Ryan Barnes

Emerging Markets: Betting Against Conventional Wisdom

I gotta' go with HaavBline here...this piece is both chuckle worthy and a head-scratcher - the patented "double enigma"!

You can't simply write about mega-hindsight picks without any mention of what you ­actually did then, or what you held, or what you told clients, etc.

The author here seems to be proposing a policy where investors should be on the lookout for "Black Swans" every calendar year. Why? If there was one to find every year they wouldn't be black swan events in the first place. The two mentioned (tech stocks in 99 and housing/financials in 07-08) were essentially a decade apart. Any investor who was told to bet on the nasties in the meantime would have been bleeding premiums for nothing, meanwhile missing out on a pretty decent global market.

And this quote "Since the market low on 3/9, it's almost like investors have completely forgotten about the financial crisis. Did it ever exist?"

This is definitely worth a chuckle to anyone that, oh I don't know, reads the daily newspaper, or turns on the TV for 30 seconds, reads the internet, or picks up their pink slip or foreclosure notice. Pretty sure all those folks aren't doubting the existence or persistence of the financial crisis.

As for the "investing strategy" proposed - which I have to deduce because there's nothing concrete given - it seems that we should be betting against a basket of emerging market sovereign debt. If I were advising clients to do that I'd be filling out my next job's applications right along with it. But go ahead and short 12 emerging market ETFs, and you'll probably get one that goes bust, maybe even two. But on the other 10 or 11, what do you think will be the result when the countries sport 5% annualized, organic GDP growth? I'd say you'll lose much more than your profit on the former.

Sorry folks, I'm not usually a Negative Ned, but this piece seems like a great way to sell a newsletter to scared, tattered investors, and a really poor way to dispense financial advice.