The Emerging-Market Bubble

This chart (via Paul) I think is too meek: of course the current emerging-markets boom is debt-financed. And boy does it look bubblicious, what with the Bovespa having doubled in the past 12 months and rapidly approaching its all-time high.

I’m a believer in the long-term future of Brazil, and even count a Brazilian ETF among my few investments. But at this point any investment in emerging markets looks very much like a speculative momentum play: don’t invest anything you can’t afford to lose.

Comments

[Philly Jim]

Looks like that "good" feeling is about to run out. Brazil could cut down all their rainforest, but if there are no customers for exotic wood flooring and furniture, what's the point? I'd stay short-term on that country -- be able to get out quick! My long-term hope is that the Olympic gamers don't find themselves being gutted for their organs, or mistaken for poor "favela" dwellers by police, or worse -- for blue-eyed devils from NYC by the president.

2009 Nov 27 04:42 AM

[Djvu]

yes the bubble is financed by Uncle Sam and helicopter Ben zero interest rates..US biggest export to the world -the dollar carry trade

2009 Nov 27 08:21 AM

[NoGambler]

um, when do you think it's time to get out of BRF and EWZ? What about PRLAX?

2009 Nov 27 11:19 AM

[surfgeezer]

I can only speak for myself and emphatically say NO leverage but still a high percentage. Dollar is set to devalue against currencies. It would have devalued more and is being supported by countries we have a trading deficit with to keep their products cheap. Brazil's new financial tax will only buy so much treasuries and cannot stop the slow fall of the dollar as the fundamentals- better debt control, better export base, higher interest rates, GDP advancing much quicker- will win.

2009 Nov 27 07:34 PM