Lately I've been working with the idea that these labels are worthless. I believe the financial crisis has rendered them useless or at least almost useless. If you look at the list, what does Ireland being listed as a developed market do for you? What priority is this fact in your decision to either include Ireland in your portfolio or to avoid it? As opposed to the label wouldn't you be more concerned about their debt load, ability to service the debt, the likelihood of more bailouts, the fate of the banks, the real estate situation, the unemployment rate and probably a few other things?
On January 1st Estonia adopted the euro as its currency. It was able to do so because it met all the criteria set out for a country to in fact adopt the currency. Although the wisdom adopting the currency could be questioned it is likely to be a huge benefit for them in terms of trade and the country has one of the smallest debt loads in the world.Candidly, aside from not knowing of a way to invest in Estonia, I have no idea whether it would make for a good investment or not but a cursory glance at, in this case, Ireland versus Estonia very quickly leads us to believe that Estonia is on firmer footing, not that Ireland couldn't be a great trade, and far more worthy of research time.
Looking at other names on there, Qatar is sitting on a mountain of natural gas, Slovakia has very cheap labor, Argentina seems likely to be involved in the world's food solution, Poland may also soon qualify to adopt the euro, Pakistan has a huge and young population and they are large producers of certain crops.
All of these countries have their positive attributes and their risk factors. Ultimately these need to be weighed against each other and a decision made about whether the country is investment worthy, this conversation assumes a willingness to go narrower than global funds.
If anything, time spent assessing developed, emerging or frontier is time wasted. If you draw the conclusion that a particular country stinks as an investment destination is there a scenario where you would buy in? The more important point is that from a diversification standpoint owning countries with different attributes will play are larger role in determining your result than the above labels.
7 comments:
I would readily invest in a broad based frontier or emerging market etf by vanguard or other reliable source if I thought we were in the right point in the economic cycle. Individually there could be some real dogs, but collectively i think it could be an excellent investment.
Right now I am still market neutral. S&P is very over bought according to Hussman and others. Have you seen the shanghai has broken below the 200 dma again with this break worse than the first?
the Shanghai composite has obviously been struggling for years now. it cut in half and then made very little progress in working back to the old high.
No way to know if this 200 dma breach is worse or not. One thing is that in terms of correcting in time the market is doing that but it could take a lot more time.
I have clients in China in a small way by virtue of china exposure in two specialized ETFs (infrastructure and coal) that I think can do better than the broad indexes which are very heavy in financials which I've been saying i want no part of.
communications is an art i am not good at.
i meant the recent break below the 200 dma was worse than the one in 12/2010. my point is we are seeing lower lows and a breach of the 200 dma of late
i don't think that changes my answer or opinion; i prefer relatively small, specialized exposure
Speaking of frontier markets, AFK is selling off hard today. It's probably the fear over what is happening in Tunisia which could spread to the rest of the region. If Jordan, Egypt, and Libya go, watch what happens to the price of oil. Interesting times.
Max, I've seen editorials and the news pontificating the perceived threat that trouble in Tunisia will somehow affect the populations of its neighboring countries, to such an extent that they too will fall into chaos and disorder. Personally I see any falls in their respective markets as a buying opportunity if anything. That a country in the ME has succumbed to disorder is very unusual (apart from a couple where disorder is, unfortunately, a daily occurrence). To highlight this point I draw your attention to just how long the young in Tunisia have been blighted by lack of opportunity for employment and self-expression. Things tend to change very, very slowly in this region.
Anon 8:24, the unrest in Tunisia may be a new paradigm. In large part it was fueled and spread by postings on Twitter and FB. There have already been copycat self- immolations in Egypt and Libya. The economically disenfranchised and politically oppressed now have an immediate worldwide communication outlet but, you may be right. EGPT is up this morning after falling about 7% yesterday.
Post a Comment