Any comments on the following emerging markets:
Giving a specific answer is tough because I do not know this person, what he owns or how much he owns.
The comment says he has an exit strategy, this is the most important thing. In a given situation a particular exit strategy may not work but the discipline to actually act on your plan is the important thing. Over time an investor can learn more about their plan's strengths and weaknesses and let it evolve over time. Where this stuff is concerned I am not really trying to be exactly right, I am trying to miss most of down a lot, should it happen.
I was public about when I reduced emerging market exposure so it is tough for me to say he should sell now if he has not sold any previously. Leaving what the market might do out of the equation, the reader now knows whether he has too much emerging market exposure (this is totally a personal decision) or not. If you can't handle the volatility you should reduce regardless of what might happen next. Sleep is more important than basis points.
One important thing is that I would never advise zero exposure to emerging markets. I believe in having at least a little in everything. Emerging markets will turn around and snap back and guessing when that will happen is probably tough to do. Having at least some EM in your portfolio means you don't have to be as correct as having zero and guessing when to add.
As for the countries he mentions in his question, they all have obvious fundamental catalysts that I believe in and they all have potential problems that are playing out now. The asset class has always been volatile and will always be volatile; there is no getting away from that.
This is similar to the reader here asking about the Russia Fund. He said he had 10% in the Third Millennium Russia Fund. First of all that is a lot, regardless of the future direction. Russia is no going out of business, the Rosneft IPO will likely create more investor excitement for Russia but that is scheduled for July and the energy theme is not over. Russia is caught up in the sell the emerging markets trade now under way. I would be guessing as to whether it is over yet (my guess is that most but not all of the selling is done, just a guess). Is the 10% before of after the decline? That would be way too much for me. George is right, the stars of the fund means nothing.
One administrative note to follow up on the business from yesterday; I have this site and write the way I do because it is fun for me. I enjoy trying to help people so whatever your expectations are, you need to get a grasp of that point. Thanks for the positive comments and yes it is water off my back.
9 comments:
Roger,
I have 25% of my Fund exposure in Emerging Markets and Russia. I have it for the long term. YES, I got whacked on Eastern Europe. I have lost 30% of what I had, BUT I am still 20% up. This drop is over a 2 week period. Not sure if I have seen anything like that other then a disaster and none have occured. I think the OTHER writer was asking a pointed question as I am. DO WE LET IT RIDE AT THIS POINT OR DO WE SELL INTO THE PANIC?????I think we were both hoping you had a opinion as to what these markets would be doing over the next little while.
I'm sorry I can't decide for you.
25% in emerging markets is way more than I have. I target about 7% or so. I can't put myself in the shoes of wanting to have that much exposure. I reduced a while ago and I am done reducing.
Another 20% drop might mean 2 percentage points comes off the overall portfolio for my clients. I have no worry about that.
I think a 5% whack from here to the over all portfolio would be a different story.
I have unyielding faith in the theme over a period of years but still, that leads me to own much less than you have. I mentioned earlier today that I think most of the selling is done but I have less skin in the game and so the consequence of being wrong is much less than for you.
Sorry but that is the best I can do
To all emerging market investors: Excellent commentary by Don Coxe here
http://www.bmoharris.com/webcast.asp
explaining his reasons for the steep correction in metals, emerging markets and other speculative investments (45 minutes of audio).
Regardless, I have been investing in emerging markets for more than 10 years and honestly, corrections like these go with the territory. I look at the long term performance, say the last 10 years - Latin America - up more than 200%, Asia - up more than 120% and I'm sure Eastern Europe/Russia are way ahead as well.
Reduce exposure? No sireee! If anything, I will add some once these markets settle down a bit. Patience is the key......
To all emerging market investors: Excellent commentary by Don Coxe here
http://www.bmoharris.com/webcast.asp
explaining his reasons for the steep correction in metals, emerging markets and other speculative investments (45 minutes of audio).
Regardless, I have been investing in emerging markets for more than 10 years and honestly, corrections like these go with the territory. I look at the long term performance, say the last 10 years - Latin America - up more than 200%, Asia - up more than 120% and I'm sure Eastern Europe/Russia are way ahead as well.
Reduce exposure? No sireee! If anything, I will add some once these markets settle down a bit. Patience is the key.
the markets are telling WISE investors to head to cash until October. This market will be at a lower level in 4 months.
Emerging Market plays are a suckers game. Take any leftover profits and head to cash.
The charts say EEM is heading lower to the 80's range. Get out on any strength.
and Roger, thanks for a job, done.
MXAM is worth a hard look at this price. Do your own due diligence but this company has huge potential.
Anyone with a bet as large as 25% and yet is fishing around for advice like Dorothy searching for the Wizard is making a big mistake. No one should have 25% stake in anything unless their convictions about the investment are solid.
I've been reading this blog for a little while and what Roger is saying is that he is not an Emerging Markets equity expert. He has exposure there as a diversification and because he does believe in the long term outperformance of the asset class. But he manages his risk there on a short leash because he is not an expert. No one can be an expert on everything.
No one should be 25% into any asset sub-class unless they are an expert. And that means having your own view and in emerging markets equity that view had better be able to withstand some pretty big market moves. The time to ask whether you should be there is not after 30% whackage. The time to have asked that question is about 2 months when you were sitting on 50% gains.
My advice to you would be to bail, as you can't handle EM equity. Otherwise you would have bailed 20% ago or been buying more now. Not fishing around blogs for advice.
25% is a little excessive, however, the return on this risk is worth the overweight stance. Over the last 3 years, such a portfolio probably cleaned house. However, corrections like these tend to wipe out almost a year's worth of gains in a jiffy. So as long as the investor is taking periodic profits, selling into strength and buying weakness, kudos to him for being brave enough to buy into the emerging markets. Of course, I am wrongfully considering all international markets as emerging markets. Singapore, Germany, Egypt are emerging markets by my standards.
-- Faisal Laljee
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