Highland Capital Management’s James Dondero Thinks That Global Markets Are Sending Signals To Investors
James Dondero has spent a good portion of his life in the investment world. Mr. Dondero was an executive with American Express Europe for 17 years, and he was also a partner in Protective Life before Highland Capital Management became an investment and hedge fund company. Dondero and Mark Okada started Highland Capital more than 20 years ago, and the company has made a major impact on the global investment industry. With more than $21 billion assets under management, Highland Capital is considered a major player in hedge fund investing as well as credit management. Dondero’s job on facebook is to produce returns for his limited partners and that’s not an easy task these days. The world economy is not performing very well. Ten of the largest global stock markets have been on a downhill path for most of the second half of this year.
Dondero thought that the simultaneous crash of these ten markets would start to make investors nervous, but most investors think the downturn is just a normal bump in the investment road. Some economists say it’s not a bump in the investment road, it’s more like a major hole in that road. In the last two months, the global stock market decline has been worse than the drop in value that happened in 2008. The U.S. stock market dropped 777 points in 2008, and investors woke up with a severe case of empty pockets. Since the peak of the market in the first half of 2015, the market is down three times as much as the 2008 crash, but some investors say it’s only a temporary glitch. Dondero thinks otherwise because stock market wealth is being destroyed all over the world.
What Mr.James Dondero is saying makes sense when investors put all the pieces of the global puzzle together. The U.S. stock market is down 2,000 points since its peak in 2015. The China stock market is off 40 percent from its peak, and the Japanese market is off by 3,000 points. When Germany is added to the mix, Dondero says that market has lost 25 percent of its value. The United Kingdom and France are down 16 and 18 percent respectively, and the Brazilian market has lost 12,000 points since its peak. Italian stocks are down 15 percent, and India’s market is off by 4,000 points. The best country, of the ten, is Russia with a 10 percent decline.
Economist say, and Mr. Dondero agrees with some of them that the global economy is experiencing another seven-year cycle of downturns. That stock market cycle started in 1966, and it has continued since then. What Dondero and other investors that have studied these downturn cycles say is, there is always opportunities to take advantage of when financial markets decline. The key is to recognize what is happening and then react accordingly. Mr. Dondero doesn’t expect a one day bust where all investments go south without warning, but he does say investors should look for bargains now, and continue to study the financial signs that can produce great returns.