Emerging Markets

  • 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 →

  • 22 Jan
    Sunday Edition: A “Buy It And Forget It” Diversified Portfolio With 300% to 500% Upside Potential

    Sunday Edition: A “Buy It And Forget It” Diversified Portfolio With 300% to 500% Upside Potential

    Today we are going to take a sneak peak at six globally diversified high growth companies with 10-bagger potential. Companies I believe every serious investor should own.

    But first, I want to talk about a big mistake I see most investors making, which is to “over diversify.” When you own too many stocks, your chance of outperforming the market diminishes because you become the market.

    I’ve shared with our readers before what I believe is the right number of stocks to own so that you have enough diversification to mitigate non-systemic or individual company risk, yet not own too many stocks and hamper your ability to outperform the market. More →

  • 06 Jan
    This Is Why You’ll Want To Take A Closer Look At Investing In China

    This Is Why You’ll Want To Take A Closer Look At Investing In China

    • The large GDP-credit gap in China could be a win-win; panics should be seen as an opportunity to buy on the cheap.
    • Forecasts for the yuan are negative indicating further depreciation. Don’t fight the positive dollar trend for now.
    • Some sectors are going to get crushed by China, thus it is a threat.

    Introduction

    In the last two years, China has shaken the markets twice: once when the Chinese market correction began in August 2015, and when it seemed that we were in for a Chinese/global recession in January 2016. More →

  • 03 Jan
    Do You Need To Invest In Frontier Markets To Be Well Diversified?

    Do You Need To Invest In Frontier Markets To Be Well Diversified?

    • Due to low liquidity, frontier markets are highly influenced by foreign capital inflows and outflows.
    • Political risks, exposure to oil, and variegate PE ratios advise against investing in frontier market ETFs.
    • However, there is one low risk high reward option.

    Introduction

    A frontier market is a developing country not big enough to be considered an emerging market. The term describes smaller, less accessible, but still investable markets. Such investments are considered high risk because of high volatility and lack of information.

    Small markets usually have low liquidity and are very sensitive to foreign fund flows. Capital inflows alongside positive sentiment quickly lead to a bubble. More →

  • 26 Dec
    Beware The Short Term Cycle In The Automotive Industry

    Beware The Short Term Cycle In The Automotive Industry

    • The automotive industry is expected to grow in the future. While the high barriers to entry eliminate new competition, it’s a perfect business to be in.
    • The short-term debt cycle and stretched balance sheets indicate a contraction in revenues, margins, and profits.
    • To make money with automotive stocks just follow the short-term cycle and be patient, it will hit stocks, it always does and it is close.

    Introduction

    I have recently been nagging about the negative asymmetric risk reward situation the general stock market offers. In order to give you more value, I’m going to analyze a few sectors in detail with the hope of finding the ones that will give you better risk reward ratios.

    Today, I’ll discuss the automotive industry. Many consider it extremely cheap, but valuations simply don’t want to hear about it and remain low. I’ll start with an analysis of the two cycles in the industry, continue with an overview of the fundamentals and a conclude with a risk reward estimation. More →

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