Emerging Markets

  • 26 Apr
    If You’re An Investor, Now’s The Time To Get Out Of The S&P 500, Index Funds, & ETFs

    If You’re An Investor, Now’s The Time To Get Out Of The S&P 500, Index Funds, & ETFs

    • If you only look at averages, passive investing will always outperform active due to lower fees, but you can only expect average returns.
    • The market is skewed and inefficient due to huge flows into passive funds, outflows from active funds which should be doing the thinking, and euphoric management doing large stock buybacks. This creates a highly risky situation.
    • Avoid owning index funds, ETFs, and stocks that are largely owned by passive funds.

    Introduction

    There are two investing worlds. One is the world of active investing where the fund manager you hired analyzes company after company and invests in those they think are the best. The passive manager simply disperses your funds over an index where you will perform exactly as the market performs. With passive investing, fundamentals, dividends, growth, sales, scandals, and business trends don’t matter at all. More →

  • 24 Apr
    Global Growth Is Finally Getting Some Traction, Be Sure Your Money Follows

    Global Growth Is Finally Getting Some Traction, Be Sure Your Money Follows

    • Macroeconomic trends are extremely important for your investing or trading returns.
    • The IMF’s World Economic Outlook is a great starting point for understanding where the risks and opportunities lie.
    • Long term trends show emerging markets and commodities are the place to be.

    Introduction

    Investing is both difficult and easy. It’s difficult if you try to guess what the market’s sentiment will be next week or next month, while it’s easy if you simply look at slow moving structural macroeconomic trends. These trends are like little forces that shape the market, similar to the gravitational forces among planets in our solar system. More →

  • 07 Apr
    Emerging Markets Are Still A Buy Even At Two-Year Highs

    Emerging Markets Are Still A Buy Even At Two-Year Highs

    • The International Monetary Fund revised economic growth projections for emerging markets and developing economies up to 4.5% for 2017 and 4.8% for 2018.
    • Not all emerging markets are cheap, therefore the best strategy is to invest in individual stocks.
    • Buying companies in growing economies at low price earnings ratios is what will make the difference for your portfolio in the next 10 years.

    Introduction

    Over the last year, you’ve probably read some of my articles where I’ve said that emerging markets are the best investment class as the demographics are better and stocks are much cheaper in relation to what the S&P 500 offers. As markets can’t overlook such positive characteristics for very long, emerging markets are up more than 18% in the last 12 months. More →

  • 16 Mar
    The U.S. Market Is Irrationally Expensive – What Does The Rest Of The World Have To Offer?

    The U.S. Market Is Irrationally Expensive – What Does The Rest Of The World Have To Offer?

    • Global markets are much cheaper, but there’s an even better option.
    • It’s relatively easy to find stocks that have huge growth potential at cheap valuations. I’ll describe three sectors.
    • In the long term, the current trend of favoring the U.S. dollar and equities is going to shift to where the growth is. There’s no doubt about it, so be prepared.

    Introduction

    The U.S. equity market is like driving a luxury car. It’s reliable (low volatility or as some say, low risk), costs you a bit more to maintain (low dividends), it makes you look good (investing with the big boys), and it will eventually bring you to where you want to go.

    Investing in emerging markets is like driving a cheap car. Nobody considers your investments cool (looking for bargains in unknown areas like Russia, China, or India), the car won’t be as reliable (break down more often – think volatility), but it will be cheap to repair (high dividends), and eventually will also bring you to where you want to go. More →

  • 03 Mar
    Why An ETF Is The Wrong Way To Invest In Emerging Markets

    Why An ETF Is The Wrong Way To Invest In Emerging Markets

    • Irrational market sentiment and low liquidity create high volatility that can easily be seized by smart investors. Just do the opposite of what the crowd does.
    • Despite what the market might think in a certain moment, emerging markets and businesses grow alongside economic development and positive demographics.
    • ETFs are the crowd and due to their construction and rules, ETFs represent buying high and selling low, which is a terrible strategy anywhere but it’s extremely costly on volatile emerging markets.

    Introduction

    I have a positive bias towards emerging markets because of their positive demographics, growth aspirations, and low starting level from a macroeconomic perspective, and because, from a behavioral perspective, emerging markets are completely irrational, much less liquid, and highly volatile, especially individual stocks.

    You might wonder why I like volatility, low liquidity, and irrational behavior. Well, at the first sign of fear on financial markets, everybody rushes to sell their emerging market position. This, combined with low liquidity, creates huge volatility which is the best investing opportunity if you are a value/growth investor. More →

  • 23 Feb
    Bubble, Crisis, Bubble, Crisis – Debunking The Chinese Real Estate Sector

    Bubble, Crisis, Bubble, Crisis – Debunking The Chinese Real Estate Sector

    • The Chinese government is controlling the real estate market and allowing short, two-year boom bust cycles.
    • Western investors don’t understand China and see either a bubble or a crash.
    • The best way to invest is to seize the wild market swings created by such erratic behavior.

    Introduction

    The question we would all like to know the answer to is this: is the Chinese real estate market in a bubble?

    If it is, any kind of burst would create a credit crisis, lower economic growth, and quickly spill over first on global financial markets, and consequently onto the global economy.

    There is no consensus on whether or not Chinese real estate is in a bubble. I’m going to describe both perspectives to give you the best information possible for China and Chinese real estate related investments. More →

  • 22 Feb
    What Will The Economic World Look Like In 2050?

    What Will The Economic World Look Like In 2050?

    • Emerging markets will be the economic leaders of the world.
    • Investment returns are related to economic performance, so it’s wise to be internationally diversified.
    • However, diversifying just to diversify is the biggest mistake you can make as emerging markets are full of risk.

    Introduction

    PricewaterhouseCoopers (PwC) just released its report on what the economic world will look like in 2050. You might wonder what that has do to with your investment returns as 2050 is 33 years from now, but it has everything to do with your returns if your investment horizon is longer than a few years because these global trends that will shape the world up to 2050 will also be the trends that will shape your portfolio returns. More →

  • 14 Feb
    A Look At The Crazy World Of Chinese Stocks

    A Look At The Crazy World Of Chinese Stocks

    • It isn’t unusual that a Chinese stock loses 75% to 90% of its IPO value after a year or two.
    • Delisting, lack of transparency, obscure companies, fraud, buyouts at large discounts, and fears around the economy are some reasons for such performance.
    • You should require at least 50% per year from Chinese stocks with minimum risk. Such opportunities can be found.

    Introduction

    Chinese stocks are, to say it in one simple word, crazy. And apart from crazy, looking at Chinese stocks that are trading on the NYSE seems like walking through a graveyard.

    Companies like China Xiniya Fashion Limited (NYSE: XNY), China Zenix Auto International (NYSE: ZX), ChinaCache International (NASDAQ: CCIH), or Kingtone Wirelessinfo Solution Holding Ltd (NASDAQ: KONE) all seized the craziness going on in 2011 around China and listed themselves on American markets. The results for initial investors were disastrous. More →

  • 29 Jan
    Sunday Edition: The Mighty Dollar

    Sunday Edition: The Mighty Dollar

    Several weeks ago, I wrote about how I believe it’s possible to time financial markets with a high degree of accuracy.

    In today’s article, I want to discuss the US dollar and why I believe it is nearing a long-term top (sometime in the next 6 to 18 months), and how you can use this trend change to make a small fortune. More →

  • 23 Jan
    On Seth Klarman & His <i>Margin of Safety</i>

    On Seth Klarman & His Margin of Safety

    • Understanding value is just the beginning of profitable investing.
    • Would you be able to hold, on average, 33% of your portfolio in cash with peaks above 50%?
    • Studying human behavior through history is what the best hedge fund managers do.

    Introduction

    Seth Klarman’s book Margin of Safety – Risk-Averse Value Investing Strategies for the Thoughtful Investor sells on Amazon (NASDAQ: AMZN) for $1,992.92 new, and $792.33 used. It’s priced that high because it is a collector’s item that was printed in a small run.

    I believe Klarman would agree that it’s better to invest in stocks than to pay that much for a book. I agree and didn’t want to wait for the book turn up at the library, but I finally managed to get a copy.

    I’ll analyze the book, see what is still relevant today as the book was published in 1991, and share Klarman’s insights with you in a series of articles. Before we start with the book, I’ll start with some insight on Seth Klarman, his investing technique, performance, and general view on investing. More →

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