Mobius: Another crisis is 'around the corner'

Another financial crisis is inevitable, according to Mark Mobius, executive chairman of Templeton Asset Management's emerging-markets group. “There is definitely going to be another financial crisis around the corner because we haven't solved any of the things that caused the previous crisis,” he said last week at the Foreign Correspondents' Club of Japan in Tokyo in response to a question about price swings. “Are the derivatives regulated? No,” he said. “Are you still getting growth in derivatives? Yes.” The total value of derivatives in the world exceeds total global gross domestic product by a factor of 10, said Mr. Mobius, who oversees more than $50 billion. With that volume of bets in different directions, volatility and equity market crises will occur, he said. The global financial crisis three years ago was caused in part by the proliferation of derivatives that were tied to U.S. home loans and that ceased performing, triggering hundreds of billions of dollars in writedowns and leading to the collapse of Lehman Brothers Holdings Inc. in September 2008. The MSCI AC World Index of developed and emerging-markets stocks tumbled 46% between Lehman's downfall and the market bottom March 9, 2009. “With every crisis comes great opportunity,” Mr. Mobius said. When markets are crashing, “that's when we're going to be able to invest and do a good job.” The freezing of global credit markets caused governments — from Washington to Beijing to London — to pump more than $3 trillion into the financial system to shore up the global economy. The MSCI AC World gauge surged 99% from its March 2009 low through May 27. The largest U.S. banks have grown larger since the financial crisis, and the number of “too big to fail” banks will increase by 40% over the next 15 years, according to data compiled by Bloomberg. Separately, higher capital requirements and greater supervision should be imposed on institutions deemed “too important to fail” to reduce the chances of large-scale failures, staff members at the International Monetary Fund warned in a report May 27. Earlier at the same event, Mr. Mobius said that Africa has an “incredible” investment potential and that he has stakes in Nigerian banks.