Bloomberg.com: Opinion
The above link is a column by Chet Currier suggesting caution about emerging market investments after a big move up in the last few months.
I have touched on this off and on in the last couple of years in terms of moderation. Lately some emerging/frontier markets have been white hot.
I have disclosed owning the Vietnam Opportunity (VOF.L) personally and for a couple of clients and out of nowhere it has made a very big move. I mentioned buying a Russian stock personally and for a few clients in October that is up 12% or 13% since then.
At this point it makes sense for me to think about selling down some of this non-core exposure.
Here sentiment is great and it looks like all systems go, kind of like last April. While I have no reason to try to predict a 20% correction this might be a good time to revisit emerging market weightings.
Wikinvest Wire
13 comments:
Roger.
I am holding a couple of Australian ETFs (DNH & EWA), and given the drought there, do you suggest that I sell off these holdings?
There has been some suggestion that their economic growth might slow as a result of this drought.
http://news.bbc.co.uk/1/hi/business/6212608.stm
http://news.yahoo.com/s/ap/20061205/ap_on_re_au_an/australia_drought
Giving advice to or taking advice from a total stranger is a bad idea.
I am familiar with the drought.
I don't mind asking you a couple questions to help you decide for yourself.
Why do own any Australia? Is a bet on Australia or a counter strategy to the US or something else?
What percentage of your total holdings do these two funds make up? Often people find a theme they thing is great and end up with 20% in it which is a bad idea from where I sit.
Roger, you sold emerging markets in the spring, only to watch them now reach new highs.
After making the wrong call back then, are you now suggesting people listen to you now?
Roger.
You asked me "Why do own any Australia? Is a bet on Australia or a counter strategy to the US or something else?"
Actually it's for both reasons of the bet based on their generous dividends and for the diversification. And I would say that I have less than 5% of my holdings in those two funds.
Thanks.
to the 5:38 post, read the posts from April 24-25 and then popoff. I cut back a little, described in those posts as a tweaking.
Further I am not suggesting anyone do anything.
Why does it being a non-core holding make a difference? Within your method of investing is it not a good idea at some point to re-balance back to what ever your original holding value was at some point?
On a different note, something I had not considered before, with these ETFs do you not avoid the market cap balancing problem versus price balancing problem that some of the index mutual funds would have (say an S&P500 fund).
Russell120
it being cor or non-core does not have to matter you are correct. In April I reduced the core holdings (ADRE & China) because they did get too big. This time aroundthe broader market has done better than earlier in the year so the size of the emerging market core positions is not so big that I think I need to shave it just now.
John Templeton has always maintained that there are wonderful investment opportunities around the world every day. Research and transparency in many markets has never been better. If Sir John could make mega-millions using a prop plane,newspapers, a land line telephone,pencil pad, and an assistant or two, are we that lazy not to take advantage of the marvelous research available at our fingertips, or naive not to recognize that instant news about the world will certainly benefit some areas of investment and be detrimental to others?
I like the 007 quote: "The world is not enough"...so long as you know your limitations.
As you say certain Emerging Markets are "White hot" at the monent. I trade FX and interest rates primarily Latin America but watch the entire EM world and try to go where it is "hot". I too have cut back on some of my positions in Brazil and Mexico as of last night. We have come a long way (as has dollar weakness) and although the big picture remains in tact a pullback seems very possible. Also Roger because of you Iceland is squarely on my radar. Although I have not jumped into that pond yet I believe there is going to be a time in the near future to look for the currency to begin to strengthen. Great job with this site I enjoy reading it everyday.
If you think Australia going to go down, then sell.
Emerson said: "A foolish consistency is the hobgoblin of little minds," and this equally true in investing as it is elsewhere in life.
Roger has been bearish since this blog started. Roger couldn't hit the broad side of the barn he lives in. What a tool!
Australia looks a lot like the US might in a few quarters. It has worked its way through a housing slump (though prices have recovered, construction hasn't), monetary policy is tight by any description (6.25%), and growth is reflecting both the state of monetary conditions and the weather the drought knocked off 0.3% from Q3 growth, which itself was just 0.3%.) It will likely underperform sharply in the event that the US landing is hard. I wrote up the similarities between the US and Australia on my own blog a few days ago. I am short Aussie equity futures, by way of disclosure.
Iceland is the country most likely to experience an Asian-crisis meltdown come the liquidity-withdrawal revolution. It is a crowded trade with limited market liquidity. The payoff is likely to resemble an option selling strategy...so just go in with eyes wide open!
Emerging markets
Reits
Utilities
Value stocks
Gold and metal companies
ALL fall in the basket of "had the run" now they are lay-up investments.......in ALL the asset allocation models now.
What looks good? To ME, the things that have looked the worse.
tg
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