John Rutledge picked iShares Pacific ex-Japan (EPP) on Bulls and Bears. Apparently he likes Australia, Singapore and Hong Kong. I'm on board with the idea, as you know, but more so with Australia.
Dr. Rutledge mentioned being able to capture these three markets with the product. EPP does correlate to Australia. If you look at the chart here you can decide for yourself whether you think it correlates to Singapore or Hong Kong. Hong Kong used to have a higher correlation than it does now.
I have nothing negative to say about EPP but I'm not sure Singapore is being captured that much as only 10% of EPP is in Singapore.
Fellow blogger Greg Newton from Naked Shorts had an excellent piece published in Barron's about the new micro-cap ETFs. You can read it here if you have a subscription.
2 comments:
Roger:
Let's say that 2006 IS going to be a very bad year for stocks. First, are we talking all stocks in all markets? If not, then what stocks or sectors should investors think about moving to right now? Also, I'm not clear on the rationale behind your pessimistic outlook for 2006. On another note, and speaking of fires, I went to a chili cookoff yesterday -- need I say more?
I read the Barron's article on the MicroCap ETFs. About a year ago, I reduced the small cap allocation in my mom's 401k, as per "the book". What does "the book" say? It says to rotate into large cap growth stocks in a rising interest rate environment. Needless to say, I missed out on some good returns in that sector over the past year. Like everybody else, I had no idea that long rates would actually go down in that time! But finally, I think the time for small caps is over.
I still have no idea what's really going on in the macro picture. There seems to be an ocean of liquidity inflating all asset prices at once. Then there's the related problems of global imbalances and almost universally low implied risks to capital. This is crazy. I've personally been in 100% cash for a few months. The savings rates are rising ... I wonder if others will be tempted to do the same. I may have to wait a long time for the kind of bargains I'm looking for.
Long term, I've heard that Canada and Australia are good places to invest, because they have the raw inputs that will power/supply the world economy in the future. Also, everybody's talking about Japan. I don't think Japan is a proven prospect yet. Two other potential prospects are Germany, and even more iffy, Russia. Oh yeah, I think Brazil is a leading prospect for emerging market investing. Brazil is on its way to being the "bread basket" of the world. Of course, China and India ... I actually like India better. And the rest of the Asian emerging economies. I think China is bound to have some kind of financial crisis, sooner or later. That would be a good time to get in.
P.S. If energy prices are related to that ocean of liquidity I mentioned earlier, I think prices will eventually moderate. Don't even get me started about the hedge funds ... or the GSEs. And pension liabilities. Maybe you can sum up everything with two words: Moral Hazard. It doesn't look good ... but what do I know? Maybe everything will be alright.
P.S.S. Take everything I say with a grain of salt. I'm not an expert, and above all, I don't have the experience of someone like Roger.
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