Emerging Markets ETFs Soar Despite Gloom

On Thursday, emerging market ETFs soared with Brazil (EWZ) up 12.34%, Russia (RSX) up 19,6%, India (INP) up 7,97% and China (FXI) up 14.87% This reminds me of Warren Buffett's remark a few weeks ago, "if you wait for the robins, the spring will be over." These short-term gyrations are disconcerting but remember that stocks are a claim on a very long-term stream of cash flows.

A record decline in the price of crude oil helped to push the U.S. trade deficit down to the lowest level in nearly a year even though the deficit with China shot up to an all-time high. The Commerce Department reported Thursday that the trade deficit fell by 4.4% to $56.5 billion in September, the smallest imbalance since October 2007.

Why? A 15.7% fall in petroleum imports as the average price for imported crude oil dropped by a record $12.41 per barrel and the volume of shipments fell to the lowest level in more than five years. This helped lead to a reduction in overall imports by 5.6% to $211.9 billion.

Demand for imported goods fell by a record amount, reflecting the sharp slowdown in the U.S. economy but imports from China shot up in September, led by huge gains in shipments of televisions, toys and games as retailers stocked up for the holidays. This plus plummeting U.S. exports to China resulted in a record trade gap between the two nations of $27.8 billion -- almost half our overall trade gap. China is the new Japan problem! 

Jobless claims also shot up last week and Treasury reported that the budget deficit soared to $237 billion putting us on track for a $1 trillion deficit for the year.

One of the hardest-hit sectors in 2008 has been the shipping industry. The most popular measure of this is the Baltic Dry Index. This index, which measures the cost of shipping raw materials around the world, hit 11793 in May, and has lost 93%. Shares of shipping companies have been beaten down as a result, with most major shippers down by more than 60% on the year.

Japan will lend the International Monetary Fund up to $100bn in temporary funds to help emerging economies weather the global financial crisis, Taro Aso, prime minister, will tell the G20 summit in Washington this weekend.

Comments

[j'adoube:]

Carl-

What value does this post add?

j'adoube

2008 Nov 14 12:27 PM

[geigelhill:]

Article was one big non sequitur. No explanation why emerging market EFt's are soaring.

2008 Nov 15 07:55 AM

[retrace:]

Whether the emerging market ETF's hold up at this point in time is another question, to much dirty laundry left to be done.

Buffet (Berkshire) seems to be moving towards worldwide companys.

Based on the fact that Buffet invests with a long term philosophy, it looks like he has decided that a U.S. recovery is going to be a very long time coming with the reducing of positions in U.S. companys, banks, home improvements and autos.

But Buffet can afford to be early and wait...............


www.bloomberg.com/apps...

2008 Nov 15 10:30 AM

[retrace:]

Brazil mulls its own bailout as it heads to G20

www.marketwatch.com/ne...

2008 Nov 15 11:20 AM

[jepittman:]

One clear point the author makes is that it doesn't take much to move these markets dramatically. His issue IMO is that the news flow may be becoming less negative and these ETFs can have very big moves when market sentiment shifts.

2008 Nov 16 10:57 AM