Every morning I read the Jyske Bank page for forex and emerging market commentary. Their opinions are not necessarily better than anyone else's but it is a great place to get factual information about various elections, central bank meeting dates and market expectations.
Today as I was reading about a surprise rate hike in South Africa up to 7.5% I had a thought about the next 15 years for equity investing. This is really a 60,000 foot question (to quote Stephen Roach).
What is the better bet for the next 15 years, that the US can maintain its place as top economic banana or that emerging market countries make real progress on every front and close the gap between themselves and the US?
This kind of seems like a no brainer. This is not a call to go 50% in emerging markets nor does it have anything to do with what might happen in the next two months with stock prices. It seems logical that emerging markets, as an asset class, can do some catching up economically and socially.
If this holds any water I would not expect every single emerging country to participate. Also this would not have to be ruinous to the US. I am not one for apocalyptic scenarios but that the dollar could be 20% weaker and mortgages might cost 9% at some point in the future does not seem radical or calamitous.
Something to think about.
Wikinvest Wire
4 comments:
There is very interesting commentary on emerging markets and all other markets on Nouriel Roubini's blog.
http://www.rgemonitor.com/blog/roubini
If emerging markets are going to "emerge", why haven't they done so already?
Fred
Fred,
Great question. My intial reaction would be communication. A lot of EMs have no fixed line infrastructure and they never will. Wireless is on the road to ubiquity and opens the door to many other things.
I remember a stat from 15 years ago (give or take) that only 25% of the world's population had ever heard a dial tone.
I think could be the most important catalyst for starting modernization in many of the countries.
As you know Roger, I'm a fan of somewhat overwieghting some emerging market positions - they represent about 20% of the world GDP, but only 7% stock market capitalization.
I suggest that for a LONG TERM investor (i.e. 10-20 year horizon) that maybe 20-25% wieghting could be suitable FOR SOME INDIVIDUALS.
Although everyone calls themselves long-term investor, when the volatility hits the fan, many "long-term" investors run screaming for the exits.
As to Fred, I would add that many of these countries ARE emerging. GDP per capita and financial and structural reforms have taken huge strides over the past 10-15 years.
Remember that even the US took many decades to "emerge" - witness the rural electrification program that took the better part of two decades to accomplish, and the interstate highway program that also took better than a decade.
As Roger intimates, these countries standard of living might take a long time to fully close the gap, but it's in the gap closign that the most profitable opporunites generally exist.
Nice posting again, Roger.
Jay Walker
The Confused Capitalist
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