The Pips Are Squeaking

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This should be a short post.  I just want to note the degree of stress that many emerging market countries are under.  The Fed raises rates, and something blows up.  That is often the class of debt that has grown the most in the bull phase of the cycle, or, the one that has financed with short-term debt.  This is the “volatility machine” that Michael Pettis wrote so well about.


Q1 hedge fund letters, conference, scoops etc, Also read Lear Capital:



The Brazilian stocks I own have been falling.  A little lower, and I will make them double-weight positions.  Five times earnings for utilities that cannot be done without?  Wave the shares in.

Look at Argentina, Indonesia, and Turkey.  Fundamentally misfinanced.  Maybe own assets there that have enduring demand.  I own IRSA [IRS].

Russia is fundamentally sound.  I own shares in RSXJ, which is not so connected to the energy sector.

Buy the emerging markets generally, avoiding those markets are fundamentally misfinanced.  Or wait, and buy later.  Emerging market selloffs are often sharp and significant.  I’m not sure what is the right way to do it, so you could buy half now, and wait.  If it rallies, be glad you got some cheap.  If it sells off more, buy the full position.

There are some good values now; they could get better later.  Buy a little and wait like my “do half” strategy says.  Don’t get greedy, look for decent gains over 3-5 years.

And now for something completely different:

I appeared on RT Boom/Bust two weeks ago, and offered my thoughts on Wells Fargo at the end of the show.  I think they still have more problems to be revealed.  That said, things aren’t getting worse, so this might be a good time to buy the shares of Wells Fargo.

Full disclosure: My clients and I own shares of IRS, SBS, ELP, BRF, and RSXJ

Article by David J. Merkel, CFA, FSA – The Aleph Blog

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