Whitney Tilson’s email to investors discussing does investing in emerging markets still make sense? The bear and bull cases; How a Global Trash Glut Hurt a $25 Billion Industry; Speeding up videos.
1) I’ve never invested in emerging markets (“EM”) for circle of competence reasons, but have always felt like they would be fertile grounds for investors who spoke the language and knew the countries well (due to their higher growth and less efficient markets). But not everyone agrees – there’s quite a bull-bear debate.
This in-depth article in the Financial Times makes the bear case: Does investing in emerging markets still make sense?
Starting in the early 1990s, globalisation, in the form of increased cross-border trade, the commodities supercycle and the rise of global supply chains, drove the emerging world inexorably – or so it seemed – along a path of convergence with the developed world.
But convergence is no longer assured. Today, high commodity prices are a fading memory. Trade is stuttering and global supply chains are being disrupted.
2) In response, my friend Kim Iskyan, who lives in Singapore and specializes in emerging and frontier markets, writes:
Whenever I see something about a particular asset class/sector coming to an end, it feels like the perfect contrarian signal – and the Financial Times running a piece saying "it's the end of emerging markets" is pretty much that. The arguments here are compelling, but the effort to label what's likely cyclical as structural is in my view a classic bottom-of-the-market blunder. In particular...
1) EM growth is predicated (increasingly) more on domestic growth, than export-driven (i.e., globalization) growth (which is so 1990s);
2) Productivity doesn't rise in a straight line. Never has, never will. A plateau is inevitable. Then policies fall into place... innovation powers ahead... technology evolves... and then poof, productivity growth picks up again; and
3) "China is slowing" has been the boogeyman for (no exaggeration) 15+ years. Of course China's economic growth is slowing... what else can it do? A stopped watch is right twice a day, and this is both always right, and always wrong.
And the comment at the top of the article about how EM is so diverse – well, precisely. So to then say, "EM is no longer an asset class" is kind of silly. Stock picking (market picking) has always been important in EM. And these changes highlight that.
3) Speaking of emerging markets, here's a fascinating look at the global trash industry:
'We Are Swamped': How a Global Trash Glut Hurt a $25 Billion Industry by WSJ Excerpt:
Across India, from poor villages to expensive residential areas of cities, millions of trash pickers are at work to collect what other people dispose. They are called raddiwalas, ragpickers, scavengers and waste managers.
Indian recycling companies took advantage of the deep discounts and started importing more trash from the U.S. and elsewhere. In 2018, the imports of mixed scrap plastic to India rose 33%.
4) A great tip from one of my readers, Quinn C.:
I've been subscribed to your newsletter for around half a year now and am getting tremendous value from it, thank you! It's clear you put a lot of time and effort into it.
In response to your comment about listening to YouTube at 2x speed, I wanted to share a quick tip of my own about the Chrome extension, Video Speed Controller, which you can download here.
It adds a speed controller to any video so you're no longer limited to 2x speed on YouTube – you can go as fast as you want.
It's not limited to YouTube – it'll work on pretty much any video it finds. I find it especially useful listening to company earnings webcasts which often don't have built-in speed control and can be excruciating at 1x speed.
Cheers, hope you find it useful!
I've installed it and love it. Thank you, Quinn!