January 17, 2014

By Derek On January 17, 2014 Under Uncategorized

“I try to do the right thing with money. Save a dollar here and there, clip some coupons. Buy ten gold chains instead of 20. Four summer homes instead of eight.”LL Cool J

Scotland

What’s new?

Taking advantage of a strong USD we are back from a brief holiday to Canada as the 14th year of the third millennium begins. I was excited to see the United Nations has designated this year 2014, to be the “International Year of Family Farming.” Last year, in case you were wondering, was designated the “International Year of Water Cooperation.” With thrilling subjects like these one wonders why Hollywood isn’t calling. Latvia has officially adopted the euro and is now the 18th Eurozone country. Next month begins the Winter Olympics in Potemkin Village, Russia. And the referendum on Scottish Independence is scheduled to be held on my birthday. So much to look forward to this year.

After underperforming global equities in 2013 by 29%, emerging markets have started the year with a much diminished fan club. As I write this the 10 worst-performing stock markets so far this year are all in the emerging market category. The Shanghai SE Composite is off 4% already which is bad but the ignoble title holder is Mongolia: down 7.65% this month. GS is telling investors to slash allocations to EMs by a third and calling for a decade of underperformance to follow. (A decade! Seriously, who can see that far out?). MS and CS have also sounded off forecasting another lousy year for EM world, with MS labeling Brazil, India, Indonesia, S. Africa and Turkey, “The Fragile Five.” Currently, the MSCI EM Index is trading at 10X forecast 12-month earnings vs. 15X for developed markets. This is the largest valuation gap in eight years. But that isn’t calling in the punters yet.

 

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