Beware the bubbles

Jeremy Charlesworth, from Moonraker Fund Management, encourages investors to put their eggs in lots of baskets because not every investment might hatch returns

Despite his impressive track record in running lucrative commodity and energy funds, Britain-based Jeremy Charlesworth of Moonraker Fund Management remains wary of the latest round of economic recovery across the globe.

"It's still difficult to read," Charlesworth said, referring to commodities such as gold and oil. His firm won the 2009 European Fund of Hedge Funds Award. "For gold, the bubble has been in the making. At the current price of $1,100 to $1,200 [Bt36,459 to Bt39,779] per ounce, I expect a correction to, say, $970," explained Charlesworth, who was recently in Bangkok to attend investment and related events hosted by the MBMG Group.

On crude oil, the investment expert said he believed this "black" gold should stay within the range of $65 to $85 per barrel this year, depending on the sustainability of the global economic recovery. In addition, oil prices are subject to massive speculative pressures, but it definitely will not fall back to $35 per barrel. Charlesworth said markets are very tricky so investors cannot afford to be rigid. They need to be quick and nimble in jumping in and out of the markets. In other words, you're advised to put all your eggs in as many baskets as possible as no single asset has ever consistently outperformed throughout an entire time period, so market leaders would have to vary according to prevailing market conditions.

For example, UK bonds were the top performers in 2008, with a 14.4-per-cent return, while global equities and property were the worst performers, with a negative return of 40 per cent and 22.5 per cent, respectively. In addition, diversification among asset classes helps reduce the risk of holding the "wrong" asset class at any given time. With regard to the global economy, Charlesworth is far from optimistic.

"We're living in an [increasingly] uncertain world. We've seen the printing of a massive amount of money [in western economies] which could lead to hyper-inflation."

Since late 2008, trillions of dollars at nearly zero interest have been injected into the US and other western countries to prevent a financial system breakdown following the September 2008 bankruptcy of the Lehman Brothers. As a result, fewer people now trust their banks or governments, he said, adding that the dwindling confidence in financial assets meant more funds had to be shifted to property, gold and other real assets. On energy crops, he said, sugarcane was now one of the best performers following the 2008 peak in corn as both could be used to produce ethanol for mixing in gasoline. Charlesworth said China's government entities have also commoditised a significant amount of their dollar assets as part of their diversification owing to the weakness of the greenback.

"China seems to have bought up commodities such as copper, steel, lead and tin. Their warehouses are now full of all this stuff. In my opinion, the first quarter of this year will be good. The second quarter will also be good. But I have worries for Q3, and the June figures could be flat," he said.

Charlesworth also predicted that there would be a second round of economic stimulus in the US, but this time bail-out measures would aimed at creating jobs and helping indebted consumers. The fund manager also does not rule out the chance that the global and US economy could face a double-dip or tumble again later this year.