Emerging Market Investing: You’re Doing it Wrong

Published on
June 30th, 2020
62 minutes

Rethinking Risk Management: Avoid Surprise, Not Risk

Emerging Market Investing: You’re Doing it Wrong

The Interview ·
Featuring Tassos Stassopoulos

Published on: June 30th, 2020 • Duration: 62 minutes

Emerging markets have come back to the forefront of investor outlooks recently as many market participants and commentators argue that years of US outperformance are coming to an end sooner rather than later. Of those arguments, many rely on a handful of macro or valuation factors that lead them to a specific country or sector that is poised to pounce. Tassos Stassopoulos, managing partner and CIO of Trinetra Investment Management, takes a completely different approach and in this interview with Max Wiethe, he argues that the tailwind of emerging market consumer demand growth is strong enough to overpower any macro headwind. Here, Stassopolous lays out his ethnographic research framework where he gets face to face with the EM consumers driving trends. He explains how focusing on those consumers and their cultures over companies and their talking points can help investors identify trends long before other market participants. He also explores a few of the biggest consumer trends and companies he is focused on right now and discusses how COVID-19 is accelerating trends and affecting his ability to do the boots on the ground research that is so critical to his unique process. Filmed on June 25, 2020.



  • SB
    Sean B.
    1 August 2020 @ 11:23
    Fantastic, bring him back please.
  • SG
    Sashi G.
    26 July 2020 @ 11:09
    This interview and Tassos is a very interesting contribution from RV. Kudos!
  • GS
    Gregorius S.
    14 July 2020 @ 08:50
    Tassos, do you incorpate Neil Howe's work on the 4th Turning. Your description of going back to conservative quadrant is very similar.
    • TS
      Tassos S. | Contributor
      16 July 2020 @ 20:29
      Gregorius, thanks for your comment. Yes you are right about the similarities in the 4th turning and shifts in the developed world to conservatism. See comment below to Christos on the potential incorporation of S-H's work in our framework.
  • CS
    Christos S.
    14 July 2020 @ 07:49
    This is great stuff, Tasso. I actually remember you from school a million years ago, I think we even sparred a couple of times when you used to do Judo... I love the approach - a deeper twist on Jim Rogers' adventures capitalist? I experienced something similar I guess when I was putting together a property fund in Eastern Europe in the early 2000's. We were all a little too arrogant in believing we understood or even 'knew' what the people on the ground actually wanted or aspired to, but when I went on the ground and actually mixed with the end client I realised how myopic we were. It changed the design of what we were building and what locations made sense. Hearing you speak about the cultural and developmental cycle makes it all fall into place. I wonder how it could all be also viewed through a broader framework like that of Strauss-Howe (Fourth Turning) who also see the generational characteristics on a broader scale.
    • TS
      Tassos S. | Contributor
      16 July 2020 @ 20:27
      Dear Christo Many thanks for your comments. Judo, sparring was so long ago, the world was still on its “second turning” :-) I really like the S-H approach. I believe they are completely right about events and their influence generations. I believe there are 4 elements that influence how people develop: 1. Genetic DNA 2. Generation: The stories of our shared history. You and I have lived through a war in 1974 so we are both shaped in similar ways by that experience. 3. Culture: Stories of your family/tribe 4. Personal experience We have been discussing ways to integrate elements of their generational approach with our work. Things we have been debating are what if turns are happening faster and what if they a country is not following the expected archetype sequence (in Cyprus, you and I were nomads by birth who got shaped by a war and the post war generation was prophets). As we are investing capital behind our values framework, we need processes that also tell us if we are wrong, so we correct before it gets expensive. For example, 5 years ago we believed that values shifted in a predictable way around, like a ferry’s wheel. Similar to how the archetypes change in a predictable sequence. But over the past 3 years we found that certain countries, and not necessarily because of a crisis, values were shifting in different direction from what theory was telling us. The process we put in place helped us spot these changes early. We did it by studying multigenerational households (grandparents, parents, children) and speaking to culture observers, people whose careers depend on spotting cultural shifts early, such as film producers or politicians. On politicians, I don't think they shape the discourse. Good politicians are just amazing at reading the cultural shifts and positioning their message for it.
  • IM
    Ian M.
    9 July 2020 @ 17:57
    Amazing interview, loving the breadth of content you guys bring....something of this slant really brings something else, thankyou!
  • PA
    Paul A.
    4 July 2020 @ 08:20
    Fascinating and spot-on insights. I'm currently in Inner Mongolia and can see someone exercising on their living room treadmill right outside my window! Will definitely spend more time on this framework. Many thanks Max and Tassos! Paul
    • MW
      Max W. | Real Vision
      5 July 2020 @ 01:02
      Is it the peloton girl?
  • JF
    Jennifer F.
    4 July 2020 @ 01:54
    So very interesting
  • JF
    Jennifer F.
    4 July 2020 @ 01:54
    So very interesting
  • RP
    Raoul P. | Founder
    30 June 2020 @ 11:17
    Loved this. Seeing someone do things differently to others to find a true edge is inspiring...
    • SS
      S S.
      30 June 2020 @ 11:35
      How did you even get time to watch it haha? Need to step up my game.
    • TS
      Tassos S. | Contributor
      3 July 2020 @ 19:56
      Thanks Raoul. I am grateful for all the time Max had spent to understand the process so we could have an in-depth discussion.
  • JR
    Jason R.
    2 July 2020 @ 19:37
    Tassos -- this was a great presentation. I found myself glued to the monitor to listen. I have always been a Macro guy, but the bottom-up analysis and consumer-research focus has me intrigued. Have you written any books, or can you recommend any? Once again thanks -- your energy, passion and enthusiasm for the subject really comes through on video.
    • TS
      Tassos S. | Contributor
      3 July 2020 @ 19:49
      Dear Jason, many thanks for your comments. I have not written a book, but post insights from our consumer research at https://www.trinetra-im.com/insights If you are interested in the process of ethnography a good book is "Think Like an Anthropologist" by Matthew Engelke. This is a quote from Gillian Tett of the FT in the book: “I happen to think that anthropology is a brilliant background for looking at finance. Firstly you are trained to look at how societies and cultures operate holistically, so you look at how all the bits move together. And most people in the City don’t do that… But the other thing is, if you come from an anthropology background, you will try and put finance in a cultural context. Bankers like to imagine that money and the profit motive is as universal as gravity. They think it is basically a given and they think it is completely apersonal. And it’s not. What they do in finance it is all about culture and interaction”. On the Interview I spoke about India and Indonesia. Two books I would recommend for those two markets are “Dreamers: How Young Indians are Changing the World” by Snigdha Poonam and "Indonesia etc.: Exploring the Improbable Nation” by Elizabeth Pisani, which is quite an engaging read. Please feel free to get in touch with me through Linkedin, Twitter or our website if you have further questions.
  • SA
    Sourabh A.
    2 July 2020 @ 18:20
    Wow !This was an amazing interview , a lot of Insights , Thanks !
  • GL
    G L.
    1 July 2020 @ 17:17
    Great interview. My main concern with the EM consumption narrative is the high structural youth unemployment in some key markets. Circa 50% and climbing in some SSA nations, and that was before covid. Structurally high youth unemployment is a big issue and it fuels social unrest - I can't see that dynamic alleviating any time soon.
    • TS
      Tassos S. | Contributor
      2 July 2020 @ 15:01
      Many thanks for the comments, G. Two thoughts. First, It is helpful to think of investing in EMs in three distinct phases.: - Resource Phase: You take resources out of the ground to sell to the workshops of the world. This is where most frontier markets are, such as SSA that you mention. - Workshop of the World Phase: You produce and depend on DM demand, like Taiwan and Korea. - Domestic consumption phase: This is the pure growth phase of EMs where success becomes democratised and people invest in education for their kids, their healthcare etc. This is the pure growth phase to try to capture and most of SSA would not fall in this group. Second, relates to the point of statistics and data which Max raised at the beginning of our discussion and their availability and unreliability in EMs. For example, in India over the past decade we are find an increasing number of women homepreneurs, setting up businesses from home. They are not counted in the official statistics as contributing to India’s GDP. Yet, they are part of a silent revolution of women homepreneurs who are still performing may of their old roles in the households but also bringing income and upgrading the family’s lifestyle. If you look at the official female workforce participation rate in high income countries is around 52% to an embarrassingly low 21% in India. A pure top-down approach would be missing the marked increase in women using their education and mobile technology becoming homepreneurs. I have recorded a podcast on this topic last year which you can find here https://www.trinetra-im.com/post/podcast-3-when-statistics-lie
  • FB
    Frank B.
    1 July 2020 @ 20:34
    Super interesting. I lived in China during the years he described and remember the iPhone story. The iPhone 6 was a mega-hit there and the last model that sold a bit later than other countries. Everybody wanted one and black market prices were about $1500, with huge amount of smuggling from Hongkong. Apple had a record quarter profit then. Fast forward and now most people prefer their cheap Huawei or Xiaomi, don't care about the OS because they just get their WeChat/Alipay/Didi on it and are ready to go.
    • TS
      Tassos S. | Contributor
      2 July 2020 @ 13:54
      Thanks Frank. That is exactly right. And if you are studying different EMs you will find that 3 years later you are hearing the same myths in India that you heard in China before. This is a short clip which shows part of an ethnographic discussion we had with an Indian 18 year old - I love it when he corrects me that "Apple is not a better phone but a better brand". It is here https://vimeo.com/310633963 . Only when we look at decisions of others through a their value lens can we start understanding '"why" they make those decisions.
  • HS
    Hugh S.
    2 July 2020 @ 13:45
  • AH
    Attila H.
    2 July 2020 @ 08:07
    Great interview, thanks!
  • BE
    Benjamin E.
    2 July 2020 @ 02:38
    Amazing interview!
  • CH
    Christian H.
    1 July 2020 @ 22:42
    Traditional fundamental Wall Street analysis misses trends not just in EM - eg. apple circa 2002 was going out of business just like TSLA a year ago. Great interview. Max - like you, I'd buy more and better wine - is this a trend worth exploring?
  • CD
    Christopher D.
    1 July 2020 @ 20:55
    haha everyone wonders why i have a OnePlus phone, faster, super stable, third of price and i diversify between US and China on who spies on me. i am an equal opp guinea pig.
  • EF
    Ed F.
    1 July 2020 @ 15:37
    Given this is essentially a Pitch for Capital - would love questions around the Funds Performance. 2018, c. -18%....
    • MW
      Max W. | Real Vision
      1 July 2020 @ 16:56
      His 2018 performance (12/29/2017-12/31/2018) was -13.97%. Compared to $EEM performance of -15.31%, he outperformed by 135 bps. His 2019 performance (12/31/2018-12/31/2019) was +24.00%. Compared to $EEM performance of +18.20%, he outperformed by 580 bps. His 2020 YTD performance is (12/31/2019-6/30/2020) is -5.74%. Compared to $EEM performance of -10.35%, he is outperforming by 462 bps YTD. Lifetime performance of his fund (9/20/2017-6/30/2020) he is up 3.55%. Compared with $EEM performance of -5.94%, he has outperformed by 9.49% Also, his time horizon is 5+ years and the fund is approximately 3-years old so maybe not even time to yet to judge. Preliminary results say that if you are looking to get long exposure to EM, Trinetra is outperforming the benchmark index consistently.
  • PG
    Philippe G.
    1 July 2020 @ 15:12
    Great perspective!!
  • DZ
    Dan Z.
    30 June 2020 @ 18:03
    Interesting perspective. I would push back with what if the trend towards more consumption is wrong. If we are entering a time of stagflation, with inflation affecting currencies, goods and services. Low to negative growth world wide for the foreseeable future. Here in the US almost half of the working class is unemployed. How do these trends alter to accommodate this change in the environment?
    • TS
      Tassos S. | Contributor
      1 July 2020 @ 14:49
      Thanks for your comment, Dan. Imagine a country where a critical mass of poor people are becoming economically viable. Parents willing to sacrifice everything for their children's education, role models for the journey from rags to riches, technology to copy and industrialize, a labor cost advantage, a supply chain of low cost raw material. That started driving demands and dreams beyond subsistence. You might think I am talking about EM today, but I could be talking about the UK in the 1700s or the US in the 1800s or Japan in 1900s. The rise of domestic consumption is not a new story but a story that has been happening for almost 300 years and will continue beyond our lifetime as countries take people from low productivity sectors like agriculture and move them to higher productivity sectors such as industry. COVID-19 should not be a killer of this long term trend but could prove to be a speed bump. But as there are sectors that will suffer sever slowdown, there will also be sectors that are going to see acceleration during their period. For example, eCommerce, Fintech, having remote access to healthcare, Ed-Tech companies. To find the opportunities in the current challenging environment, we need to look beyond the macro and look at the opportunities at each company level.
  • TM
    Tyler M.
    30 June 2020 @ 23:18
    Max, nice video. I absolutely loved listening to Tassos. Fascinating stuff. I'd like to hear more from him.
    • TS
      Tassos S. | Contributor
      1 July 2020 @ 14:11
      Thanks Tyler, glad you enjoyed it.
  • AI
    Andras I.
    1 July 2020 @ 05:46
    Thank you Tassos for reinvigorating my interest in this field! I was lucky to live on 4 continents for work and traveled all over the place in every possible way and used to contemplate these kind of social observations a lot - without much purpose that time. Max: great job! How about a second episode with Jim Rogers and Tassos Stassopolous? I send you some berries!
    • TS
      Tassos S. | Contributor
      1 July 2020 @ 14:10
      Dear Andras, many thanks for your comment and I am glad to see that it woke up the ethnographer in you!
  • RD
    REMCO D.
    1 July 2020 @ 03:36
    Fascinating stuff! Thanks guys.
  • SB
    Steve B.
    1 July 2020 @ 02:42
    good stuff, max and tassos!
  • JH
    Joseph H.
    30 June 2020 @ 22:36
    Really enjoyed that, thank you both.
  • JS
    Jon S.
    30 June 2020 @ 21:10
    Nice interview but structurally does not really follow any logic in my humble opinion.
  • NF
    Neal F.
    30 June 2020 @ 18:11
    Nice interview Max.
  • OM
    Owen M.
    30 June 2020 @ 14:39
    Max, where is the flannel shirt? Nice work sir. enjoyed this.
    • MW
      Max W. | Real Vision
      30 June 2020 @ 15:54
      Back in NY with the rest of my fall/winter clothes. Should be back in the rotation in a few months. Until then, I hope you like my extremely limited road wardrobe.
  • JV
    Jonny V.
    30 June 2020 @ 15:44
    Great video! Interesting with a different perspective! No doubt real world insights provides a real edge in investing. Thanks real vision!
  • YB
    Yuriy B.
    30 June 2020 @ 13:07
    Interesting talk. Would have been nice to hear more individual equity names in the EM space.
    • MW
      Max W. | Real Vision
      30 June 2020 @ 14:30
      Just look up their holdings 🤦‍♂️
  • Nv
    Nick v.
    30 June 2020 @ 14:23
    Excellent. Well done
  • SS
    S S.
    30 June 2020 @ 11:37
    Tassos' library has more books than my local library. 🤣🤣
  • GM
    Gaurav M.
    30 June 2020 @ 09:17
    Fascinating video. Please try to balance the usual trading related stuff with more such content. Thanks
  • VP
    Veselin P.
    30 June 2020 @ 08:06
    Good stuff! Love how different this video is from the typical USD / Gold / BTC / Swaptions videos around here. You do proper on the ground research and form an investment thesis. Cool