Cyberfriend and fellow blogger Bill Luby--see "Blogs I Like" on the left-hand column down the page--really made me think a bit harder with this comment at "Vix and More" on September 11:
"If emerging markets are the buffer whose continued growth is supposed to buttress developed markets in this economic slowdown, then emerging markets need to find their own firm ground and soothe anxious investors before they can be expected to lubricate the wheels of the global economy."
I've been thinking that the dual myths of emerging markets decoupling from the US and continuous emerging market ascendance are both exploding as many emerging markets are down double the US stock market losses in the past year. Look at CAF, EWZ, or even RSX recently.
Several months ago I wrote this post about bonds http://twocents.blogs.com/weblog/2008/07/bonds-galore-and-more.html
At that time I recommended reading Societe Generale's James Montier's and Albert Edwards' crucial interview with Kate Welling. It's a bit of a circuitous route to get to it. Go here first:
http://www.investorsinsight.com/blogs/john_mauldins_outside_the_box/archive/2008/07/14/inflation-is-not-the-problem.aspx Then click through to the Investment Postcards site, and finally, if necessary, to Welling@Weeden.
http://www.investorsinsight.com/blogs/john_mauldins_outside_the_box/archive/2008/07/14/inflation-is-not-the-problem.aspx Then click through to the Investment Postcards site, and finally, if necessary, to Welling@Weeden.
I have just re-read that interview entitled "Inflation Not The Problem". Given what's happened in the two months since then it's an even greater shock to me now than it was then. This very thorough interview covers the gamut of markets and economics and technical analysis, and puts the emerging markets and commodities (synonymous in my view) and much else into true perspective. As my readers here know, this year I gradually but decisively cut back in commodity exposure and was out of all emerging market stocks, mainly China via CAF and general emerging via MSF, last year. Recently I've talked about a "vacation from inflation" but the ripple effects could possibly be greater than a simple short term pullback.
It's even more ominous that if the growth trend emerging markets are down harder so far, the US and European markets probably have a lot farther to fall despite all the central banks' maneuvers.
If you cannot get to the Kate Welling key interview through the maze, email me, and I'll send you a PDF copy. It's a must read regardless what your opinion is. As always it's what the market does that's most important, but soundly reasoned opinion should always be respected.
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