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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.
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:
https://www.youtube.com/watch?v=gLyoBCIBCW8?t=1343
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
I realise you don’t give stock tips. But could you please share which brazilian utilities (and others) are at 5x earnings. I’ve done a search on brazil recently and didn’t see anything that cheap!
SBS & ELP are near there on a forward earnings basis, and past earnings make those estimates reasonable. The compounded growth of fully converted book value is considerable for both of them. Of course, after the revolution in 2020, it all was wiped out, but it looked promising! 😉
Thanks for your leads. Take a peek at the Malaysia ‘EWM’ country ETF. Seems to have bottomed out after a horrendous collapse, has a huge dividend that is re-invested into new EWM etf units (no payout in cash, which is a tax advantaged plus). Now that the previous governing crooks just have been kicked out there after the election of past week, some peace may finally come out of it all, once another tribe gets in the leadership role. And maybe the corruption scandal will get a solution and move off the radar screen forever too. Anyway, Malaysia is now economically turning around, their commodities (offshore crude oil + palm oil + wood + food + health care tourism) are in heavy demand from EU and China, their electronics manufacturing exports are also going well with the e-commerce and cryptocraze demand, China is building several ports and a huge railroad link between them to circumvent the Mallacca strait bottleneck, and the Saudi’s are investing heavily in a new petrochem mega plant complex there too. Their Ringgit currency has been trashed down to ‘restroom money’ status, but that is a plus, since it makes their imports expensive and exports cheap, which is a plus when most of their exports are paid in USD/Euro/Yen or Yuan, and most of your imports are from China. I just bought some EWM’s recently, and am also selling october puts on EWM, to juice the returns a bit up (10% per year return just by selling 6-months duration put options on EWM, without taking into account the supplementary received dividend and possible ETF price increase down the road).