That is a chart of the US dollar versus the Romanian leu.Romania is a deficit country that relies on foreign investment, really it is at the mercy of foreign investment. In fact foreign investment is vital throughout the region. The only country nearby that might be in generally rougher shape is Latvia, but the lat, as it is known, has only weakened by about 1% compared to almost 10% for ron.
This article from MarketWatch gives a good recap of what is going on including some detail about a recent report from S&P that says Romania, Latvia, Iceland, Bulgaria, and Turkey are most vulnerable to adverse market conditions. The overnight rate in Romania is 7% and has been heading lower since February.
This may seem like an obscure market, and maybe it is, but (something I have touched on in the past) it is worth being somewhat in touch with substantial currency dislocations going on out there. It could be argued that the risk aversion correction of Q2 2006 started in Iceland, another relatively obscure country.
I am not saying you have to be an expert in these things but simply knowing a thing or two about Romania and having just read the headline of the MarketWatch article puts you in touch that something is going on and knowing a little bit of market history tells you that it could become market moving.
If you own any foreign countries you probably have one that like Romania is a higher yielding deficit country. If Romania dominoes to take down other countries, you might reasonably infer that the country you own has no fundamental link to Romania (assuming of course that it does not) and so if it does go down in sympathy selling it is probably not a good idea.
Giving this no thought might lead to a bad sale if this story does impact other markets.
13 comments:
Richard,
Better check the map. Latvia is by no means nearby. In fact, Latvian culture is a world apart from Romanian. This speaks volumes for investment. John
and Richard is a world apart from Roger which is my name.
Eastern Europe and similar issues confronting the economies? That doesn't seem that far apart in terms of investment merit.
Roger, not Richard. No intent at insult.
I second this general theme. Seems like there is an untapped market for a web site that focused mainly on charts of assorted financial inputs and outputs that had the largest moves over various time periods, and correlations between them. I mean the category to include currencies, global securities markets, commodities, credit spreads, VIX, etc. - anything that could have a big effect on the profit/loss of some business somewhere.
I am going to a Croatian village (yes, village, about one hundred still live in it in the province of Zumberak near Karlocav) reunion in Canada of approximately two hundred and seventy-five Croatian relations from five countries in two weeks (when the slivovice is matured - about 130 proof).I have the honor of giving the initial chop to the first lamb and pig on the open spits and pronouncing the opening toast this year.I'll make sure to mention that they should invest in Romania and the Baltic States adjacent to a resurgent Russian empire.That should have a few battle axes and crossbows aimed in my direction.
"According to the group's quarterly delinquency survey, a seasonally adjusted 0.65% of loans on one- to four-unit residential properties entered the foreclosure process during the period, the highest level in the survey's 55-year history. In the first quarter, when the previous record was set, 0.58% of loans entered the process; a year ago, 0.43% entered the process. . . .
According to the survey, 1.40% of all outstanding loans were somewhere in the foreclosure process during the second quarter, up from 1.28% in the first quarter and 0.99% a year ago."
Yes this is the worst credit problem in many many decades and getting worse. I expect to see all types of problems before this is all over including currency problems among others.
http://tinyurl.com/2jpz68
Of course there are disruptions in the market place look at commercial paper vs discount rate chart at the fed site
off topic but:
a while back someone asked about
a good etf information site...I
use http://www.etfscreen.com/
also, someone asked about an agriculture etf other than
DBA (I think that was it)
I just heard of a new one
MOO.
take care
Maybe two years ago the Economist had a feature article on the free wheeling, free spending, loose money of Iceland. Lots of leveraged start ups. Wild and crazy schemes. The Economist expected many of these to unwind with a vengeance.
http://tinyurl.com/26mx88
Expect to see lots of problems in emerging markets
Roger.
What do you think of RAFI ETF's using RAFI fundamental indexation?
http://tinyurl.com/2vfde3
http://tinyurl.com/36fcfr
in the times i have looked at the RAFI funds it seemed like the broad-based products really beat the market but that the sector funds lagged the Intelidex (another PowerShares brand) sector funds.
not sure if that has changed or not.
sorry, one other thing, I don't really use broad-based products and for sector, while i don't usually use ETFs in the instances i do i use funds from other providers that offer other attributes not in the Powershares products.
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