February 28, 2014

By Derek On March 1, 2014 Under Uncategorized

“Sell down to the sleeping point.” Jesse Livermore


Markets (in general) are going up so what is there to worry about? I worry that we may be getting ahead of ourselves and it is keeping me awake. I tried counting sheep but have decided instead to count the warning signs. There are several that we will look at now to determine if we should go with them or go with the sheep and keep buying?

At the beginning of the year we looked at the meltdown in emerging markets and concluded it was overdone and that investors would soon separate the wheat from the chaff. That is what seems to have happened thus far. While fast money in equity markets panicked, fixed income demand for EM debt remained encouragingly stalwart. According to Dealogic, EM governments and agencies have sold $29.8 bn worth of bonds so far this year – the highest level on record. Indonesia and Mexico both successfully flogged US$4 bn in debt and even tiny Slovenia managed to pitch out the door a $3.5 bn note (equivalent to $1,750 for every man, woman and child in the country). Slovenia may be unique, as the official Slovenian Tourist Board takes pains to point out on their website: “Slovenia is the only country in Europe that combines the Alps, the Mediterranean, the Pannonian Plain and the Karst.” I love Karst.

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