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QE2 and the new capital levees

|Includes: iShares MSCI BRIC ETF (BKF)

Reading this morning in the Journal about the fees Taiwan is considering imposing on "foreign funds parked on the island for no apparent reason" (surely a difficult thing to determine), on top of other articles I've read about attempts to curb "hot money" flows into emerging markets, it occurred to me that this may be part of the plan for QE2. With everybody and his 3rd grade brother already in agreement that emerging markets are the place to invest because we can expect them to grow more quickly than developed ones, emerging markets are already a stiflingly crowded trade. I too am long various emerging market equity and debt funds, and would be more encouraged to pile in further were it not for the fact that the chorus of supporters is so deafening.

And now, with all these capital gates and other newfangled disincentives being thrown into place by emerging market governments, that's all the more reason not to follow the leaders. And perhaps Bernanke et al. suspected this effect might come about, that investors would be forced to invest closer to home by all the pushing and shoving to get onto your Embraers and your Baidus. Now, if only US corporations would stop cowering in their respective corners and whining about future uncertainty (what else is new) and do some more hiring instead of buybacks, it would be great.


Disclosure: Small positions in all the listed funds/ETFs