We recently wrote a brief--Have An Escape Route--about following the news but make sure you know where the exits are.
Following the news is akin to following the money and until recently, for nearly the last four years, that money was flowing into emerging markets. According to a piece in today's WSJ between 2009 and 2012 private money flowing into emerging markets totaled $4.2 trillion, "more than all the money invested in the Tokyo Stock Exchange."
A nice piece of change anyway one chooses to count it. Troubles in Emerging Market Land seem to be spreading. From Brazil to China to India and Turkey it appears that the prospects of slower growth and rising interest rates are taking their toll.
End result: investors are fleeing as they yank their capital from bond and equity funds. Like rigor mortis, reality has a way of setting in. Toss in political unrest and the slowing of the global locomotive most know as China and it looks more and more like another round of investor hand-wringing time.
A quick scan of some currencies tells much of the tale. Brazil's real is down more than 20% this year. The South African rand has lost a similar amount against the US dollar as gold prices tanked and to the north the Canadian loonie is, well, looking a bit loonie owing to a high level of household debt, a looming real estate bubble and weak energy prices.
Recall back in 2009 when the EU turmoil erupted many investing soothsayers like Bill Gross and others touted EMs, especially their debt instruments. Have they called you recently and warned you where the exits were located?
Much of this could be summarized by one word--growth. Investors flock to it. But they get their hats over non-growth. How much non-growth? Probably a lot more than MSM is predicting.
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