Barron’s Dissects ETFs and Emerging Markets

Barron’s had some interesting stuff on both emerging markets and ETFs. There was a point counter point about emerging markets with Jim O’Neill from Goldman Sachs as the bull and Richard Bernstein as the bear. First a tip of the hat to O’Neill for making a point I have been making for a while now which is that the term emerging markets is out of date. It was odd that Barron’s did not find another emerging market analyst to make the bear case; Bernstein is more of a strategist and the mutual fund he runs is pretty broad. I took Bernstein’s argument to be more of a short term argument and that he thinks emerging markets will lead again in a couple of years or so. Both pointed to potential issues with inflation in some countries as being problematic, we know that China and Brazil are on the front burner for this issue. Given the global back drop and what appears to be secular problems that are nowhere near being solved for the US, Big Western Europe and Japan the cyclical threats cited in the article about emerging markets are small potatoes. If you are one to trade around cyclical events, of which I am not critical, you need to realize that a downturn is not the same thing as a decade-long roundtrip to nowhere. The cover story this week was about finding the best yielding ETFs. Unfortunately the article failed to mention that past dividends cannot be counted on in the future. There was a positive mention of client holding iShares TIPS ETF (TIP) because the yield now...

Barron’s Dissects ETFs and Emerging Markets

Barron’s had some interesting stuff on both emerging markets and ETFs. There was a point counter point about emerging markets with Jim O’Neill from Goldman Sachs as the bull and Richard Bernstein as the bear. First a tip of the hat to O’Neill for making a point I have been making for a while now which is that the term emerging markets is out of date. It was odd that Barron’s did not find another emerging market analyst to make the bear case; Bernstein is more of a strategist and the mutual fund he runs is pretty broad. I took Bernstein’s argument to be more of a short term argument and that he thinks emerging markets will lead again in a couple of years or so. Both pointed to potential issues with inflation in some countries as being problematic, we know that China and Brazil are on the front burner for this issue. Given the global back drop and what appears to be secular problems that are nowhere near being solved for the US, Big Western Europe and Japan the cyclical threats cited in the article about emerging markets are small potatoes. If you are one to trade around cyclical events, of which I am not critical, you need to realize that a downturn is not the same thing as a decade-long roundtrip to nowhere. The cover story this week was about finding the best yielding ETFs. Unfortunately the article failed to mention that past dividends cannot be counted on in the future. There was a positive mention of client holding iShares TIPS ETF (TIP) because the yield now...

More Signs that the Word "Emerging" Means Nothing

Heidi Moore had a post at Marketplace the other day about mutual fund managers moving more into emerging markets, even going to the extent of removing previous (artificial) limits on how much they could invest in emerging. Off the top there are two different thoughts here. The first one is whether a move by mutual fund companies to remove these limits could be a bell ringing on the space. A permanent bell seems ridiculous only because many of the countries thought of as emerging have decent fundamental underpinnings and will continue to have decent fundamental underpinnings for many years. So then a bell ringing could only realistically be cyclical and of course there are almost always markets facing normal cyclical issues. Normal investing and market behavior includes cyclical declines. If we are lucky there might be some warning that would allow for reducing exposure but any great ten year story will still include a couple of large declines. The other point I see here is one I’ve been making for a while now which is that term emerging market has lost most or all of its meaning. Each country is its pros, cons and attributes. Building a diversified portfolio can mean assessing the pros, cons and attributes of various countries and blending together different types of pros, cons and attributes to gain exposure to countries that will have different reactions to certain types of cyclical events. Of course this should not create the illusion that some countries should be expected to completely avoid the occasional panic that comes along. Before the financial crisis I set what turned out to...

More Signs that the Word “Emerging” Means Nothing

Heidi Moore had a post at Marketplace the other day about mutual fund managers moving more into emerging markets, even going to the extent of removing previous (artificial) limits on how much they could invest in emerging. Off the top there are two different thoughts here. The first one is whether a move by mutual fund companies to remove these limits could be a bell ringing on the space. A permanent bell seems ridiculous only because many of the countries thought of as emerging have decent fundamental underpinnings and will continue to have decent fundamental underpinnings for many years. So then a bell ringing could only realistically be cyclical and of course there are almost always markets facing normal cyclical issues. Normal investing and market behavior includes cyclical declines. If we are lucky there might be some warning that would allow for reducing exposure but any great ten year story will still include a couple of large declines. The other point I see here is one I’ve been making for a while now which is that term emerging market has lost most or all of its meaning. Each country is its pros, cons and attributes. Building a diversified portfolio can mean assessing the pros, cons and attributes of various countries and blending together different types of pros, cons and attributes to gain exposure to countries that will have different reactions to certain types of cyclical events. Of course this should not create the illusion that some countries should be expected to completely avoid the occasional panic that comes along. Before the financial crisis I set what turned out to...

The Rest of the EM Sector Funds Are Here

Emerging Global Shares, after a long time gap, filled out its suite of emerging market sector ETFs. There is some rebranding of the line and symbol changes for most of the existing funds that you can go to the website to learn more about if you are interested in that, I am more interested in whether or not there is any utility to the funds. From the big picture, the idea is that for investors willing to make sector decisions, being able to choose from domestic, developed foreign and developing foreign allows for a more precise allocation. Obviously thematic ETFs are part of this discussion too. Generally the group of EG funds is heavy in BRIC countries and South Africa with some other countries mixed in varying amounts, Mexico features prominently in a couple of funds. In eyeballing the funds some look very useful and some I wouldn’t have much interest in. The materials fund makes a great first impression. It is heaviest in South Africa followed by Russia, Brazil and China. It is a who’s who of platinum miners, industrial metals miners and coal companies with client holding Vale (VALE) being the largest name in the fund. I also like the telecom fund. It allocates 18% to China, 13% to Mexico and 11% each to South Africa and Brazil. If you look at the holdings you will see they cover a lot of ground in terms of small holdings from other countries. This sector, more than most of the others, should be able to easily cover a lot of ground because just about every country has a big...

The Rest of the EM Sector Funds Are Here

Emerging Global Shares, after a long time gap, filled out its suite of emerging market sector ETFs. There is some rebranding of the line and symbol changes for most of the existing funds that you can go to the website to learn more about if you are interested in that, I am more interested in whether or not there is any utility to the funds. From the big picture, the idea is that for investors willing to make sector decisions, being able to choose from domestic, developed foreign and developing foreign allows for a more precise allocation. Obviously thematic ETFs are part of this discussion too. Generally the group of EG funds is heavy in BRIC countries and South Africa with some other countries mixed in varying amounts, Mexico features prominently in a couple of funds. In eyeballing the funds some look very useful and some I wouldn’t have much interest in. The materials fund makes a great first impression. It is heaviest in South Africa followed by Russia, Brazil and China. It is a who’s who of platinum miners, industrial metals miners and coal companies with client holding Vale (VALE) being the largest name in the fund. I also like the telecom fund. It allocates 18% to China, 13% to Mexico and 11% each to South Africa and Brazil. If you look at the holdings you will see they cover a lot of ground in terms of small holdings from other countries. This sector, more than most of the others, should be able to easily cover a lot of ground because just about every country has a big...