The Emerging Markets "lost decade" is over

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AlohaJoe
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The Emerging Markets "lost decade" is over

Post by AlohaJoe » Wed Sep 06, 2017 1:53 am

The Emerging Markets Total Return Index posted an new all time closing high today, marking the official end of the "lost decade" starting with the 2008-2009 crash. (I guess "lost decade" sounds better than "lost eight years".)

Image

Over the next few months we should start seeing more posts about people overweighting EM again ;)

From the blog: https://theatlasinvestor.com/emerging-m ... e-is-over/

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Lauretta
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Re: The Emerging Markets "lost decade" is over

Post by Lauretta » Wed Sep 06, 2017 2:01 am

I came across this interesting article on them yesterday
http://www.iijournals.com/doi/abs/10.39 ... 7.26.1.117
you need to register to download it, but basically it shows, based on past data, that there is an inverse relationship between present P/BV and future returns (as would be expected). However the curve for MSCI EM is much more scattered than that for MSCI World. Thus the 4 yrs subsequent returns starting from the present P/BV have varied between an annual loss of 8.8% and an annual gain of 36.9%. So I would overweigh it but not excessively... ;-)
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donfairplay
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Re: The Emerging Markets "lost decade" is over

Post by donfairplay » Wed Sep 06, 2017 3:42 am

Hot diggity! I made 0%

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Re: The Emerging Markets "lost decade" is over

Post by oldcomputerguy » Wed Sep 06, 2017 5:19 am

AlohaJoe wrote:
Wed Sep 06, 2017 1:53 am
Over the next few months we should start seeing more posts about people overweighting EM again ;)
For what it's worth, I already hold some EM as part of Total International, so I guess I'll just keep doing what I've been doing. I'm not smart enough to try to second-guess the market; I learned that a couple years ago.
Anybody know why there's a 20-pound frozen turkey up in the light grid?

Valuethinker
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Re: The Emerging Markets "lost decade" is over

Post by Valuethinker » Wed Sep 06, 2017 6:03 am

AlohaJoe wrote:
Wed Sep 06, 2017 1:53 am
The Emerging Markets Total Return Index posted an new all time closing high today, marking the official end of the "lost decade" starting with the 2008-2009 crash. (I guess "lost decade" sounds better than "lost eight years".)

Given how much they have underformed the US market in particular this is perhaps moot?

I am struck by the degree of differentiation. Emerging Markets was a useful catch-all phrase in the 1990s, then in the 2000s we had the BRICs, but it seems to me the markets are increasingly individual in terms of what drives them. Russia is not Brasil is not China is not South Korea (which is not really Emerging) which is not Turkey etc.

China is a unifying theme by market cap-- over 30% of the total index I believe. Passive funds are so heavily weighted towards China-HK-Taiwan that I find it hard to invest simply on the basis of a love of "Emerging Markets".

Political and other events of the last 10 years have convinced me that the long run decline of the West against the world as a whole is well in train. Which is partly just a reversion back to form-- India & China were c. 30-40% of world GDP in 1700. The long period of western dominance is almost at a close. HOWEVER that doesn't mean that the EM don't have serious problems, and that this will be quick.

I really encourage you to read Dieter Helm's "Burnout: End game for fossil fuels" which despite the title is a much more wide-ranging book than that. His main hypotheses are that:

- fossil fueled energy will be abundant in supply, and cheap, for the forseeable future due to fracking
- due to 3D printing, the ability to profit from the offshoring of the western world's manufacturing base is over
- carbon emissions will be restricted in the future in some way (yes, that is an oppositional force to 1)
- solar energy will become increasingly cheap and ubiquitous (alongside developments in energy storage), and the electricity utility industry will move to a broadband model-- selling access to the grid, reliability and capacity (like your broadband bandwidth), rather than a units-of-use consumption model

He then spends the 2nd and 3rd parts of the book going through the impacts on countries, and then companies -- both fossil fuel producers and electric utilities.

The United States is a clear winner on these trends on his analysis-- having cheap oil and natural gas and large domestic demand (thus incentivizing local production of manufactured goods). Saudi Arabia and Russia clear losers.

He's fairly bearish on the long term prospects for conventional energy producers and electric utilities- -questions their ability to adapt fast enough.

The Chinese route to success, of becoming the cheap offshoring point for world manufacturing, is therefore, in his analysis, a route that is closing for developing countries in the future.

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Lauretta
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Re: The Emerging Markets "lost decade" is over

Post by Lauretta » Wed Sep 06, 2017 6:28 am

Valuethinker wrote:
Wed Sep 06, 2017 6:03 am

I am struck by the degree of differentiation. Emerging Markets was a useful catch-all phrase in the 1990s, then in the 2000s we had the BRICs, but it seems to me the markets are increasingly individual in terms of what drives them. Russia is not Brasil is not China is not South Korea (which is not really Emerging) which is not Turkey etc.
One of the very few books on investing that I have read said that there is a 'contagion' effect (I think that was the word) in EM so that they are all highly correlated, it's a recent book from 2014 called Dual momentum, but I don't know whether this is still true in practice?
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CodeMaster
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Re: The Emerging Markets "lost decade" is over

Post by CodeMaster » Wed Sep 06, 2017 6:35 am

Personally I would move away from any "emerging market" funds, not only has it gotten nowhere so long, but I think it will continue to go nowhere because emerging markets are corrupt so you dont ever get accurate anything and all their stocks are corrupt due to false numbers, data, bribary etc...

I do business in Asia and its all corrupt, briberys, false data, fake things... but they have their own of doing business and you can still grow as a business while all that is going on, but for stocks, I wouldnt ever bet anything on it since all data / numbers etc are going to be faked or corrupt in some way thus to me , you cant ever guage how anything is really ever doing, its a total loss emerging market IMO

:sharebeer

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Lauretta
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Re: The Emerging Markets "lost decade" is over

Post by Lauretta » Wed Sep 06, 2017 7:22 am

CodeMaster wrote:
Wed Sep 06, 2017 6:35 am
but they have their own of doing business and you can still grow as a business while all that is going on
:sharebeer
Yes I heard stories like that of fund manager Anthony Bolton who did very poorly in EM because they were lying to him apparently. I am not sure how much this is due to cultural differences though. I am sure people lie a lot and do a lot of dodgy things in developed countries, but because it's their own country this looks more familiar to them and they are less alarmed.
Maybe an Asian who read about Madoff would think westerners are all liers and thiefs?
I am Italian, I have lived all my professional life outside my country, and I know that abroad Italians have the reputation of being dishonest.But I find myself naturally trusting Italians and I think that it's mainly due to the fact that I am familiar with them.
At the moment of writing this I am staying in a foreign, highly developed country which does not have such a bad reputation for lying and dishonesty, but to me this is absurd, both because of my personal experience and because e.g. I saw on local TV two programs in the last week on 2 murderers who gave interviews after their crimes and being extremely crafty in pleading their innocence. They were excellent actors, trying to attract the pity of the viewers, and they looked so convincing! But this country does not have a reputation for dishonesty at all!
All this to say that for me it's more a question of familiarity with a culture that makes us feel comfortable with it, rather than some societies being much more dishonest than others.
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Re: The Emerging Markets "lost decade" is over

Post by Valuethinker » Wed Sep 06, 2017 7:29 am

Lauretta wrote:
Wed Sep 06, 2017 6:28 am
Valuethinker wrote:
Wed Sep 06, 2017 6:03 am

I am struck by the degree of differentiation. Emerging Markets was a useful catch-all phrase in the 1990s, then in the 2000s we had the BRICs, but it seems to me the markets are increasingly individual in terms of what drives them. Russia is not Brasil is not China is not South Korea (which is not really Emerging) which is not Turkey etc.
One of the very few books on investing that I have read said that there is a 'contagion' effect (I think that was the word) in EM so that they are all highly correlated, it's a recent book from 2014 called Dual momentum, but I don't know whether this is still true in practice?
Coined in 1997-98 when a crash in Thailand then spread to Indonesia, South Korea, Brazil, Russia ....

It is definitely real but the market seems increasingly more sophisticated about that, does not treat these countries as all the same vis a vis political and macroeconomic risk.

The danger of contagion now is more about interlinked banking systems (eg Iceland and UK as was) and about the impact of China on most exporting economies. The Canadian and Australian housing markets for example are probably quite linked to the Chinese one.

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Re: The Emerging Markets "lost decade" is over

Post by rkhusky » Wed Sep 06, 2017 7:32 am

AlohaJoe wrote:
Wed Sep 06, 2017 1:53 am
The Emerging Markets Total Return Index posted an new all time closing high today, marking the official end of the "lost decade" starting with the 2008-2009 crash. (I guess "lost decade" sounds better than "lost eight years".)
It is? I'll have to check my data, because I thought EM was still down 10% from its high in 2007. And VWO (Vanguard's Emerging Market fund) was down 0.76% yesterday.

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Re: The Emerging Markets "lost decade" is over

Post by asif408 » Wed Sep 06, 2017 8:08 am

AlohaJoe wrote:
Wed Sep 06, 2017 1:53 am
Over the next few months we should start seeing more posts about people overweighting EM again ;)
I'm still seeing a lot of "Do I need international stocks" and "USA!, USA!" type posts, so I think we're still a few years away from that being outweighed by the "How about I overweight EM" posts. When that happens I will start to reduce my EM holdings. And when the posts start for "How about 100% EM", I will sell all my EM :D

CodeMaster
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Re: The Emerging Markets "lost decade" is over

Post by CodeMaster » Wed Sep 06, 2017 9:29 am

asif408 wrote:
Wed Sep 06, 2017 8:08 am
AlohaJoe wrote:
Wed Sep 06, 2017 1:53 am
Over the next few months we should start seeing more posts about people overweighting EM again ;)
I'm still seeing a lot of "Do I need international stocks" and "USA!, USA!" type posts, so I think we're still a few years away from that being outweighed by the "How about I overweight EM" posts. When that happens I will start to reduce my EM holdings. And when the posts start for "How about 100% EM", I will sell all my EM :D
You need international stocks, just not EM stocks

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Re: The Emerging Markets "lost decade" is over

Post by sambb » Wed Sep 06, 2017 9:41 am

CodeMaster wrote:
Wed Sep 06, 2017 6:35 am
Personally I would move away from any "emerging market" funds, not only has it gotten nowhere so long, but I think it will continue to go nowhere because emerging markets are corrupt so you dont ever get accurate anything and all their stocks are corrupt due to false numbers, data, bribary etc...

I do business in Asia and its all corrupt, briberys, false data, fake things... but they have their own of doing business and you can still grow as a business while all that is going on, but for stocks, I wouldnt ever bet anything on it since all data / numbers etc are going to be faked or corrupt in some way thus to me , you cant ever guage how anything is really ever doing, its a total loss emerging market IMO

:sharebeer
does corruption ever happen in the USA or other developed markets, or are they immune. I wonder.

CodeMaster
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Re: The Emerging Markets "lost decade" is over

Post by CodeMaster » Wed Sep 06, 2017 9:48 am

sambb wrote:
Wed Sep 06, 2017 9:41 am
CodeMaster wrote:
Wed Sep 06, 2017 6:35 am
Personally I would move away from any "emerging market" funds, not only has it gotten nowhere so long, but I think it will continue to go nowhere because emerging markets are corrupt so you dont ever get accurate anything and all their stocks are corrupt due to false numbers, data, bribary etc...

I do business in Asia and its all corrupt, briberys, false data, fake things... but they have their own of doing business and you can still grow as a business while all that is going on, but for stocks, I wouldnt ever bet anything on it since all data / numbers etc are going to be faked or corrupt in some way thus to me , you cant ever guage how anything is really ever doing, its a total loss emerging market IMO

:sharebeer
does corruption ever happen in the USA or other developed markets, or are they immune. I wonder.
yes but not as much as the EM... here if you do something wrong, you get in seirus trouble... FDA will come and shut your whole plant down. In Asia, its not so, you can bribe them off, you can buy licenses... corruption is COMMON and done by everyone.

In u.s. if your a man of power, like a congressman or something, you can get way with lot more and only the rich with power tend to do it..

your not gonna get stock data showing losses and gains by faking you way ... audits will happen adn if your caught your scrwed

in Vietnam, audits mean nothing...

Which is why you cant believe any of the stock reports from EM... there all messed up , how are you suppose to bet on it if you dont really know whats going on wiht the company

CodeMaster
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Re: The Emerging Markets "lost decade" is over

Post by CodeMaster » Wed Sep 06, 2017 9:50 am

China used to be a mess but now they are totally anti corruption as much as the U.S., you go to jail for corruption. China is a good and must have investmnet, I dont consider China an emerging market at all... but many of the smaller countries, which I work with very closely with inclduing the government and I am telling you how it works and what I see... you cant and dont want to invest in the stock of EM countries

snowman
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Re: The Emerging Markets "lost decade" is over

Post by snowman » Wed Sep 06, 2017 10:13 am

When I started investing in the mid-90s, I used to have similar thoughts, based on my own experience: most countries outside of US are not just corrupt, but extremely corrupt. Yes, the US is somewhat corrupt too, but in a very different way. I too thought there is no way I would invest in any of those countries.

I changed my mind around 2000-2002, during dot.com crash where I got burned by US tech stocks. I worked in hi-tech, knew the industry, knew the players, I thought I had sorted winners and losers pretty well. I was proven wrong. I realized personal experience means nothing in long-term investment game, nobody knows future, and the only thing we can do is to diversify.

So that's what I've been doing for the last 15+ years. Yes, I do own a slice of EM (used to be EEM, I swapped it for VWO when Vanguard introduced it some years back). It's a wild ride, always has been. I re-balance once a year. It's such a routine by now I don't even realize the pain of doing it. I think once you de-personalize your investment strategy (whatever it is) and are able to stick with it through thick and thin, you are good to go no matter what. It worked for me, and my guess is for most people on this site. It's the wabblers, or people who think they know more than the market (like I did years ago) that tend to get into repeated problems.

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Re: The Emerging Markets "lost decade" is over

Post by nedsaid » Wed Sep 06, 2017 10:17 am

CodeMaster wrote:
Wed Sep 06, 2017 6:35 am
Personally I would move away from any "emerging market" funds, not only has it gotten nowhere so long, but I think it will continue to go nowhere because emerging markets are corrupt so you dont ever get accurate anything and all their stocks are corrupt due to false numbers, data, bribary etc...

I do business in Asia and its all corrupt, briberys, false data, fake things... but they have their own of doing business and you can still grow as a business while all that is going on, but for stocks, I wouldnt ever bet anything on it since all data / numbers etc are going to be faked or corrupt in some way thus to me , you cant ever guage how anything is really ever doing, its a total loss emerging market IMO

:sharebeer
There actually does seem to be a "corruption premium" built into such markets, I think I remember somewhere that Larry Swedroe wrote an article that mentioned this. Sort of like the "sin" premium. The pioneer of international investing, John Templeton, was aware of such risks as well as iffier numbers. But he would hold his nose and buy anyway if stocks looked really cheap.

I think investors should have Emerging Markets in their portfolio but certainly there are extra risks when you invest there.
A fool and his money are good for business.

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Re: The Emerging Markets "lost decade" is over

Post by CodeMaster » Wed Sep 06, 2017 10:23 am

snowman wrote:
Wed Sep 06, 2017 10:13 am
When I started investing in the mid-90s, I used to have similar thoughts, based on my own experience: most countries outside of US are not just corrupt, but extremely corrupt. Yes, the US is somewhat corrupt too, but in a very different way. I too thought there is no way I would invest in any of those countries.

I changed my mind around 2000-2002, during dot.com crash where I got burned by US tech stocks. I worked in hi-tech, knew the industry, knew the players, I thought I had sorted winners and losers pretty well. I was proven wrong. I realized personal experience means nothing in long-term investment game, nobody knows future, and the only thing we can do is to diversify.

So that's what I've been doing for the last 15+ years. Yes, I do own a slice of EM (used to be EEM, I swapped it for VWO when Vanguard introduced it some years back). It's a wild ride, always has been. I re-balance once a year. It's such a routine by now I don't even realize the pain of doing it. I think once you de-personalize your investment strategy (whatever it is) and are able to stick with it through thick and thin, you are good to go no matter what. It worked for me, and my guess is for most people on this site. It's the wabblers, or people who think they know more than the market (like I did years ago) that tend to get into repeated problems.
you def want internaitonal funds but jsut not em funds IMO

why would you ever want to invest in corruption riddled countries, i can go into all of those EM countries and bribe my wya to anything


china is set for rise sicn they fixed their corruption issue, some aweosme index and stocks i like to follow include

cweb
mchi
yinn
kweb
cqqq
BABA

CodeMaster
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Re: The Emerging Markets "lost decade" is over

Post by CodeMaster » Wed Sep 06, 2017 10:26 am

Lemme share a story

Vietnam for example, is southeast asias FASTEST growing emerging market

say you wanted to import and sell adn try tap into their fast growing economy and get piece that pie..well to sell youll need get license fro that product.

in u.s. maybe youd go to the FDA official webiste and apply or whatever.. its all done properly and processed.

in vn, a foreigner from u.s might think thats howyou do it... goes online and applies PROPERLY , pays all fees....
nothign happens

in vn, why would a gov wanna go out his way to process you application. youll never get approved, that isnt how business is done

unless you perhaps know one of the gov officials, and provide a friendly "tip"

without contacts and knowing how to get around the Vietnam way, you got zero business. this is just one example...

now imagine how accurate their stock data is gonna be LOL

dont get me wrong, VN businesses are growing like mad... but stocks cant be trusted from emerging markets UNTIL they find anti corruption being more benefitial then maintaining corruption, like China did...

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in_reality
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Re: The Emerging Markets "lost decade" is over

Post by in_reality » Wed Sep 06, 2017 10:38 am

CodeMaster wrote:
Wed Sep 06, 2017 10:23 am
china is set for rise sicn they fixed their corruption issue, some aweosme index and stocks i like to follow include

cweb
mchi
yinn
kweb
cqqq
BABA
I can't view China as having fixed things. Contracts are not honored often enough that it makes it tough in many cases to enter an agreement. If China were "fixed", investors could buy into BABA as an owner with legal protection instead of having a contract to the earnings.

To call the legal system in China as anything other than emerging is quite a stretch.

Less corrupt than Mexico? Very possibly. Less risky? Impossible to know what scenarios might play out.

CodeMaster
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Re: The Emerging Markets "lost decade" is over

Post by CodeMaster » Wed Sep 06, 2017 10:41 am

in_reality wrote:
Wed Sep 06, 2017 10:38 am
CodeMaster wrote:
Wed Sep 06, 2017 10:23 am
china is set for rise sicn they fixed their corruption issue, some aweosme index and stocks i like to follow include

cweb
mchi
yinn
kweb
cqqq
BABA
I can't view China as having fixed things. Contracts are not honored often enough that it makes it tough in many cases to enter an agreement. If China were "fixed", investors could buy into BABA as an owner with legal protection instead of having a contract to the earnings.

To call the legal system in China as anything other than emerging is quite a stretch.

Less corrupt than Mexico? Very possibly. Less risky? Impossible to know what scenarios might play out.
Are you referring to any recent corruptions in China?

I know they have a bad rep... but baesd on my experience doing business there, they accept no corruption and will penaltize you VERY HARD for ANYTHING done ... any bribing , etc... JAIL TIME

Before, it was opened and required to bribe.

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Re: The Emerging Markets "lost decade" is over

Post by AlohaJoe » Wed Sep 06, 2017 11:01 am

CodeMaster wrote:
Wed Sep 06, 2017 10:26 am
Vietnam for example, is southeast asias FASTEST growing emerging market
Vietnam isn't an emerging market. It is a frontier market, which is the category below EM. No EM fund holds any Vietnamese stock.

lack_ey
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Re: The Emerging Markets "lost decade" is over

Post by lack_ey » Wed Sep 06, 2017 11:11 am

IMHO if you're going to draw an arbitrary line referencing the past, you should expect the return to cross over the T-bill return over the period at least, not the point of sticking-it-under-the-mattress-would-have-been-better. So give it a little more time. Or maybe a lot. :twisted:

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Re: The Emerging Markets "lost decade" is over

Post by avalpert » Wed Sep 06, 2017 11:12 am

AlohaJoe wrote:
Wed Sep 06, 2017 11:01 am
CodeMaster wrote:
Wed Sep 06, 2017 10:26 am
Vietnam for example, is southeast asias FASTEST growing emerging market
Vietnam isn't an emerging market. It is a frontier market, which is the category below EM. No EM fund holds any Vietnamese stock.
That's right, it appears CodeMaster doesn't understand what emerging market funds invest in - as someone on this board once said:
If you want to trust people who dont[sic] fully understand somehting[sic] yet give you a conclusion on it, suit yourself

CodeMaster
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Re: The Emerging Markets "lost decade" is over

Post by CodeMaster » Wed Sep 06, 2017 11:14 am

AlohaJoe wrote:
Wed Sep 06, 2017 11:01 am
CodeMaster wrote:
Wed Sep 06, 2017 10:26 am
Vietnam for example, is southeast asias FASTEST growing emerging market
Vietnam isn't an emerging market. It is a frontier market, which is the category below EM. No EM fund holds any Vietnamese stock.
i didnt check if EM funds have them but VN or not, all the likes around those statuses are the same in lack of integrit to truly evalute stock investments data

you can see investors news reporting same thing ive been sharing, just googled it and found it. VN is booming, but foreign invesment isnt working. and it wont work until corruption is cleaned up like china did

http://www.institutionalinvestor.com/ar ... bAdwcgjFjU

and a lot of news and sites call VN emerging market is why i call them it, but regrdless if VN is one or not, my point remains for those that are EM's or similar (frontier?)

https://www.bloomberg.com/news/articles ... nk-opening

CodeMaster
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Re: The Emerging Markets "lost decade" is over

Post by CodeMaster » Wed Sep 06, 2017 11:15 am

avalpert wrote:
Wed Sep 06, 2017 11:12 am
AlohaJoe wrote:
Wed Sep 06, 2017 11:01 am
CodeMaster wrote:
Wed Sep 06, 2017 10:26 am
Vietnam for example, is southeast asias FASTEST growing emerging market
Vietnam isn't an emerging market. It is a frontier market, which is the category below EM. No EM fund holds any Vietnamese stock.
That's right, it appears CodeMaster doesn't understand what emerging market funds invest in - as someone on this board once said:
If you want to trust people who dont[sic] fully understand somehting[sic] yet give you a conclusion on it, suit yourself
im sharing my opinion as an investor... not as an expert on tv nor do i claim to be one... we're having a discussion lol and if you click the links i posted below, bloomberg calls vn emerging market but thats all beside point... lets stay on topic and keep any of that in its own thread lol

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siamond
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Re: The Emerging Markets "lost decade" is over

Post by siamond » Wed Sep 06, 2017 11:19 am

Lauretta wrote:
Wed Sep 06, 2017 7:22 am
[...] All this to say that for me it's more a question of familiarity with a culture that makes us feel comfortable with it, rather than some societies being much more dishonest than others.
That was a very insightful post, Lauretta. As an expatriate now living in the US and having traveled in many countries for work, I resonate a lot with your perspective. Also, people tend to lose sense of history. The US was an emerging country not so long ago (and funny, this was the time where stock returns were the highest!).

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Re: The Emerging Markets "lost decade" is over

Post by lack_ey » Wed Sep 06, 2017 11:42 am

siamond wrote:
Wed Sep 06, 2017 11:19 am
Lauretta wrote:
Wed Sep 06, 2017 7:22 am
[...] All this to say that for me it's more a question of familiarity with a culture that makes us feel comfortable with it, rather than some societies being much more dishonest than others.
That was a very insightful post, Lauretta. As an expatriate now living in the US and having traveled in many countries for work, I resonate a lot with your perspective. Also, people tend to lose sense of history. The US was an emerging country not so long ago (and funny, this was the time where stock returns were the highest!).
Just to be argumentative, I'd say US stock returns were highest from the early '80s to the end of the century, and the US wasn't an EM them.

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Re: The Emerging Markets "lost decade" is over

Post by siamond » Wed Sep 06, 2017 11:53 am

lack_ey wrote:
Wed Sep 06, 2017 11:42 am
Just to be argumentative, I'd say US stock returns were highest from the early '80s to the end of the century, and the US wasn't an EM them.
Hey, no cherry picking! :wink:

Yes, ok, granted, but I was referring to longer periods of time than that...

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Re: The Emerging Markets "lost decade" is over

Post by SimpleGift » Wed Sep 06, 2017 12:35 pm

AlohaJoe wrote:
Wed Sep 06, 2017 1:53 am
The Emerging Markets Total Return Index posted an new all time closing high today, marking the official end of the "lost decade" starting with the 2008-2009 crash.
Like so many aspects of the global market, it does appear that emerging markets' outperformance goes in cycles (chart below). Perhaps we’re at the start of another cycle when emerging markets will shine?
Personally, we’ve been invested in Vanguard’s Emerging Markets Index Fund almost since its inception in 1994. Secretly, I hope emerging market stocks do outperform in the future (as we do have a tilt toward them), but I’m not depending on it. It’s just one part of our broadly-diversified global equity portfolio.
Cordially, Todd

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Re: The Emerging Markets "lost decade" is over

Post by nisiprius » Wed Sep 06, 2017 1:15 pm

Oh, AlohaJoe, it would just warm the cockles of this aging heart if you could find it in you to edit the thread title to something like

"The Emerging Markets 'lost decade' is over"--Tiho Brkan

or

Tiho Brkan thinks he sees end to Emerging Markets "lost decade"

or

The Emerging Markets "lost decade" may be over
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Re: The Emerging Markets "lost decade" is over

Post by nisiprius » Wed Sep 06, 2017 1:20 pm

By the way, who is Tiho Brkan and why should I consider him an authority?
As a successful trader, business consultant and portfolio wealth manager, Tiho is known to visit up to twenty countries per year, all the while observing global economic trends, purchasing off-shore real estate and executing investments on behalf of his clients. With a keen belief in living like a Global Citizen, Tiho takes pleasure in unearthing rare business opportunities worldwide, building strong connections in the fields of accounting, banking and law while helping his clients with international taxation & citizenship planning.
He is apparently connected with a private advisory service called "Atlas."
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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Re: The Emerging Markets "lost decade" is over

Post by lack_ey » Wed Sep 06, 2017 1:31 pm

nisiprius wrote:
Wed Sep 06, 2017 1:15 pm
Oh, AlohaJoe, it would just warm the cockles of this aging heart if you could find it in you to edit the thread title to something like

"The Emerging Markets 'lost decade' is over"--Tiho Brkan

or

Tiho Brkan thinks he sees end to Emerging Markets "lost decade"

or

The Emerging Markets "lost decade" may be over
Why is that even necessary? This is unambiguously a statement about past total return, i.e. signaling that the total return index is at a new record high.

Image
http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D
VWO and EEM being emerging markets funds (EEM including South Korea and having a higher ER)

$10k invested at the previous peak is now more than $10k again.

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Re: The Emerging Markets "lost decade" is over

Post by siamond » Wed Sep 06, 2017 2:10 pm

Simplegift wrote:
Wed Sep 06, 2017 12:35 pm
Like so many aspects of the global market, it does appear that emerging markets' outperformance goes in cycles (chart below).
You made me ponder if we can easily create a similar chart with the Simba spreadsheet. One has to add a derived data series to compute EM minus S&P500 returns, but that is pretty trivial to do (I used a geometric difference). We already have a rolling returns chart, but then we don't have 3-years rolling returns (only 1-year, 5-years, 10-years, 15-years), but it was easy to extend the existing logic. Here is the outcome (I disabled the 15-years display, for clarity). It's based on annual returns, hence less granular that the chart you posted.

Image

Now this raises an interesting point. The Simba spreadsheet computes rolling returns FORWARD (N years starting from the year on the X axis). Quite obviously, the chart you posted computed rolling returns BACKWARDS (N years up to the current point). And although this is arbitrary, for whatever reason, the latter way seems more intuitive to me. Do you think I should fix that?

I also wonder if we should ditch the 1-year period, and only propose 3/5/10/15 years? And maybe we could automate a bit further the analysis of the premium of a given portfolio (here EM) against a portfolio of reference (here S&P 500)?

(sorry, I guess I am side-tracking the thread a bit here!)

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Re: The Emerging Markets "lost decade" is over

Post by Kenkat » Wed Sep 06, 2017 2:43 pm

Well good, because I have been waiting...

EM was a great diversifier in the early to mid-2000's and really help cushion the blow of the tech crash.

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Re: The Emerging Markets "lost decade" is over

Post by SimpleGift » Wed Sep 06, 2017 3:13 pm

siamond wrote:
Wed Sep 06, 2017 2:10 pm
Now this raises an interesting point. The Simba spreadsheet computes rolling returns FORWARD (N years starting from the year on the X axis). Quite obviously, the chart you posted computed rolling returns BACKWARDS (N years up to the current point). And although this is arbitrary, for whatever reason, the latter way seems more intuitive to me. Do you think I should fix that?

I also wonder if we should ditch the 1-year period, and only propose 3/5/10/15 years? And maybe we could automate a bit further the analysis of the premium of a given portfolio (here EM) against a portfolio of reference (here S&P 500)?
Actually, the rolling returns chart you prepared is quite impressive. I don’t always think of using the Simba spreadsheet, but it obviously works nicely for this type of comparative analysis. Not sure whether the forward or backwards method makes much difference, as long as the relative performances are clear over time.

For what it's worth, most of these comparison charts (domestic vs. international, value vs. growth, etc.) use 3-year rolling returns. See Figure 1 in this article. Looking at the chart you prepared, I think either 3-year or 5-year rolling returns work fine, but the 3-year appears most explanatory and clear, to my eye. Not sure the 10-year adds much. Just my two cents.
Cordially, Todd

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Re: The Emerging Markets "lost decade" is over

Post by siamond » Wed Sep 06, 2017 3:42 pm

Thanks, Todd. I moved the Simba discussion here, to avoid further side-tracking the OP's thread.

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Re: The Emerging Markets "lost decade" is over

Post by nisiprius » Wed Sep 06, 2017 4:04 pm

lack_ey wrote:
Wed Sep 06, 2017 1:31 pm
nisiprius wrote:
Wed Sep 06, 2017 1:15 pm
Oh, AlohaJoe, it would just warm the cockles of this aging heart if you could find it in you to edit the thread title to something like

"The Emerging Markets 'lost decade' is over"--Tiho Brkan

or

Tiho Brkan thinks he sees end to Emerging Markets "lost decade"

or

The Emerging Markets "lost decade" may be over
Why is that even necessary? This is unambiguously a statement about past total return, i.e. signaling that the total return index is at a new record high.

Image
http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D
VWO and EEM being emerging markets funds (EEM including South Korea and having a higher ER)

$10k invested at the previous peak is now more than $10k again.
Mutter, mutter, $10,057 is more than $10,000 but $9,960.31 isn't; those aren't real returns; and 10/31/2007 to 09/05/2017 isn't a decade... why not use a whole decade? Presumably one of your ETFs isn't quite ten years old? But, OK, definitions are a problem. I would say personally, but it could be disputed, that "the lost decade is over" implies that we can pretty confidently expect sustained growth coming forward. The fact that we've just barely edged to a new high doesn't tell us whether or not we are out of that ragged plateau. That chart doesn't give me any particular confidence that this isn't just a little fluctuation up that will be followed by another little fluctuation down.

[Added] I was going to ask how you got a total return chart that only shows ETFs, but you didn't. I'm not quite sure what that chart is, by the way--how did you get that from Morningstar? If I plot VEMAX first, it turns out that a) you absolutely can get ten full years for VEMAX, VWO, and EEM, and b) all three of them and the MSCI ACWI Ex-USA NR USD index have all made money, roughly 20% total for the ten full years (not annualized):
VEMAX:12,350.63 MSCI ACWI Ex USA NR USD:11,953.81 EEM:12,197.45 VWO:12,353.59
so all of them have earned some gains, not losses, over ten years... and, too much work to check, but possibly have eked out a slim real return as well. Please note that I just presented data against my own point...
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Re: The Emerging Markets "lost decade" is over

Post by lack_ey » Wed Sep 06, 2017 4:20 pm

nisiprius wrote:
Wed Sep 06, 2017 4:04 pm
Mutter, mutter, $10,057 is more than $10,000 but $9,960.31 isn't; those aren't real returns; and 10/31/2007 to 09/05/2017 isn't a decade... why not use a whole decade? Presumably one of your ETFs isn't quite ten years old? But, OK, definitions are a problem. I would say personally, but it could be disputed, that "the lost decade is over" implies that we can pretty confidently expect sustained growth coming forward. The fact that we've just barely edged to a new high doesn't tell us whether or not we are out of that ragged plateau. That chart doesn't give me any particular confidence that this isn't just a little fluctuation up that will be followed by another little fluctuation down.
The original post is about the index. I just graphed actual funds for convenience (and recall that EEM has an ER of 0.70%, and one could have readily switched to IEMG halfway through if considering South Korea as emerging and thus not wanting to use Vanguard's fund). It's not exactly a decade because I started from the peak that I saw. The total return is higher if you pick a different point, including going back exactly 10 years.

I think you're looking for an interpretation of the words that is I think reasonable out of context, but not intended here and not how people use the phrase. There's not an explicit forward prediction or implication that we are heading into a new, non-lost decade. EM broke the previous high*, but we don't know if the next ten years will be all the way back down or not. It's just a "hey, X happened" and then we move on.

*which I think is kind of meaningless, and in a previous post I suggested adjusting the current level by the risk-free rate that could have been earned since, whereas you suggested adjusting for inflation


edit:
nisiprius wrote:
Wed Sep 06, 2017 4:04 pm
[Added] I was going to ask how you got a total return chart that only shows ETFs, but you didn't. I'm not quite sure what that chart is, by the way--how did you get that from Morningstar? If I plot VEMAX first, it turns out that a) you absolutely can get ten full years for VEMAX, VWO, and EEM, and b) all three of them and the MSCI ACWI Ex-USA NR USD index have all made money, roughly 20% total for the ten full years (not annualized):
VEMAX:12,350.63 MSCI ACWI Ex USA NR USD:11,953.81 EEM:12,197.45 VWO:12,353.59
so all of them have earned some gains, not losses, over ten years... and, too much work to check, but possibly have eked out a slim real return as well. Please note that I just presented data against my own point...
It's total return. You just have to use the right URL to get ETF growth-of-$10000 plots, like

Code: Select all

http://quotes.morningstar.com/chart/fund/chart?t=VWO
Or you can use the go-to-a-mutual-fund-page-first trick as usual.

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Re: The Emerging Markets "lost decade" is over

Post by asset_chaos » Wed Sep 06, 2017 4:23 pm

Total world, holding around 98% of investable market cap of companies irrespective of where they're headquartered or listed, renders discussions like these about fluctuations of market sectors strictly for entertainment purposes.
Regards, | | Guy

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Re: The Emerging Markets "lost decade" is over

Post by nisiprius » Wed Sep 06, 2017 4:31 pm

lack_ey wrote:
Wed Sep 06, 2017 4:20 pm
It's total return. You just have to use the right URL to get ETF growth-of-$10000 plots, like

Code: Select all

http://quotes.morningstar.com/chart/fund/chart?t=VWO
!!!! Is that documented somewhere? How did you figure that out?
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Re: The Emerging Markets "lost decade" is over

Post by lack_ey » Wed Sep 06, 2017 4:37 pm

nisiprius wrote:
Wed Sep 06, 2017 4:31 pm
lack_ey wrote:
Wed Sep 06, 2017 4:20 pm
It's total return. You just have to use the right URL to get ETF growth-of-$10000 plots, like

Code: Select all

http://quotes.morningstar.com/chart/fund/chart?t=VWO
!!!! Is that documented somewhere? How did you figure that out?
I wasn't clever enough to figure it out, but I saw somebody else mention it on Bogleheads a while back. Notice how it's actually the same URL structure as you get when clicking around on the mutual fund pages.

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Re: The Emerging Markets "lost decade" is over

Post by snowman » Wed Sep 06, 2017 5:57 pm

For ETFs, I use this website:

https://www.etfreplay.com/combine.aspx

For 10 years as of yesterday, the total return for VWO is 23.2%, including all dividends.

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Re: The Emerging Markets "lost decade" is over

Post by VictoriaF » Wed Sep 06, 2017 6:06 pm

Lauretta wrote:
Wed Sep 06, 2017 7:22 am
CodeMaster wrote:
Wed Sep 06, 2017 6:35 am
but they have their own of doing business and you can still grow as a business while all that is going on
:sharebeer
Yes I heard stories like that of fund manager Anthony Bolton who did very poorly in EM because they were lying to him apparently. I am not sure how much this is due to cultural differences though. I am sure people lie a lot and do a lot of dodgy things in developed countries, but because it's their own country this looks more familiar to them and they are less alarmed.
Maybe an Asian who read about Madoff would think westerners are all liers and thiefs?
I am Italian, I have lived all my professional life outside my country, and I know that abroad Italians have the reputation of being dishonest.But I find myself naturally trusting Italians and I think that it's mainly due to the fact that I am familiar with them.
At the moment of writing this I am staying in a foreign, highly developed country which does not have such a bad reputation for lying and dishonesty, but to me this is absurd, both because of my personal experience and because e.g. I saw on local TV two programs in the last week on 2 murderers who gave interviews after their crimes and being extremely crafty in pleading their innocence. They were excellent actors, trying to attract the pity of the viewers, and they looked so convincing! But this country does not have a reputation for dishonesty at all!
All this to say that for me it's more a question of familiarity with a culture that makes us feel comfortable with it, rather than some societies being much more dishonest than others.
You may be interested in this article:
"Are Some Countries More Honest than Others? Evidence from a Tax Compliance Experiment in Sweden and Italy"
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4823977/

From the abstract:
a team of researchers wrote:Exploiting a set of cross-cultural tax compliance experiments, we find that the average level of tax evasion (as a measure of ordinary dishonesty) does not differ significantly between Swedes and Italians. However, we also uncover differences in national “styles” of dishonesty.
Victoria
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Re: The Emerging Markets "lost decade" is over

Post by baw703916 » Wed Sep 06, 2017 7:07 pm

Kenkat wrote:
Wed Sep 06, 2017 2:43 pm
Well good, because I have been waiting...

EM was a great diversifier in the early to mid-2000's and really help cushion the blow of the tech crash.
And it's been a great diversifier this decade as well. Just think, if you'd been 100% invested in U.S. stocks, your portfolio value might be so inflated you'd panic and not stay the course! :)
Most of my posts assume no behavioral errors.

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Re: The Emerging Markets "lost decade" is over

Post by Top99% » Wed Sep 06, 2017 7:34 pm

This thread means it is time for me to whip it out again: https://www.callan.com/wp-content/uploa ... d_2017.pdf
This is the single best piece of visual evidence I know of for the value diversification. As for Emerging markets suffering from corruption, I suspect the market knows that already.
Adapt or perish

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Re: The Emerging Markets "lost decade" is over

Post by garlandwhizzer » Wed Sep 06, 2017 7:41 pm

Top99% wrote:
This thread means it is time for me to whip it out again: https://www.callan.com/wp-content/uploa ... d_2017.pdf
This is the single best piece of visual evidence I know of for the value diversification. As for Emerging markets suffering from corruption, I suspect the market knows that already.
1+

Garland Whizzer

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Re: The Emerging Markets "lost decade" is over

Post by badbreath » Wed Sep 06, 2017 8:14 pm

So does this mean I should rush into emerging markets. Na I will just stay the course.
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Re: The Emerging Markets "lost decade" is over

Post by SimpleGift » Wed Sep 06, 2017 9:11 pm

Top99% wrote:
Wed Sep 06, 2017 7:34 pm
As for Emerging markets suffering from corruption, I suspect the market knows that already.
Interesting to note the current statistics from Vanguard’s website below. Though emerging markets and the U.S. market currently have almost identical projected earnings growth rates and return-on-equity, the emerging markets fund has valuation ratios less than 75% of the U.S. fund.
  • Image
Appears to be a healthy discount for the added corruption risk, political risk, currency risk, and the like — though sector differences likely also contribute a bit to the valuation differences
Last edited by SimpleGift on Wed Sep 06, 2017 9:18 pm, edited 1 time in total.
Cordially, Todd

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Re: The Emerging Markets "lost decade" is over

Post by cantos » Wed Sep 06, 2017 9:18 pm

Valuethinker wrote:
Wed Sep 06, 2017 6:03 am
The Chinese route to success, of becoming the cheap offshoring point for world manufacturing, is therefore, in his analysis, a route that is closing for developing countries in the future.
Except that this is no longer the Chinese route to success. There is a huge drive toward alternative fuels in China. China is a country that thinks long term about its future - as an old civilization it tends not to be myopic and focus on short term gains. Furthermore, he political structure encourages long term thinking. If anything, your points favour investing in China.

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