Are Emerging Markets Bottoming?

We (the U.S. markets) officially hit a bear market when we were down 20% from the highs.  Everyone was complaining the market was awful in the U.S.  Have you looked at the emerging markets lately?  While we were busy falling 20%, they were falling 40-60%.  They dropped for two reasons.  First, they got way too extended at the end of 2007.  Secondly, investors began to sniff out global growth slowing down.  So, down they went.

What are we left with?  Global growth will continue to slow which is good in the short-term.  We don’t want all those markets growing too fast with inflation all over the place.  So, the various central banks are raising rates, tightening money supply and trying to tap the breaks.  The various stock markets have anticipated this and fell hard.  But, let’s remember they are slowing from 11% to 9%.  This is compared with our economy growing at 1-2% per year.  Some emerging market stocks look extremely cheap to me. 

In the last few days, I’ve been buying E-House China (EJ) which is the largest real estate company in China and an India ETN (exchange traded note).  I believe these can make you quick money in the short run for a trade or you can buy them as a long-term investment if you want to put up with more volatility.

So, maybe the emerging markets are bottoming before ours.  As for our markets, they are still going to struggle in the next few weeks I believe.  This rally has been very weak internally.  If we keep rising on weak demand and low volume, I’ll be adding to my shorts.

2 Responses to “Are Emerging Markets Bottoming?”

  1. 1 Lee August 7, 2008 at 6:33 am

    Thank you for your thoughts on market direction.

    I thought I heard on the Aug. 6th broadcast as Dan Frishberg was speaking with Art Laffer, that Art was saying that things may be different this time and that we could be seeing the market go up from here – caught the tail end so could not be sure – sounds a bit contrary to what your suggesting – add to overall market short (aka. SDS) when market goes up the way it has over the last few days………

  2. 2 keggerss August 7, 2008 at 8:55 am

    You might have heard that. We always don’t agree. Generally we do but perhaps not in this case. I belive there is more downside to come but we’re not at an extreme one way or the other so I’m not too short and not too long.

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