Anyone watching the emerging markets?

[vt]

Re: Anyone watching the emerging markets?

Lacy Hunt thinks the bond bull market will prevail. Hoisington management is one of the top bond managers so they shouldn't be ignored.

https://www.zerohedge.com/news/2018-...conomic-growth

[GRG55]

Re: Anyone watching the emerging markets?

that's quite an intricate scenario.
i think the u.s. consumer is in no better shape than the em's.

I am not sure in this round if all EMs are "created equal". The problem of too much US$ denominated debt may not be an issue across significant parts of the EM world this time.

[jk]

Re: Anyone watching the emerging markets?

a couple of factoids from a couple of twitter feeds:

More



Luke Gromen Retweeted Chris
We've long been saying that if stocks just stop rising, it will quickly translate into weaker US consumption bc [US Net Cap Gains + US Taxable IRA Distribs = 200% of annual PCE (Personal Consumption Exp) growth]. Stocks stopped rising in 1q18, & look what happened to PCE growth:

chris:
Personal consumption sequentially fell over 200 bps to just .73 percent, according to revised GDP data. #fedThis was the worst print in 5 years.Amazing, the effects of record household/consumer debt across the board.

[touchring]

Re: Anyone watching the emerging markets?

I am not sure in this round if all EMs are "created equal". The problem of too much US$ denominated debt may not be an issue across significant parts of the EM world this time.

Here's an interesting chart.

https://www.rba.gov.au/publications/.../bu-1215-6.pdf

[thriftyandboringinohio]

Re: Anyone watching the emerging markets?

Thanks touchring, I finally got a chance to read the article, nice find.

So EMs in the past ten years have tripled the amount of debt they hold denominated in dollars, most of this as corporate bonds. That exposes them to risks if the dollar goes up - it makes their heavy debt load even heavier.

The authors sure seem credible, it's the Reserve Bank of Australia. Throughout the article the authors seem to make one point time and again: although this situation looks risky, we should not worry because much of this debt is hedged to reduce the FOREX risk. Notably, the authors never discuss how the hedges work to counteract the risk of a rising dollar. Do you understand how the hedges work? I'd like to know more about that point. Hedging strategies are notorious for failing because nobody who planned them expected the events that actually occurred later. The original models turn out to be incomplete and the hedges fall apart.

[touchring]

Re: Anyone watching the emerging markets?

I am not sure in this round if all EMs are "created equal". The problem of too much US$ denominated debt may not be an issue across significant parts of the EM world this time.

Depends on which EM, the EMs that have kids that are not married but got no grandkids are only better than the US because they save on marriage.

Let's assume it takes an average of $1000 a month to rear a kid (including loss of income), if you don't have kids, you save $12000 just for 1 kid and $24000 a year for 2.

If you're not married, stay with mom, you save on housing loan/taxes and rent and probably even food. That's a crazy amount of cash saved.

Imagine a population of 100 million that saves this cash, that's $2.4T a year that goes into the savings.

Yes, $2,400,000,000,000!!!

[touchring]

Re: Anyone watching the emerging markets?

I think I’m starting to have an idea what Trump is trying to do. He wants to transform America’s international trade by rewriting the rules of trade. To do this, he threatens economic war.

The cutting of taxes and boosting of the domestic economy is all part of the game plan to buttress the home base. You need to fortify your castle first before you send out your troops.

He knows that in a full blown trade war, Europe and China will surely collapse first politically before America does because they are all relying on American consumers ultimately.

[jk]

Re: Anyone watching the emerging markets?

americans have long been the consumers of last resort. however, the u.s. consumer is tapped out- up to his neck in debt, especially non-cancelable student debt, with no growth in income and rising prices for medical insurance, housing, food and fuel.

[kriden]

Re: Anyone watching the emerging markets?

This thread explains a lot imho: https://twitter.com/TheLastRefuge2/s...72142866767872

[Techdread]

Re: Anyone watching the emerging markets?

Yawn, Made in China or Assembled in China.

[kriden]

Re: Anyone watching the emerging markets?

Pretty dismissive comment. Care to elaborate how it applies to the thread?

[touchring]

Re: Anyone watching the emerging markets?

americans have long been the consumers of last resort. however, the u.s. consumer is tapped out- up to his neck in debt, especially non-cancelable student debt, with no growth in income and rising prices for medical insurance, housing, food and fuel.

Debt? No problem. Just print money or restructure the debt for everyone then. That's what China did, write off hundreds of billions of SOE debt.

Money is just a figure, it doesn't matter if Warren Buffett is worth $100 billion and has zero debt, he spends less than $4 a day on breakfast.

What is important is you retain engineering knowledge and build factories cos you need these if WWIII breaks out. Factories and engineering knowledge are real, money is just a figure.

[thriftyandboringinohio]

Re: Anyone watching the emerging markets?

Debt? No problem. Just print money or restructure the debt for everyone then. That's what China did, write off hundreds of billions of SOE debt.

Money is just a figure, it doesn't matter if Warren Buffett is worth $100 billion and has zero debt, he spends less than $4 a day on breakfast.

What is important is you retain engineering knowledge and build factories cos you need these if WWIII breaks out. Factories and engineering knowledge are real, money is just a figure.

Thanks touchring those are all good points. I think it's important to keep clear the difference between "what's likely to happen" versus "what should happen". Printing money may fit under both headings. It's likely that some sort of inflationary policies will be followed to inflate away lots of this debt. Further, it may be the better choice - the only other choice is default of some type or other.

What's interesting is the method of printing/inflating. Those people closest to the printing press do better than those further away as the new money works through the economy. By the time the last people get the new money, prices have adjusted upwards so they get an inflation adjusted amount of zero. Those who get the money first get the full nominal face value. Schemes like QE put the new money into the hands of the big banks first. Helicopter money would put the money first into the hands of the average person. Government deficit spending puts it first into the hands of the industry selling the order, perhaps defense or perhaps road builders.

[Techdread]

Re: Anyone watching the emerging markets?

This bashing of other countries by the Trump administration in what it thinks is unfair trading will does not take into account the interconnected global economy.

China is the last place where things get assembled the real worth of goods is written in code that is done in the USA or by companies owned by American entities, focusing on the finished article is just pandering to those whom feel left out and not fixing the real problem.

America will lose big time if it tries to take on every where else, Already China is backing countries that America marginalises.

[thriftyandboringinohio]

Re: Anyone watching the emerging markets?

...America will lose big time if it tries to take on every where else, Already China is backing countries that America marginalises.

Probably right. I marvel at those people who think the USA can get everything it wants every time from every body if only it were tough enough. Mean enough. Strong enough. It seems to me the USA since 1950 has pushed this as far as it can be pushed, getting much of what it wants often. The USA built the whole global system of laws and finance like the UN, the WTO, the World bank, etc, and we gave ourselves an insider's advantage built into each one of them. If we infuriate the other major nations they will build replacement systems and lock the US out of controlling them. I hope we don't tear down those institutions and walk away from all those arrangements, most of them are pretty sweet deals. Losing the petrodollar is just the tip of that iceberg. We risk becoming like a washed-up celebrity, standing there shouting "don't you know who I am?!"