I'm Calling an Emerging Markets Bottom

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grap0013
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I'm Calling an Emerging Markets Bottom

Post by grap0013 » Fri Jan 15, 2016 9:49 am

I'm calling an Emerging Markets bottom this year. Not sure what month/day per se but sometime in 2016. This reminds me of the shoe shine boy in 1999 who is giving his customers stock tips. Twice in the past week I've heard people who are uninterested in investing talking about how Emerging Markets are going down the tubes and to avoid them. EVERYBODY now knows this. Hence the bottom is in sight. Buy buy buy. Yes, yes, yes I hear you. I mean to say "make sure to buy back to your predetermined target allocation". :)
There are no guarantees, only probabilities.

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Re: I'm Calling an Emerging Markets Bottom

Post by livesoft » Fri Jan 15, 2016 9:59 am

OK, I will ask my spouse to invest her 2016 Roth IRA contribution 100% into emerging markets. Which ETF should she choose: VWO, DGS, or EWX? She intends to invest today.
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Re: I'm Calling an Emerging Markets Bottom

Post by RNJ » Fri Jan 15, 2016 10:01 am

I
livesoft wrote:OK, I will ask my spouse to invest her 2016 Roth IRA contribution 100% into emerging markets. Which ETF should she choose: VWO, DGS, or EWX? She intends to invest today.
IEMG.

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in_reality
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Re: I'm Calling an Emerging Markets Bottom

Post by in_reality » Fri Jan 15, 2016 10:03 am

I wonder if it won't take longer but if China isn't using the capacity that's been built up for its growth, I wonder if emerging economies will be able to take advantage of low prices to develope their infrastructure.

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Re: I'm Calling an Emerging Markets Bottom

Post by livesoft » Fri Jan 15, 2016 10:03 am

@RNJ, IEMG is reserved for tax-loss harvesting in the future in other accounts.
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grap0013
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Re: I'm Calling an Emerging Markets Bottom

Post by grap0013 » Fri Jan 15, 2016 10:12 am

livesoft wrote:OK, I will ask my spouse to invest her 2016 Roth IRA contribution 100% into emerging markets. Which ETF should she choose: VWO, DGS, or EWX? She intends to invest today.
:-) DGS, it's a nice RBD today too!
There are no guarantees, only probabilities.

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Re: I'm Calling an Emerging Markets Bottom

Post by livesoft » Fri Jan 15, 2016 10:16 am

grap0013 wrote:
livesoft wrote:OK, I will ask my spouse to invest her 2016 Roth IRA contribution 100% into emerging markets. Which ETF should she choose: VWO, DGS, or EWX? She intends to invest today.
:-) DGS, it's a nice RBD today too!
OK, transaction completed. Thanks!
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Re: I'm Calling an Emerging Markets Bottom

Post by sk.dolcevita » Fri Jan 15, 2016 10:20 am

These may be the last famous words, but I think there is more downside to come. Among many reasons, the following stand out at the moment:

No emerging market country has blown up yet. It will need one or two to do so to make people puke.

Chinese market is at the verge of breaking below its 52 week low of about 2850, an important support. Emerging market low would become visible once the Chinese low is set.

The low on oil is probably not in. Iran's pre-embargo production was about 3MM bpd, they are just starting ou with 500K bpd and will be desperate to ramp as fast as possible.

We don't know yet what the new normal for the commodity demand is. Chinese data are fudged and it will take some time for the market to figure out the point at which existing (over)capacity would be rationalized.

I was looking at VWO trading volume. I would like to see a big spike on a down day to call a bottom.

And I can go on... I would be getting interested at around $25. Or I will be missing the big rebound.

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Re: I'm Calling an Emerging Markets Bottom

Post by ge1 » Fri Jan 15, 2016 10:22 am

Not sure if it is the bottom (and I don't really care), but valuations are getting very attractive, to the point you may be kicking yourself in a few years looking back at this if you don't buy.

The performance over the last 10 years has been so horrendous it is actually hard to believe. Vanguard ETF VWO is down 11% over a 10 year period (excluding dividends), this is brutal.

I will be a buyer today.

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Re: I'm Calling an Emerging Markets Bottom

Post by an_asker » Fri Jan 15, 2016 10:24 am

livesoft wrote:
grap0013 wrote:
livesoft wrote:OK, I will ask my spouse to invest her 2016 Roth IRA contribution 100% into emerging markets. Which ETF should she choose: VWO, DGS, or EWX? She intends to invest today.
:-) DGS, it's a nice RBD today too!
OK, transaction completed. Thanks!
Is this part of your "Instructional Transactions (with screenshots)" series? ;-)

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Re: I'm Calling an Emerging Markets Bottom

Post by livesoft » Fri Jan 15, 2016 10:28 am

And a market order was used since the spread was 2 cents. Oh, the horror!
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Re: I'm Calling an Emerging Markets Bottom

Post by chisey » Fri Jan 15, 2016 10:40 am

I had never invested in Emerging markets prior to this month, except as portions of broad international funds. After I saw how lousy the last ~10 years have been I started buying VEMAX on January 4. My initial purchase is already down almost 9%, so obviously I was early . . . but I'm buying more today anyway, and all Roth contributions this year will probably be in that fund.

I was underweight international already, so basically I'm rebalancing into it using EM instead of a broader fund. Surely EM will come roaring back sometime . . . :)

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Re: I'm Calling an Emerging Markets Bottom

Post by livesoft » Fri Jan 15, 2016 10:44 am

chisey wrote:Surely EM will come roaring back sometime . . . :)
Now that we have bought more today, it surely will not.
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Re: I'm Calling an Emerging Markets Bottom

Post by chisey » Fri Jan 15, 2016 10:46 am

livesoft wrote:
chisey wrote:Surely EM will come roaring back sometime . . . :)
Now that we have bought more today, it surely will not.
Heh, that's the thought I keep having. Good thing I'm only looking to get up to 5% of my portfolio with it.

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Re: I'm Calling an Emerging Markets Bottom

Post by sai » Fri Jan 15, 2016 11:15 am

Thanks for the post and comments.

P.S. first time I see livesoft getting help :beer

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Re: I'm Calling an Emerging Markets Bottom

Post by Manbaerpig » Fri Jan 15, 2016 11:16 am

Lol at this thread. Emerging is cyclical. I'm sure all the issues I'm China will magically resolve themselves real soon

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Re: I'm Calling an Emerging Markets Bottom

Post by grap0013 » Fri Jan 15, 2016 11:22 am

sai wrote:Thanks for the post and comments.

P.S. first time I see livesoft getting help :beer
I'm not sure he's being serious. :wink: Tough to tell.

I just looked yesterday. SFENX (EM value) is down 40% over the past 5 years. Not even including inflation. We are close/into bloodbath territory with EM value especially.
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Re: I'm Calling an Emerging Markets Bottom

Post by livesoft » Fri Jan 15, 2016 11:23 am

Hey, DGS is already DOWN from where it was purchased today. What's up with that?
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grap0013
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Re: I'm Calling an Emerging Markets Bottom

Post by grap0013 » Fri Jan 15, 2016 11:26 am

livesoft wrote:Hey, DGS is already DOWN from where it was purchased today. What's up with that?
The day is still early. Expect an after lunch rally.
There are no guarantees, only probabilities.

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grap0013
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Re: I'm Calling an Emerging Markets Bottom

Post by grap0013 » Fri Jan 15, 2016 11:31 am

^ Reminds me of a South Park episode about investing in the market. I'm paraphrasing, "Here's your money going into the market....and it's gone!"
There are no guarantees, only probabilities.

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Re: I'm Calling an Emerging Markets Bottom

Post by Hayden » Fri Jan 15, 2016 11:34 am

livesoft wrote:
grap0013 wrote:
livesoft wrote:OK, I will ask my spouse to invest her 2016 Roth IRA contribution 100% into emerging markets. Which ETF should she choose: VWO, DGS, or EWX? She intends to invest today.
:-) DGS, it's a nice RBD today too!
OK, transaction completed. Thanks!
I'm planning on following you today, buying emerging markets. But, why did you buy it in the Roth? I thought one should buy EM in a taxable account?

Thanks for your help

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Re: I'm Calling an Emerging Markets Bottom

Post by livesoft » Fri Jan 15, 2016 11:45 am

Any and all assets classes are good for a Roth account. Of course, it is best to buy assets that will lose money in a taxable account.
Right now, I have no money in my taxable accounts to buy equities. After all, my spouse just made a Roth IRA contribution.

But I will say this: If DGS goes up a few percent from here, then I am selling it.
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Re: I'm Calling an Emerging Markets Bottom

Post by FillorKill » Fri Jan 15, 2016 11:59 am

livesoft wrote:Hey, DGS is already DOWN from where it was purchased today. What's up with that?
Don't look back. Get on the bid for VSS - down 3+%. Just got filled @ 83.72

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Re: I'm Calling an Emerging Markets Bottom

Post by skepticalobserver » Fri Jan 15, 2016 12:04 pm

As commodity exporters the emerging market economies are so, so dependent on China. Do you really think CHINA has hit bottom?

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Re: I'm Calling an Emerging Markets Bottom

Post by garlandwhizzer » Fri Jan 15, 2016 12:16 pm

I don't know when it will happen, whether it will be this year as grap0013 suggests, but I do believe that EM after years of substantial underperformance will have its day in the sun again. Most assets in the market goes through cycles over and over. Currently commodities, PME, Energy, and EM are showing severe weakness relative to the market as a whole based presumably on their dour outlook both presently and going forward. Treasuries as always during difficult market times are doing great. At some point, no one can definitely say when, that cycle will change and the last shall be first yet again because it rises from a very depressed valuation base relative to the currently more popular asset classes. The Callan Periodic Table paints this picture rather clearly over time. Those who hold on to EM and other universally despised asset classes or even rebalance into then at difficult times like these are likely to be rewarded in the long run. This is yet another reason to have and maintain a broadly diversified portfolio in my opinion.

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Re: I'm Calling an Emerging Markets Bottom

Post by DG99999 » Fri Jan 15, 2016 12:19 pm

ge1 wrote:Not sure if it is the bottom (and I don't really care), but valuations are getting very attractive, to the point you may be kicking yourself in a few years looking back at this if you don't buy.

The performance over the last 10 years has been so horrendous it is actually hard to believe. Vanguard ETF VWO is down 11% over a 10 year period (excluding dividends), this is brutal.

I will be a buyer today.
As of late AM today, the MSCI Emerging Market Index was down just over 35% - not necessarily a bad time to buy. Probably could go down further (we've seen something approaching 70% losses in the past), but still better than buying at the peak.

Also, as of today, M* shows that the 10 year return for VWO was about +1.7% annualized - the difference may be dividends.
I am not a financial professional. My posts are only my opinion on the topic. You need to do your own due diligence and consult with a professional when addressing your financial questions.

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William Million
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Re: I'm Calling an Emerging Markets Bottom

Post by William Million » Fri Jan 15, 2016 12:31 pm

Problem is emerging market funds are now mostly China funds. You don't get much diversity.

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Re: I'm Calling an Emerging Markets Bottom

Post by scsiguru » Fri Jan 15, 2016 12:33 pm

And why does CNBC have to "YELL" in their breaking alerts on my phone? They are using ALL CAPS...ridiculous!!

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Re: I'm Calling an Emerging Markets Bottom

Post by Steadfast » Fri Jan 15, 2016 12:38 pm

Yeah, looks like the crowds are certainly heading for the exits, though I am not seeing total chaos yet.

But it's attractive enough for me to start buying at this point and if it moves further down, consistent with topping off my allocation targets a little early.

Good luck ladies and gentlemen.
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Re: I'm Calling an Emerging Markets Bottom

Post by chisey » Fri Jan 15, 2016 12:44 pm

William Million wrote:Problem is emerging market funds are now mostly China funds. You don't get much diversity.
I think this overstates it a little. China will continue to have a big effect on the EM indices, but it's really not that much greater than the effect Japan has on developed indices (~23% right now).

VEMAX Country diversification (% of common stock) as of 11/30/2015
China 28.8%
Taiwan 14.3%
India 12.8%
South Africa 8.9%
Brazil 6.9%
Mexico 5.6%
Russia 4.5%
Malaysia 4.2%
Thailand 2.7%
Indonesia 2.4%
Philippines 1.9%
Turkey 1.7%
Poland 1.5%
Chile 1.3%
UAE 0.9%
Colombia 0.6%
Hungary 0.3%
Egypt 0.3%
Peru 0.2%
Czech Rep 0.2%
Hong Kong 0.0%
Other 0.0%
Morocco —
Spain —

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Re: I'm Calling an Emerging Markets Bottom

Post by grap0013 » Fri Jan 15, 2016 12:54 pm

Steadfast wrote:Yeah, looks like the crowds are certainly heading for the exits, though I am not seeing total chaos yet.

But it's attractive enough for me to start buying at this point and if it moves further down, consistent with topping off my allocation targets a little early.

Good luck ladies and gentlemen.
Right. EM value trailing 1 year PEs are ~8. Even if they drop another 25-30% they'd be in the 5-6 PE range. For a basket of stocks? Not just one country? Yep that's right. That's a ridiculously low price for the earnings.
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Re: I'm Calling an Emerging Markets Bottom

Post by ray.james » Fri Jan 15, 2016 1:06 pm

grap0013 wrote:
Steadfast wrote:Yeah, looks like the crowds are certainly heading for the exits, though I am not seeing total chaos yet.

But it's attractive enough for me to start buying at this point and if it moves further down, consistent with topping off my allocation targets a little early.

Good luck ladies and gentlemen.
Right. EM value trailing 1 year PEs are ~8. Even if they drop another 25-30% they'd be in the 5-6 PE range. For a basket of stocks? Not just one country? Yep that's right. That's a ridiculously low price for the earnings.
Grap, where are you seeing these numbers? On morning star I see FP/E of 11.71.

I agree they are very good value and so is the VSS(small cap international). Early contributing Roth to both.
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Re: I'm Calling an Emerging Markets Bottom

Post by oneleaf » Fri Jan 15, 2016 1:37 pm

Bought more PXH and DGS today. I think these are great valuations for good longterm returns.

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Re: I'm Calling an Emerging Markets Bottom

Post by grap0013 » Fri Jan 15, 2016 2:10 pm

ray.james wrote: Grap, where are you seeing these numbers? On morning star I see FP/E of 11.71.
The only way to get trailing PEs in Morningstar to my knowledge is to set up a free portfolio and look under the "My view" tab and add the trailing 1 year PE as a metric you'd like to include.

I see the following trailing 1 year PEs for my EM holdings:

SFENX 8.68
QEELX 8.72
DGS 9.57
DFCEX 12.62
There are no guarantees, only probabilities.

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Re: I'm Calling an Emerging Markets Bottom

Post by livesoft » Fri Jan 15, 2016 2:25 pm

OK, I'm selling VSS in one account and buying VSS in another account. This improves my portfolio tax efficiency.
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Re: I'm Calling an Emerging Markets Bottom

Post by ray.james » Fri Jan 15, 2016 2:27 pm

grap0013 wrote:
ray.james wrote: Grap, where are you seeing these numbers? On morning star I see FP/E of 11.71.
The only way to get trailing PEs in Morningstar to my knowledge is to set up a free portfolio and look under the "My view" tab and add the trailing 1 year PE as a metric you'd like to include.

I see the following trailing 1 year PEs for my EM holdings:

SFENX 8.68
QEELX 8.72
DGS 9.57
DFCEX 12.62
I rechecked again and realized you mentioned value. I was looking at VWO.
Also, I see the valuations from X-ray tool. You don't need a portfolio in that case. Thanks.
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Re: I'm Calling an Emerging Markets Bottom

Post by nisiprius » Fri Jan 15, 2016 2:29 pm

I don't understand the concept of an "emerging markets bottom," because I still don't see what it is that emerging markets are supposed to have in common other than not being categorized as developed. I don't know why you'd expect Peru to hit a bottom just because Qatar has, because apart from speaking Spanish the two countries have nothing in common. Oh, wait, they don't have that in common, either.
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Re: I'm Calling an Emerging Markets Bottom

Post by jalbert » Fri Jan 15, 2016 2:31 pm

The calling of the bottom has no date or value level. Today's close, and 70% below today's close sometime in 2016, are both consistent with the call.

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Re: I'm Calling an Emerging Markets Bottom

Post by rustymutt » Fri Jan 15, 2016 2:34 pm

Correct me if I'm wrong, but doesn't small cap usually lead market returns in bullish markets. That would make me recommend EEMS as the small cap value EM ETF to invest in.

I suggest using EEMS, and tilting towards small value.
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Re: I'm Calling an Emerging Markets Bottom

Post by saurabh » Fri Jan 15, 2016 3:00 pm

nisiprius wrote:I don't understand the concept of an "emerging markets bottom," because I still don't see what it is that emerging markets are supposed to have in common other than being undeveloped. I don't know why you'd expect Peru to hit a bottom just because Qatar has, because apart from speaking Spanish the two countries have nothing in common. Oh, wait, they don't have that in common, either.
I think it is quite pejorative to use the word "undeveloped". Maybe that makes you feel better about avoiding investing in EMs but that is a strange way to characterize countries within the EM index that have seen amazing economic gains. Countries like China and India have literally shaken up the global economic order and all kinds of companies and people in "developed" markets have felt their impact. I could also say the same about how developed markets have nothing in common but yet they are seen as a group when performing asset allocation. Many of the countries in Europe have nothing in common but yet they are seen as a group. What makes unrelated countries linked is that many foreign investors view them as a single asset class, so their stock markets can be pretty correlated at times of stress, especially on the downside. The fact that China is 35% of the EM index itself guarantees that a bear market there can cause a bear market in the index. Also Asian countries are over 70% of the EM index and that will also create linkage.

Getting back to the original poster, if China gets back to where it was before the speculation started a year and a half ago, it would still fall nearly 30%, so I don't think anyone can call a bottom while that market keeps going down nearly every day.

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Re: I'm Calling an Emerging Markets Bottom

Post by nisiprius » Fri Jan 15, 2016 3:12 pm

saurabh wrote:...I think it is quite pejorative to use the word "undeveloped"...
Well, what would you suggest as an objective or neutral term, then? "Emerging markets" is clearly marketing hype (like "high-yield bonds.")

How about "less developed markets?"
saurabh wrote:Maybe that makes you feel better about avoiding investing in EMs...
I don't avoid emerging markets. I do invest in them. What makes you think I avoid them? I don't try to time the market in them, however.
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Re: I'm Calling an Emerging Markets Bottom

Post by ND Fan 1 » Fri Jan 15, 2016 4:10 pm

With all this talk about Emerging Markets, is holding Vanguard Total International sufficient when it comes to holding EM? I see it has about 17% EM. I'm debating about buying more EM, but for the most part, I just buy Total International for my 30% International portion of my asset allocation. I will probably just keep it simple and only use Total International, and not bother buying a separate EM fund. I don't think I can handle the volatility and feel I'm already at my risk tolerance with an 85/15 stock/bond split.

In this thread when you guys are talking about buying up more EM, are you guys talking about buying more EM only funds?

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Re: I'm Calling an Emerging Markets Bottom

Post by ogd » Fri Jan 15, 2016 4:18 pm

saurabh wrote:Maybe that makes you feel better about avoiding investing in EMs but that is a strange way to characterize countries within the EM index that have seen amazing economic gains. Countries like China and India have literally shaken up the global economic order and all kinds of companies and people in "developed" markets have felt their impact.
You seem to think that superior economic growth leads to superior stock market returns. But this is (somewhat surprisingly) not so, in fact, a bit of the opposite; see e.g. http://www.economist.com/blogs/buttonwo ... nd-markets and links therein.

It's a little less surprising if you rephrase the stock market returns as these companies, from these prices. As opposed to a million newcomers, or US companies shifting production to China and India while grabbing most of the profits.

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Re: I'm Calling an Emerging Markets Bottom

Post by jginseattle » Fri Jan 15, 2016 8:42 pm

I use large rebalancing bands when it comes to Emerging Markets.

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Re: I'm Calling an Emerging Markets Bottom

Post by tainted-meat » Fri Jan 15, 2016 9:04 pm

I'm putting everything I have into them. I think it's gone a bit too low at this point and think it will also rebound in a big way :moneybag

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Re: I'm Calling an Emerging Markets Bottom

Post by snowshoes » Fri Jan 15, 2016 9:05 pm

The USA was a EM not long ago, this guy made a mint there :wink: https://en.wikipedia.org/wiki/Jesse_Lauriston_Livermore

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Re: I'm Calling an Emerging Markets Bottom

Post by livesoft » Fri Jan 15, 2016 9:05 pm

ND Fan 1 wrote:With all this talk about Emerging Markets, is holding Vanguard Total International sufficient when it comes to holding EM?
Yes. Total International is all you need.
In this thread when you guys are talking about buying up more EM, are you guys talking about buying more EM only funds?
Yes. But you should not be reading this thread because it will lead you astray.
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Re: I'm Calling an Emerging Markets Bottom

Post by sk.dolcevita » Fri Jan 15, 2016 9:30 pm

nisiprius wrote:I don't understand the concept of an "emerging markets bottom," because I still don't see what it is that emerging markets are supposed to have in common other than being undeveloped. less developed. I don't know why you'd expect Peru to hit a bottom just because Qatar has, because apart from speaking Spanish the two countries have nothing in common. Oh, wait, they don't have that in common, either.
(1) Perhaps because they are clubbed together into same ETF's and mutual funds. This is a "created" correlation versus "natural" correlation.

(2) Many of the emerging markets are commodity suppliers to China and other are primarily energy exporters. This creates a transmission channel (especially when demand for almost all commodities in China is taking a hit).

(3) They all tend to have weak currencies; hence, indiscriminate dumping when fear takes over.

I think this thread has too many optimists and/or wishful thinkers. I hope people are writing here in jest, the carnage in emerging markets is nowhere close to being done yet.

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Re: I'm Calling an Emerging Markets Bottom

Post by ND Fan 1 » Fri Jan 15, 2016 9:44 pm

livesoft wrote:
ND Fan 1 wrote:With all this talk about Emerging Markets, is holding Vanguard Total International sufficient when it comes to holding EM?
Yes. Total International is all you need.
In this thread when you guys are talking about buying up more EM, are you guys talking about buying more EM only funds?
Yes. But you should not be reading this thread because it will lead you astray.
Thanks, I'm just stick with Total International, not sure I could handle EM volatility

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Re: I'm Calling an Emerging Markets Bottom

Post by nedsaid » Fri Jan 15, 2016 10:04 pm

ogd wrote:
saurabh wrote:Maybe that makes you feel better about avoiding investing in EMs but that is a strange way to characterize countries within the EM index that have seen amazing economic gains. Countries like China and India have literally shaken up the global economic order and all kinds of companies and people in "developed" markets have felt their impact.
You seem to think that superior economic growth leads to superior stock market returns. But this is (somewhat surprisingly) not so, in fact, a bit of the opposite; see e.g. http://www.economist.com/blogs/buttonwo ... nd-markets and links therein.

It's a little less surprising if you rephrase the stock market returns as these companies, from these prices. As opposed to a million newcomers, or US companies shifting production to China and India while grabbing most of the profits.

Yes, ogd. Jeremy Siegel has made similar comments about stock market returns and economic growth. Siegel said that valuations were an even bigger factor than economic growth.
A fool and his money are good for business.

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