Thomas J. Gordon

Calculating Country Risk Observed by Betas

this is an interesting article and the author clearly has training in formal financial theory. I question her "country correlations" though. I find all world markets for the last year or more to be highly correlated (I would guess .9 or greater). If I believed this chart, I would invest in czech republic and I wouldn't get creamed when the u.s. markets go down. But for the last year all I see is everything moving together and no where to hide. I'm not offering any computed data to prove this, but this is what I observe.

Emerging Market Investing: Really an Ex-Communist Play?

johnthebear - I think you make a valid point. When you read seekingalpha you assume that the author is recommending most of the investments covered. I wasn't saying that all the symbols in the article are good investments at the current time. I was examining the causality of why they were good investments in the past, and I think that is useful to think about for investments going forward. I had never read that Mao Tse Tung stunted China's growth in a major business periodical and I wanted to say that. I hinted at which investments I felt were currently good in my disclosure and later comments I made, but you're probably right, I should be very specific.

Tom B - This was great: "Nowadays-- are we all so anesthetized by "American Idol" that we we can't see the Federal Marshalls coming up the stairs to evict us from our foreclosed houses?" I love things like that. Do you write articles? Write one called "The U.S. of A - Overweight and Over-Indebted"

Just for the record it is possible to lose 10 billion and not be criminal. You are the ceo of 'c'. Your cfo tells you that you made your numbers because of subprime. You are nervous about subprime but everyone is doing it and "residential real estate has never declined at the national level". You decide to keep doing subprime - bingo you just made huge losses for 'c'. Can more than 1/2 of us gaurantee we wouldn't make the same decision?

carey_jim - Intersting comments. So interesting I can't figure out what side you're on. I read some of your other posts and I suspect that you are very familiar with the dismal science but like to be the devil's advocate.

Concerning Nazi Germany. One thing I read said that the Nazi's took very good care of the average German citizen. They did this by bring the spoils back from conquered lands, hardly win/win economic activity at the global level.

Emerging Market Investing: Really an Ex-Communist Play?

Interesting Comments:

Mdmrjsds: You are obviously well versed in the details of comparative country economics. My first preference would be that all countries respect the Rule of Law. I certainly am not arguing that China is a pluralistic, democratic, capitalist country. But since the Wall fell it is clear that some countries are not the U.S./U.K. and not Cuba, they are somewhere in between.

User99752: Your desire for a humane and fair outcome for all individuals is admirable. As for Chuck Prince I assure you, to get where he was, he worked incredible hours, probably neglected his family and/or those close to him to advance his career, and had stress in his life that you can only dream of. I’m not saying it was a fair outcome, I’m saying you have to work really hard and have luck to get where he was.

You seem to reject Capitalism. The alternatives of the 20th century were Communism and Socialism. Communism in Russia and China resulted in millions of people killed by the government, just to get started. This did not surprise those of us who understand that giving the government total power over the economy (the government has complete control over where individuals work), the police, health care, the school’s , and the military will lead to a bad outcome. Karl Marx should have interviewed the U.S. Founding Fathers, who would have been quick to tell him that concentrating all power in one place is a recipe for tyranny.

We are not arguing that Capitalism is a perfect system, but if there is something better than Capitalism, you need to explain it to us.

Cicero: You seem to admire free markets and free minds, as do I. You bring up a point that I have seen a lot lately in financial blogs, that the fed pushed bubbles from internet stocks, to housing, to commodities. I’m not sure I agree and I’m not sure it’s a free market argument. Speculators go where they think they can make money. I guess the fed can provide excess liquidity but I don’t really see the mechanism where the fed could direct where speculators are putting their money. Greenspan spends a fair amount of time talking about this in his book.

Emerging Market Investing: Really an Ex-Communist Play?

This is the author. I suppose you might short some of the country funds mentioned if they moved towards protectionism. I was thinking more like if you were in at the right time, when would you sell.

I actually did get out of China and Russia about a year ago. China because I was worried about momentum investors and it just seemed like maybe lack of the rule of law (manifested in quality problems) was going to slow them down. Russia I was worried about the Putin transition. After I got out I read that Putin does have a free market streak so if I had known that, I might have stayed in.

A few clarifications. The return calculations were correct when the article was written about a week and a half ago. The more mathematically inclined amoung you might notice that some of the return calculations are slightly off now. I had trouble getting the article to seekingalpha (it took a week and a half), the returns were accurate when the article was written.

seekingalpha doesn't allow articles about mutual funds. The "other" investments mentioned are mutual funds that were available in the relevant time frames. letrx for russia is an example.

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