Animal Spirits Podcast - Talk Your Book: Emerging Markets Are Back

Starting point is 00:00:00 Today's Animal Spirits Talk Your book is brought to you by Schaefer Cullen. Go to Cullenfunds.com to learn more about the Cullen Emerging Markets High Dividend Fund. That's Tickr CEMFX. Again, that's CullenFunds.com to learn more. Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Batnik and Ben Carlson as they talk about what they're reading, writing, and watching. All opinions expressed by Michael and Ben are solely their own opinion, and do not refer to reflect the opinion of Ridholt's wealth management.

Starting point is 00:00:32 This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ridholt's wealth management may maintain positions in the securities discussed in this podcast. Welcome to Animal Spirits with Michael and Ben. Michael insert the Al Pacino from Godfather 3

Starting point is 00:00:52 just went out. They pull me back in. That's got to be one of the only good parts about Godfather 3. Never saw it, never will. All right. Don't. Emerging markets, I looked on a total return basis are up over 32% this year.

Starting point is 00:01:05 We're recording this on October 20th. I'll do you one better. Okay. Or no need to one up. I'll do you one also. Okay. This is surprising. Since the beginning of January, 2024, almost a full two years.

Starting point is 00:01:22 And think about all of the dominant financial headlines. Mag 7, U.S. stocks, American exceptionalism, all that. Industrial Revolution, since January 2024, emerging market stocks and U.S. stocks are even Stephen. That's kind of hard to believe. That is surprising with how well the U.S. stock market did in 2024. Now, an very easy counterpoint, which doesn't negate what I said, but, you know, is, all right, well, how about 23 and 22 and 21 and 20 and 19? Like, U.S. stocks have been in a bull market for a long time. E.M. hasn't. Nevertheless, it's just I was surprised to see that it's neck and neck for the last

Starting point is 00:02:07 almost two years. Right. And I guess if you were going to make a claim, you'd say, well, listen, things have changed, right? The dollar is down a lot. It's possible the U.S. will continue to pursue a weak dollar strategy. And that would be good for emerging markets. It's really good for international stocks. I think it's really, really good for emerging markets, if that is, we can quantify that. And so a weak dollar, which we haven't had in a while, a stained period of it makes a lot of sense. Yeah, I definitely wouldn't have said it. Yeah, sure, emerging markets is going to be the outperformer this year.

Starting point is 00:02:41 But I guess that's how this thing works. So on today's show, we talked to Raoul Sharma, who is a portfolio manager at Schaefer Cullen, Capital Management. We've had a role on the show before. He has a real boots-in-the-ground approach. He tells us about his trip to China. which after we read Dan Wang's book, Michael, I almost feel like I have to see it now. Well, I also read China and Apple.

Starting point is 00:03:02 Or no, I'm sorry. Geez. Apple and China. Apple and China. So I've read 100% more books than you have been about China. So catch up. I think the actual growth there is 50% more books than me. Well, either way.

Starting point is 00:03:18 Yeah. No, no, no, no. I've read twice. Excuse me. I've read twice as many books. as you have. Okay. So yeah, you've, um, you've graduated from tourists to actual expert, and I'm so a tourist. Uh, China and Apple. Nailed it. Anyway, we talked about with Raul, but a bunch of different stuff, we talked about the dollar and China and dividends in emerging markets,

Starting point is 00:03:39 which still matter a lot. And then their EM strategy, uh, which is the Cullen Emerging Markets High Dividend Fund. Um, so here's all that and more with Raul Sharma from Schaefer Cullen capital management. Ro, welcome back to the show. Thanks, Mike. Thanks for having me again. All right. So Ben and I recently read a book called Breakneck by Dan Wang, China's quest to engineer the future, which makes us pretty much experts on China.

Starting point is 00:04:11 And he wrote something that was obvious after reading it, but Ben and I are tourists here. So he basically, the premise of the book is that China is run and built by engineers. and the United States is built and run by lawyers. And so the way that things get done, the way that things are built, very different incentives, very different structures, obviously. China is a third of the benchmark, give or take. How do you think about, maybe since you had first time experience, how do you think about how the different cultures trickle into equity markets, it's how they think about shareholders and how that impacts how you build a portfolio. Yeah, Michael, that's a good question in terms of the engineering talent from China and kind of what

Starting point is 00:05:01 we're seeing there. And I had just gotten back from China and we spent a lot of time looking at kind of some of their newer technologies, whether it be what they're doing with AI, autonomous driving, robotics, humanoid, all those sorts of things. And they're just very, very good. They have a lot of engineering talent, you know, more engineers probably than any other country in the world. And they're just very creative of how to.

Starting point is 00:05:22 build things in a less costly way and in a more constrained way. So if they can't get Nvidia's best chips, that's not really holding them back as much as maybe the U.S. thought it would when they put those kind of restrictions on them. And, you know, if you just look at their large language models, you know, their leading models are maybe only five to six percent behind, say, a chat GPT, which is kind of the industry standard. But I've heard estimates of the cost being about 90 percent less expensive to build. So when you think about the cost, efficiency of what they're building. It's really quite impressive. And, you know, being five or six percent behind is really, you know, you've got to really think about who actually needs that

Starting point is 00:06:01 five or six percent. I mean, the models are so advanced as they are. So I was very impressed with that. And if you just look at other areas, particularly newer technologies, like say electric vehicles, robotics, humanoid, battery storage, they clearly have a global lead. There's a lot of ways to point to this. You can look at the number of patents file, the number of scientific papers that have come out. They're still behind in older areas like, say, semiconductors or software or maybe space and defense technology, but even there, they're definitely catching up. And I think it is a tribute to, you know, the entertaining talent they have and just how hard

Starting point is 00:06:37 they work. I mean, these people are working very, very hard. And, you know, so I'm impressed with that in terms of, you know, kind of the second part of your question in terms of kind of governance, that's something that's definitely sweeping Asia this year, that you're seeing a massive wave of governance reforms. started a couple years ago in Japan. Now, this year it's really South Korea is probably in the forefront. But I would say almost every country, even places like Thailand, Indonesia, they're doing things also to try to improve corporate governance and improve valuations. And China has also

Starting point is 00:07:06 been doing the same. In fact, I would say that China's probably been the global leader in terms of the percentage of share buybacks and dividend increases that the companies have made over the last five to seven years. And they're not calling these or forums kind of any program. Like in Korea, they call it the value up program. They're not calling it anything, but it's essentially the same thing where the government is telling companies to have better corporate governance to do more buybacks and just to be better companies. And I think that that is making a difference and it's one of the catalysts for that market this year. So there's the old saying that the U.S. innovates and China imitates, right? Do you think that a lot of people who have that mindset are totally underestimating

Starting point is 00:07:45 what they can do in China because it's not just like they're taking our plans and building out the hardware and software that we tell them to. You're right, they're actually engineering things on their own now. Do you think a lot of people underestimate what China can do in the tech front these days? Definitely, for sure. And like I said, especially with regards to the leading and emerging technologies where there's really nothing to imitate because they already kind of have the lead in so many of these areas. So I think that was more of a model in the past.

Starting point is 00:08:13 I mean, I'm sure there's still a lot of that kind of going on, but I think it's a lot less. And, you know, when you sit down with some of these companies, they're just very impressive, you know, across the board, not just, you know, AI companies or tech companies, but a lot of their electric vehicle companies are really kind of trendsetters and what they're doing. If you look at some of the new EVs that they're producing, these are just really beautiful cars. I mean, I think the Ford CEO was on record of pointing out to how good these cars are. He actually used one for several months to just kind of get a sense of, you know, how capable they are. And I know he came away quite impressed. So there's a kind of a U.S. industry.

Starting point is 00:08:50 insider kind of pointing to the same thing. Well, I know we've had you on before, but for listeners that might be new to Schaefer Cullen, let's zoom out before we zoom back in. How do you all think about running a portfolio? What's different about what you do versus some of the traditional ways that advisors might get access to emerging market exposure? Well, first of all, we're active, and I think that's a big difference.

Starting point is 00:09:14 We use a Benjamin Graham style value investment discipline, which, you know, basically means two things is that we're trying not to pay up. We don't pay up in terms of the multiples that we pay for stocks. And then we're very long-term investors and we don't stray from our discipline. So I think that that's pretty unique. But then we do a lot of other unique things with this strategy, which I think are particularly important to emerging markets. Like we do a lot of country research to manage country-related risks

Starting point is 00:09:38 because they matter just that much more in emerging markets. So if you look at our alpha generation over time, I think you see a healthy split between stock selection and country selection. And I think that's, you know, a function of the Ben Graham-style process, but then also that, you know, kind of top-down, kind of more risk management work that we do as well. Do you find, because a lot of people have decided, like, I'm abandoning the Ben-Gram framework in the U.S. It doesn't work anymore. These big tech stocks, that growth just seems always beat value. Do you find that there's a difference between the growth and the value parameters overseas and especially in emerging markets where that stuff still works much better than it does in the U.S.?

Starting point is 00:10:13 Yeah, definitely. I mean, I think there's, well, for one, there's a lot less of a distinction. between growth and value in emerging markets. Now, it's starting to grow again as growth outperforms value in the year to date, but because some of the former darlings, particularly some of the Chinese companies, some of the Chinese internet companies,

Starting point is 00:10:29 corrected so much in recent years. These growth stocks essentially became value stocks, and we pounced on them. We bought them too because they were finally in our range and they were paying dividends and increasing dividends, like I mentioned. So there's a bit of a less disparity, I would say, in emerging markets.

Starting point is 00:10:45 And there's certain kind of growth themes, like AI that I just think are much better ways to play it than in the U.S. or in emerging markets just because the stocks are, you know, so much cheaper. I was looking at a group of like AI suppliers like semiconductor companies, server companies, companies making cooling systems that we own in our portfolio and comparing them to the U.S. counterparts in there, you know, 50% cheaper with a yield that's still over 3%. And if you look at some of the AI enablers called companies like Alibaba or Tencent, they're still about a third cheaper than the U.S. counterparts. So, It's a cheaper way to play, I think, megatech growth themes and not just AI, but really across the board because a lot of technology supply chains run through emerging markets.

Starting point is 00:11:26 And, you know, those stocks are still trading at attractive valuations. One of the big headwinds for U.S. investors anyway has been the dollar. Talk about how that impacts both like international flows and maybe more importantly how it impacts investors. Well, a declining dollar has always been a huge catalyst for emerging market stocks. I think we've shown that if you look at the 10 periods where the dollar declined by more than 10% before this current period, emerging market stocks were up on average by about 45%. And there is a 90% hit rate. It happened 9 out of 10 periods.

Starting point is 00:12:05 And so it should be no surprise that in the current year, when the dollar has gone down by over 10%, emerging markets are up over 25%. It's quite typical. And there's reasons for it that it really kind of relieves emerging market countries, particularly those that have a lot of debt or U.S. dollar-denominated debt or depend a lot on U.S. imports, which is a lot of countries. All that gets better for those sorts of countries. So it really is a big thing. And we tend to think it's probably going to continue to happen. And we could talk about why that might be, if you'd like. So I was looking at this today. And I was looking at the emerging

Starting point is 00:12:36 markets versus foreign developed stocks versus the S&P and the NASDAQ and the Russell 2000. And the emerging markets has a lead over all of them. And I'm not sure many people would, of predicted that coming into the year. How much of this is part, is because of the dollar falling double digits and how much of this is other fundamental factors at play? I think the big thing is the dollar, no doubt. But then, you know, I think it's also those reforms I mentioned that these are very positive things, these corporate governance reforms, like I said, particularly in markets like Stap Korea, which had really been a dead market for the last, you know, 10 years, all of a sudden it might even be the single best performing emerging markets. And, um,

Starting point is 00:13:16 country and that's all in the back of these reforms that they're doing. I mentioned that's also happening in China. Certainly you're seeing very strong earnings growth coming out of particularly the technology side of EM, which we're talking about for the same reasons you're seeing it in the U.S. I mean, they're essentially benefiting from the very same, you know, demand drivers as, you know, the Mag 7 is because they're supplying the Mag 7. So those are some of the things that are really helping emerging markets. And yeah, I think that the fact that foreign investors are losing money on U.S. stocks or not making much because the dollar has gone down so much, all of a sudden, they're looking for other places, and that's a good thing for fund flows.

Starting point is 00:13:50 When you think about value within your mandate, is that at the country level, the company level, the sector level? Because a lot of these names and a lot of these countries tend to trade cheap to the U.S. for reasons that you can get into if you'd like. So how do you think about that? And how do you incorporate that into your framework? I mean, first and foremost, it's on a company level more than anything else. But, yeah, I mean, you are going to see us where you see kind of peas lower. and dividend yields higher and also not overhangs

Starting point is 00:14:20 in terms of kind of country factors to create overhands, whether it be the external position of a country or poor corporate governance, that's where you're going to see more of our exposures. But, you know, I like to think that there's good ideas kind of, you know,

Starting point is 00:14:33 everywhere in terms of how we think about value, I mean, I tend to think about it more of, we're kind of more of a core value manager. I mean, we like deep value stocks, but with deep value stocks, you tend to get kind of a lot more hair on those stocks in terms especially in emerging markets, with things like poor corporate governance or with things

Starting point is 00:14:49 like balance sheet risks. So while we're always looking for those kinds of ideas, it tends to kind of be more core value in nature. But then as I mentioned, I think, you know, the distinction between value and growth is that much less in emerging markets. You mentioned before the thinking through the country selection, how that's a big part of trying to find elephant emerging markets. I'm curious how you try to balance that out when thinking through evaluation framework because obviously there's plenty of emerging market countries that could have like single digit PEs, right? But it's for a reason because they're not shareholder friendly. So how do you balance out that desire for value with the fact that you need to make

Starting point is 00:15:24 sure the country is high quality enough where they're going to take care of shareholders? Yeah, I mean, we try to, you know, use it more as a risk management tool or a country research and we try to kind of limit exposures to countries that might be cheap but might have a lot of other problems. Now, the single best example that over the last 10 or 15 years would be Russia because if I just looked at low PE and high dividend yield and even dividend growth, I would have probably had a third of my portfolio in Russia, but because Russia has a lot of other problems from an investment perspective, we always had a lot less. And I think it's just important to understand when discounts to the historical valuations of countries grow. So I think that's another thing that sports supporting the Chinese equity market versus, say, three to four years ago. You know, three to four years ago, I'd say there was a discount that was due to, you know, three reasons. One was, was, you know, first, how poorly the domestic economy was doing. Second, there's a huge regulatory crackdown on the Internet companies, the leading companies there. And then third, there's really, you could say four reasons. Transparency and corporate governance was just

Starting point is 00:16:25 kind of okay. And then, fourth, you always have this risk of a war with Taiwan. So if you fast forward to today, I'd say that two of those factors have gone away. All of a sudden, the government's kind of supporting the technology companies. And I mentioned all the reforms that they're doing to improve corporate governance. So then you could see how a discount that, you know, might have been a lot larger in the past should be a lot smaller. And, you know, we could kind of talk about this all day depending on the countries where discounts are growing and where they're not. Certainly the external position of a country is very, very important. They're used to countries like, say, Turkey or Egypt. I think they're very cheap just because they

Starting point is 00:17:00 have such a weak combination of, you know, twin deficits, low levels of reserves, lots of debt. that's another thing that tends to weigh down the country valuations and in those sorts of countries. One of the things that makes our capital markets different is not just we have the best companies of the world, biggest earnings, highest growth, all that sort of stuff. But it's the investor appetite for risk. How does that compare to other countries around the globe, specifically the ones that you're covering? And is that a permanent headwind for investors? Or are they getting wise to the fact that they need to do something more similar to what we're doing and does that potentially unlocked value going forward? Yeah, I think the countries are realizing

Starting point is 00:17:46 that we need to do things more like us in terms of some of the governance, although it's very interesting because what's happening out in the U.S., I would argue we're going the other direction all of a sudden. And because all of a sudden we're having SOEs, state on enterprises being created in the U.S. with the government taking big stakes in companies. We're having these cross-shareholdings emerge, which we never had before, with companies taking big stakes. in one another. And then I think there's no doubt that there's a lot more companies that are kind of trying to please the administration by some of the investments they're making. And all that reminds me of what happened in markets like China, to be completely honest with you. Now,

Starting point is 00:18:18 it's very, very small. What I'm saying is I think it's important that there's a ship because then as I described in places like Asia, you're seeing the opposite happen where they're trying to be like we've always been in the past and improve that governance, get rid of those cross shareholders. That was probably the biggest driver of the Japanese market, you know, cancel treasury shares improved corporate governance. So I think it's interesting to see which way the, you know, kind of the tide is turning in emerging markets compared to the U.S. So Michael started talking about China, and that, again, I think it's a third or so of the EM index. Do you believe that they'll start caring about shareholders? I think that, I mean,

Starting point is 00:18:54 a lot of people have talked about this, the fact that the economy is growing at like 10% a year, but the stock market went essentially nowhere since like 1990. Are they actually going to be willing to accept that as part of their culture? Because that does seem like it's a cultural thing where they they haven't been as reliant on the stock market as we have for household wealth. Well, yeah, that's become much more important for them. In fact, the stock market is the key tool now for them to kind of, I would say, get the domestic economy going, which is what they really want to do. They can't really rely on the property market because that's just, you know, too far, you know, it just has a lot of problems. There's still high youth unemployment. That's not so

Starting point is 00:19:31 easy to fix either. So the thing that they can do to make people feel better about spending more is to have the stock market do better. And I think that's one of the reasons why you've seen them be quite supportive of the stock market and want to put in those governance reforms so that the multiples of your average stock, you know, can go up. And, you know, it's not that Chinese people do not have a lot of money. They have a lot of money. They just don't want to spend it right now. So there's a lot of speculation and another potential catalyst for emerging market is that you're going to see a lot of that money coming into the market. And I think you definitely have. You're especially seeing it coming if people get some of the H share, these new listings in the H share market of leading Chinese

Starting point is 00:20:07 companies, these IPOs are doing very, very well. I mean, the Hong Kong market's having a banner year for IPOs, and a lot of that money is coming from, you know, local and domestic investors. International equities. I assume that the drivers of returns are the same as here, I mean, over the long term, it's earnings, or is there anything different about the way that their stocks behave relative to fundamentals and ours? I mean, the big difference is that here we've benefited from a lot more from multiple expansion. You've seen a lot less of that in virtually all markets. Maybe you're starting to see some of it now.

Starting point is 00:20:43 But generally speaking, yeah, it's very similar in the sense that earnings growth drives, you know, stock prices. And there's a very good correlation between, you know, long-term earnings growth and stock prices. And that's another thing that is good for emerging markets is that if you look at, say, Bloomberg consensus, which admittedly, that's usually. wrong, but still, if you look, looking at three years, the EN index actually has the best average annual earnings growth than any major index, including the S&P 500. And then, you know, the stocks are, of course, about 40% cheaper. How much of an overhang do you think the potential

Starting point is 00:21:16 conflict between China and Taiwan is having over the index? I know it's been like some of the people have talked about for years now. And part two of that question is, is it possible that there is like some sort of, I don't know, positive announcement that might re-rate these stocks higher? Well, I think that, you know, that is a new discount on Chinese stocks that exists, you know, that started to exist a few years ago that didn't exist prior to that. I think it's being offset right now by some other positive emerging factors that I, you know, alluded to. But yeah, it definitely has as an impact, even on us. I mean, we have made one change in the way we invest in that region is that we really don't do small to midcaps, which we tend to like in,

Starting point is 00:21:58 in really either market, just because we want to be in a position where if there was a war, that we could be out of that market quite quickly. Now, I don't think that's going to happen anytime soon, but it's something that we have to be aware of. I think, you know, other investors have even gone, you know, one or two steps further and said, well, that makes, you know, investing in these stocks completely uninvestable, you know, I wouldn't go that far, but it's definitely something that you always have to be mindful of. You mentioned your trip to China early talk. Any other countries that you go to that you think people in the U.S. would be surprised how far advanced they are and some of the investment

Starting point is 00:22:32 opportunities that are available there? Well, there's been a lot of change in India, for sure. If you go and visit Indian airports these days, in fact, the newest airport, which is slated to be the most efficient airport in the world is opening up very, very soon outside of Mumbai. But that's a place where you've just seen dramatic change across the board. And another trend, and we were kind of talking about this is definitely the financialization of retail investors. That is definitely a similarity that we're seeing with the U.S.

Starting point is 00:23:00 Where, you know, people really wanting to invest more, wanting to learn more, even in places like India, they're doing that. You've seen a huge amount of digitization. And these markets, they tend to even use, like, the Internet and things even more than we do. So, you know, that's another big change. I'd say, you know, back to China, the single biggest change that I saw versus the last time I had been was the environment. I mean, there's been just dramatic improvement in the quality of the environment in terms of pollution. And, you know, I think that's because they, you know, are doing a lot of things.

Starting point is 00:23:31 I mean, half the cars sold in China are electric vehicles and, you know, they're the global leader and renewable equipment. So that's been a notable change, you know, as well. If you were to just look at the balance rates of these companies, not knowing what you were looking at, is there something fundamentally different about the debt to equity mix? Like, how does, I'm just curious about the propensity for these companies and countries to take risk or maybe not how conservative were they? What does that look like? I said companies, I would say they're more debt-averse.

Starting point is 00:24:02 You know, it could be because it's not as easy to get debt, or they have to do it in different, you know, kind of ways than in other countries. And then I'd say a bigger dynamic is are they taking on debt in U.S. dollars, which creates a lot of risks if the dollar appreciates, which is one of the principal reasons why a declining dollar is a catalyst for those sorts of companies. But generally speaking, I think companies are a lot more risk. adverse to debt and an EM than what you see here. But like I said, that's also a function of just how liquid our markets are. And these stages, you've got this private credit boom going. So

Starting point is 00:24:37 that certainly is fueling that on as well. So looking at like the index, you see, I think one of the surprising things is that one, I think people in the past assumed that emerging markets were mostly like financial services and then materials and industrials, right? But technology is now the biggest sector there. How close do you sit in your portfolio to the, you? index in terms of sector weightings, is it completely different? Is it pretty close? Like how how much do you vary there? I mean, in the past, we've been very, very different. These days were a lot closer than we had been just because, you know, like some of those internet darlings or other companies, you know, corrected or either, you know, their leading Chinese companies

Starting point is 00:25:17 corrected and they got cheap enough so we could buy them. So, and then there's just no doubt that you're just seeing huge earnings growth coming out from like the AI supply chain. So certainly, you know, we like that exposure. So, you know, we're a bit closer to it. I mean, you know, we're still, for example, because remember within our mandate with the dividend yield, we could have 10% of the portfolio that has a dividend yield of less than 2% at cost. So that's where we own companies like Tencent and Alibaba. But that said, we still are underweight the Chinese internet sector because there's a lot more companies than just those two. So how do dividends fit into the strategy? I mean, there's just, well, so that's the mandate. You know, 90% of the companies will have a

Starting point is 00:25:56 dividend yield of over 2% in the year to date. We just think companies that pay dividends, they care a lot more about governance. There are notable exceptions to that in emerging markets, like some of the state-owned enterprises, for example. But we just think they're kind of more reliable, and then that we don't think you have to give up on growth. I mean, the biggest difference in emerging markets is just how diverse the opportunity set is. I mean, it's not like the U.S. where you're just investing in banks and utilities and consumer staple companies. you know, we can have our, you know, largest exposure to areas like technology. So that's very unique. This is a very, very different market. And just the number of companies, like when we do

Starting point is 00:26:35 the same screens that we do in the U.S., you know, we're getting about six times a number of companies in the margin market. So it's a much more diverse universe, you know, out there. And, you know, we just think it helps lower the volatility, particularly in down markets. If you're getting a fixed component of your total return through dividends, you know, there's a good chance that you're going to go down less in down markets. And, you know, we've gone down less in 83% of down markets since our inception. So, you know, you're dealing with a more volatile asset class. And we think it makes sense to take kind of a less volatile approach. And dividends go a long way to doing that. So I think one of the big differences between the U.S. and emerging markets would be that

Starting point is 00:27:12 U.S. corporations are more likely to do share buybacks than pay a lot of dividends. In the shareholder reform, do you think that'll come to emerging markets in terms of be more buybacks? Or are they just so locked in on dividends that that's just not in their wheelhouse as much. No, you're definitely seeing that happening. You're definitely seeing an increase in buybacks. I mean, I don't think it'll ever approach to the level of what we see in the U.S. And I hope it doesn't because we like buybacks too, but we like them when, you know, company share prices have really corrected. And unfortunately, the track record with buybacks is the companies are often doing it when their share prices are all-time highs, which kind of doesn't make

Starting point is 00:27:44 a lot of sense. But yeah, it's like part of those reforms in South Korea or that we talk about Japan or even in China, definitely you're seeing an increase in buybacks as well. The conversations that you're having with investors and advisors, are they changing, are they coming around to emerging markets as an asset class again? Because it's been years and years of month of performance. Obviously, 2025 has been a terrific year, up 31% through October 20th, which is pretty remarkable. It still feels like you're not really, at least anecdotally, I'm not really seeing or hearing

Starting point is 00:28:18 about it. It's not something that the Wall Street Journal is particularly reporting on right now. But how are conversations that you're having with clients? Yeah, I mean, we've definitely had very strong flows. I mean, our mutual fund is more than doubled in the last, you know, 12 or 15 months. And so, you know, we're definitely seeing it. But I think to your point, there is still a lot to come. But I think people are taking notice. I mean, we're definitely, and our marketing team is fielding a lot more calls. There is a lot more client interest. I think people are starting to come aware of the need to diversify. from a dollar or two or have some sort of diversication at least.

Starting point is 00:28:51 I mean, you know, I'm not saying the dollar's going to collapse. You'll let it end. Hopefully it won't because we certainly don't want that. That's not good for anything. But I think, you know, we definitely see a raising awareness of that. I think if we could, you know, we got these huge talks coming up between China and the U.S. If we can just get some sort of, you know, agreement, that would be obviously huge. I mean, you know, it would be a really important thing.

Starting point is 00:29:11 And I think, you know, that's what we've seen in recent months with other countries. So, yeah, maybe the tariffs are coming and maybe they're not great. but just the certainty of knowing what they are is in itself, I think, creating a relief for Alley, relative to the uncertainty we saw at the beginning of the year. So hopefully we'll see that happen

Starting point is 00:29:27 between China and the U.S., because I really don't think it's in any country's interests to isolate from one another. I do think that it's funny that the crashing of the dollar thing, some people like to have that sort of hedge and whatever they want to put it in,

Starting point is 00:29:40 but I think people forget these currencies are just volatile, too. They're very cyclical. I think if you look at the chart of the dollar against a basket of international currency is going back to like 1970, it's gone up and down a ton, but it's essentially gone nowhere, right? So you're diversifying against the cycles as much as you are against a collapse of the dollar, right? Because this dollar has been so strong really since

Starting point is 00:30:00 the great financial crisis until this year, more or less. Yeah, I mean, I think if you look the dollar going way back, it is making lower lows over long periods of times. You have these kind of long cycles of like, say, eight to ten years where the dollar appreciates and then depreciates. But, you know, the last high it made was lower than the previous high it made, which I think was in 2021. I'm sorry, 2001. And, you know, the last low it made was lower than the low that it made, I know, 20 or 30 years ago, whenever that was. So the trend has been kind of down, I would argue. But I just think there's a lot of reasons that it could keep going down. Again, I think the big thing is President Trump's policies. I think to make his policy success, I think a cheaper dollar is the most valuable tool that he has to. do that. You know, in terms of making investment, which he's trying to attack into the U.S., cheaper in terms of reducing our deficit, in terms of making our exporters more competitive, there's no better way to do that than to have the dollar go down. And, you know, several members of the administration are in that camp, maybe even more so than him. And, you know,

Starting point is 00:31:05 hopefully it'll just be, you know, orderly. Like maybe we get a four to seven percent decline on the dollar every year for the next three to five years. And if that were to happen, I think it would be good for his agenda, but I think it would be really good for non-US equities, especially emerging market equities. You'd sign up for that, I'm sure. Sure, I wouldn't mind that, yeah. Well, for investors that want to learn more about accessing the Schaefer-Cullen EM strategy, how do they find you all? Yeah, definitely on our website. You could Google the Cullen funds. We have regional marketing contacts in every, you know, in most parts of the country. So, you know, those are all very good ways, and I think you'll see that we're pretty accessible.

Starting point is 00:31:43 All right. Thanks for all. I appreciate it. Okay. Thank you to our rule member. Check out cullenfunds.com to learn more of that C-U-L-L-L-E-N. And email us, Animal Spirits at the Compound News.com. Nope. Yes. Animal Spirits at the compound news.com. See you next time. Past performance is no guarantee of future results. Investing in the stock market involves gains and losses and may not be suitable for all investors. Investors have the opportunity for losses as well as profits. Market conditions can vary widely over time. Investing in equity securities is speculative and involves risk. Investing in foreign securities involves greater volatility and political, economic, and currency

Starting point is 00:32:23 risks and differences in accounting methods. Cullen Capital Management LLCM is an independent investment advisor registered under the Investment Advisors Act of 1940 and is doing business as Schaefer Cullen Capital Management, Inc. S-C-C-M, the Cullen Funds Trust, CFT, S-C-F, CCM and CCM are affiliates. This information should not be used as the primary basis for any investment decision, nor should it be considered as advice to meet your particular investment needs. All opinions expressed constitute Cullen Capital Management's judgment as of the date of this report and are subject to change without notice.

Animal Spirits Podcast - Talk Your Book: Emerging Markets Are Back

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