HaavBline

Emerging Markets: Betting Against Conventional Wisdom

What nonsense!

"How many investors shorted technology stocks in the late 1990s ahead of the bust in March 2000?
Alternatively, how many speculators bet against bank stocks in 2007 ahead of the historical crash in financial services companies? And how many investors wagered residential real estate prices would collapse ahead of the peak in the summer of 2006?"

I thought the author was going to claim he did. Scary.

"As we shortly conclude the halfway mark in 2009 I’m asking myself “where can an investor make money betting against conventional wisdom?” …In other words, which sectors are seemingly in a speculative “bubble” and absolutely accepted by the masses?"

How convenient! He feel like it is time to burst a bubble and there it is, a bubble a waiting there to burst by simply for him to go 'contrarian'. Is he talking about a bubble of the century, a bubble of the decade, or just a bubble of mothly variety?

Emerging market debt swooned 40% last fall as the financial crisis spread, while US treasuries rally. The EM debt only recover in sync with the rally from October bottem and has yet to recover to year ago levels.

Is the author calling for a 50% drop from current levels? or just a 10% correction?

India Unraveling: Stay Short Emerging Markets

Thanks for a good report on a local situation. It is true the case in India could be happening in many emerging markets, however, different countries have different strengths and weakness, and will have different policy response and different capabilities to adapt to the sea change in global economoic environment. China, India, Mexico are producing countries that should benefit from sharply lowered commodity prices, Russia, Brazill, Middle Ease may suffer more.

The Indian response about infrastructure spending reported by Rakesh puzzles me. Why are projects shelved when India needs to stimulate domestic spending? Why did India announce a paltry $8B stimulus package? (Why bother to announce it?) This seems to be very different policy responses from most other countries. India's balance sheet may not be golden, but as far as I know it is not in dire strait either. So I wonder what the Indian central & state goverments are doing?

I agree about the Obama factor, market seems to WANT TO warm UP to the expectations of the big stimulus package. It probably will be announced soon after he takes office in late January, then we will see what happen. Market willl probably be dogged by questions about the financing and viability of that package afterwards.

Another reader made a good observation responding to another article:
From the standpoint of purchasing power parity (or considering PP differences in China & US), even a $1T Obama stimulus package will have somewhat less impact to the US than the $580B Chinese stimulus package will have to China.