employment data suggest the economy is at a tipping point where a double-dip recession is possible and home prices could have much further to fall.

Shiller said the recent uptick in unemployment isn't yet enough of a sign as to which way the recovery is heading. But if unemployment continues to rise in the coming months, it could suggest another recession. "Whether we call it a double-dip or not, I think there is a risk," Shiller told Reuters Insider in an interview.

Also this week, investor guru Jim Rogers said staggering debts and loose monetary policy is going to send the United States into a financial crisis worse than the one in 2008.

"The debts that are in this country are skyrocketing," Rogers told CNBC, adding "in the last three years the government has spent staggering amounts of money, and the Federal Reserve is taking on staggering amounts of debt."

Meanwhile, Laurence D. Fink, chief executive officer of BlackRock Inc., said the U.S. will trail the global economy for much of the next decade.

The U.S. economy will grow 2 percent to 3 percent for the next five to ten years, lagging behind global growth of 3 percent to 5 percent, Fink told Bloomberg Television on Friday.

Also Friday, a top Federal Reserve official said that while the economy will regain some momentum in the second half, growth will remain "painfully slow" and risks to recovery have increased.

Recent disappointing data and a higher unemployment rate suggest the recovery is at risk, New York Federal Reserve President William Dudley said.

High food and energy prices and a weak housing market were among the main factors likely to keep consumer budgets tight, he said.

While the economy is officially growing again, recovery has been sluggish and unemployment rates high, which worries President Barack Obama.

"I am concerned about the fact that the recovery that we're on is not producing jobs as quickly as I want it to happen," Obama says, according to the Associated Press.

"We don't yet know whether this is a one-month episode or a longer trend."

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Another financial crisis is just around the corner because the country hasn't yet solved the problems that threw the economy into the subprime-fueled recession in the first place, says Mark Mobius, executive chairman of Templeton Asset Management's Emerging Markets...
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2011-18-10
 

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