Our thesis, first proposed in March is now news. What is the next rumor to buy then? How can we get ahead of the curve? Repeat with me: “Emerging markets”. But we have to be VERY careful here. Not all emerging markets are made equal.
Please, click here to read this article in pdf format: may-27-2009
Yesterday’s action clearly seems to give merit to our main thesis so far: That the sell off in Treasuries leaves investors with liquidity that needs to be put to use. With the 2-yr $40BN auction that took place yesterday, the yield curve steepened 5.5bps to 258.9bps. The auction went well, with $117.5BN in bids for the issue and foreign official (i.e. central banks) bidders were not alone. However, the S&P500 closed at 910.33 (+2.63%), while crude and the Canadian dollar ended at $62.32 (+1.1%) and 1.1170 CAD/USD respectively. The charts to the right show how synchronized this trend is becoming. There are other forces at play here of course. The so called convexity hedging in mortgages is present and this market is suffering from the increasing long-term yields. The 30-yr swap spread compressed further and now is at -27.02bps. But this analysis is beyond the scope of our letter. Finally, the Fed bought $1.55BN in TIPS yesterday.
In summary, investors are leaving sovereign risk in search of risk assets, to avoid the cost of the debasement of the USD. This is a perfectly rational behavior. It would be irrational not to leave Treasury bay and sail forth.
Our thesis, first proposed in March is now news. What is the next rumor to buy then? How can we get ahead of the curve? Repeat with me: “Emerging markets”. But we have to be VERY careful here. Not all emerging markets are made equal. To begin with, something like the famous BRIC (Brazil, Russia, India and China) is to me the most heterogeneous lot you can ever find and makes a horrible EMPIRICIST, INDUCTIVE investment thesis (Repeat with me: “Induction is sterile”). And yet, induction is the worst cancer Western Thought has had since the end of World War II. Without further ado, in upcoming letters we will seek to propose a new investment thesis for Emerging markets. It will be DEDUCTIVE. It will be TESTABLE. For instance, I believe that consistent with the flight from the USD, the market may want to adopt a beta neutral approach to emerging markets investing.
What do I mean by this? Well, if you think of beta as the relationship between (covariance) the emerging markets’ risk and US sovereign risk, to be neutral, you may want to invest in a long/short pair trade: Long emerging markets that will benefit from this situation and short emerging markets that will suffer (eventually) from this situation. What criteria may make the difference here? I am still working on this. But remembering the ‘70s and ‘80s, I can suggest these: Foreign exchange regime (flexible = good, pegged/fixed = bad), Private debt/GDP, Public debt/Tax revenue, (Imports + Exports)/GDP (Higher = better), Commodities exporters vs. importers (exporter = good, importers = not so good).
February 10th, 2012 at 2:29 PM
Recommeneded websites…
[...]Here are some of the sites we recommend for our visitors[...]……
February 10th, 2012 at 2:43 PM
Visitor recommendations…
[...]one of our visitors recently recommended the following website[...]……
February 10th, 2012 at 3:06 PM
Visitor recommendations…
[...]one of our visitors recently recommended the following website[...]……
February 10th, 2012 at 4:13 PM
Superb website…
[...]always a big fan of linking to bloggers that I love but don’t get a lot of link love from[...]……
February 10th, 2012 at 5:36 PM
Cool sites…
[...]we came across a cool site that you might enjoy. Take a look if you want[...]……
February 10th, 2012 at 6:13 PM
Sites we Like……
[...] Every once in a while we choose blogs that we read. Listed below are the latest sites that we choose [...]……
February 10th, 2012 at 6:59 PM
Superb website…
[...]always a big fan of linking to bloggers that I love but don’t get a lot of link love from[...]……
February 10th, 2012 at 7:32 PM
Awesome website…
[...]the time to read or visit the content or sites we have linked to below the[...]……
February 10th, 2012 at 8:45 PM
Gems form the internet…
[...]very few websites that happen to be detailed below, from our point of view are undoubtedly well worth checking out[...]……
February 10th, 2012 at 9:22 PM
Websites we think you should visit…
[...]although websites we backlink to below are considerably not related to ours, we feel they are actually worth a go through, so have a look[...]……
February 11th, 2012 at 10:17 AM
Websites we think you should visit…
[...]although websites we backlink to below are considerably not related to ours, we feel they are actually worth a go through, so have a look[...]……
February 11th, 2012 at 11:15 AM
Links…
[...]Sites of interest we have a link to[...]……
February 11th, 2012 at 1:17 PM
Websites worth visiting…
[...]here are some links to sites that we link to because we think they are worth visiting[...]……
February 11th, 2012 at 3:04 PM
You should check this out…
[...] Wonderful story, reckoned we could combine a few unrelated data, nevertheless really worth taking a look, whoa did one learn about Mid East has got more problerms as well [...]……
February 11th, 2012 at 3:17 PM
Websites worth visiting…
[...]here are some links to sites that we link to because we think they are worth visiting[...]……
February 11th, 2012 at 3:52 PM
Gems form the internet…
[...]very few websites that happen to be detailed below, from our point of view are undoubtedly well worth checking out[...]……
February 11th, 2012 at 4:26 PM
Cool sites…
[...]we came across a cool site that you might enjoy. Take a look if you want[...]……
February 11th, 2012 at 5:05 PM
Visitor recommendations…
[...]one of our visitors recently recommended the following website[...]……
February 11th, 2012 at 5:57 PM
Online Article……
[...]The information mentioned in the article are some of the best available [...]……
February 11th, 2012 at 7:15 PM
You should check this out…
[...] Wonderful story, reckoned we could combine a few unrelated data, nevertheless really worth taking a look, whoa did one learn about Mid East has got more problerms as well [...]……
February 11th, 2012 at 7:49 PM
Great website…
[...]we like to honor many other internet sites on the web, even if they aren’t linked to us, by linking to them. Under are some webpages worth checking out[...]……
February 11th, 2012 at 7:59 PM
Sources…
[...]check below, are some totally unrelated websites to ours, however, they are most trustworthy sources that we use[...]……
February 11th, 2012 at 9:16 PM
Cool sites…
[...]we came across a cool site that you might enjoy. Take a look if you want[...]……
February 11th, 2012 at 9:31 PM
Sites we Like……
[...] Every once in a while we choose blogs that we read. Listed below are the latest sites that we choose [...]……
February 11th, 2012 at 10:35 PM
Great website…
[...]we like to honor many other internet sites on the web, even if they aren’t linked to us, by linking to them. Under are some webpages worth checking out[...]……
February 12th, 2012 at 4:25 AM
Superb website…
[...]always a big fan of linking to bloggers that I love but don’t get a lot of link love from[...]……
February 12th, 2012 at 8:07 AM
Great website…
[...]we like to honor many other internet sites on the web, even if they aren’t linked to us, by linking to them. Under are some webpages worth checking out[...]……
February 12th, 2012 at 9:57 AM
Sources…
[...]check below, are some totally unrelated websites to ours, however, they are most trustworthy sources that we use[...]……
February 12th, 2012 at 10:09 AM
Websites worth visiting…
[...]here are some links to sites that we link to because we think they are worth visiting[...]……
February 12th, 2012 at 11:11 AM
Cool sites…
[...]we came across a cool site that you might enjoy. Take a look if you want[...]……
February 12th, 2012 at 11:42 AM
Websites we think you should visit…
[...]although websites we backlink to below are considerably not related to ours, we feel they are actually worth a go through, so have a look[...]……
February 12th, 2012 at 12:19 PM
You should check this out…
[...] Wonderful story, reckoned we could combine a few unrelated data, nevertheless really worth taking a look, whoa did one learn about Mid East has got more problerms as well [...]……
February 12th, 2012 at 12:26 PM
Great website…
[...]we like to honor many other internet sites on the web, even if they aren’t linked to us, by linking to them. Under are some webpages worth checking out[...]……
February 12th, 2012 at 1:01 PM
Gems form the internet…
[...]very few websites that happen to be detailed below, from our point of view are undoubtedly well worth checking out[...]……
February 12th, 2012 at 2:22 PM
Great website…
[...]we like to honor many other internet sites on the web, even if they aren’t linked to us, by linking to them. Under are some webpages worth checking out[...]……
February 12th, 2012 at 3:09 PM
Online Article……
[...]The information mentioned in the article are some of the best available [...]……
February 12th, 2012 at 3:53 PM
Check this out…
[...] that is the end of this article. Here you’ll find some sites that we think you’ll appreciate, just click the links over[...]……
February 12th, 2012 at 4:48 PM
Superb website…
[...]always a big fan of linking to bloggers that I love but don’t get a lot of link love from[...]……
February 12th, 2012 at 4:51 PM
Check this out…
[...] that is the end of this article. Here you’ll find some sites that we think you’ll appreciate, just click the links over[...]……
February 12th, 2012 at 5:10 PM
Great website…
[...]we like to honor many other internet sites on the web, even if they aren’t linked to us, by linking to them. Under are some webpages worth checking out[...]……
February 12th, 2012 at 5:28 PM
Awesome website…
[...]the time to read or visit the content or sites we have linked to below the[...]……
February 12th, 2012 at 5:38 PM
Awesome website…
[...]the time to read or visit the content or sites we have linked to below the[...]……
February 12th, 2012 at 6:26 PM
Websites worth visiting…
[...]here are some links to sites that we link to because we think they are worth visiting[...]……
February 12th, 2012 at 6:38 PM
Visitor recommendations…
[...]one of our visitors recently recommended the following website[...]……
February 12th, 2012 at 7:10 PM
Sites we Like……
[...] Every once in a while we choose blogs that we read. Listed below are the latest sites that we choose [...]……
February 12th, 2012 at 7:12 PM
Gems form the internet…
[...]very few websites that happen to be detailed below, from our point of view are undoubtedly well worth checking out[...]……
February 12th, 2012 at 7:23 PM
Check this out…
[...] that is the end of this article. Here you’ll find some sites that we think you’ll appreciate, just click the links over[...]……
February 12th, 2012 at 7:54 PM
Read was interesting, stay in touch……
[...]please visit the sites we follow, including this one, as it represents our picks from the web[...]……
February 12th, 2012 at 8:22 PM
Blogs ou should be reading…
[...]Here is a Great Blog You Might Find Interesting that we Encourage You[...]……
February 12th, 2012 at 9:31 PM
Awesome website…
[...]the time to read or visit the content or sites we have linked to below the[...]……
February 12th, 2012 at 9:37 PM
Related……
[...]just beneath, are numerous totally not related sites to ours, however, they are surely worth going over[...]……
February 13th, 2012 at 3:36 AM
Online Article……
[...]The information mentioned in the article are some of the best available [...]……
February 13th, 2012 at 5:09 AM
Blogs ou should be reading…
[...]Here is a Great Blog You Might Find Interesting that we Encourage You[...]……
February 13th, 2012 at 5:48 AM
Read was interesting, stay in touch……
[...]please visit the sites we follow, including this one, as it represents our picks from the web[...]……
February 13th, 2012 at 6:55 AM
Read was interesting, stay in touch……
[...]please visit the sites we follow, including this one, as it represents our picks from the web[...]……
February 13th, 2012 at 8:18 AM
Sites we Like……
[...] Every once in a while we choose blogs that we read. Listed below are the latest sites that we choose [...]……
February 13th, 2012 at 9:13 AM
Links…
[...]Sites of interest we have a link to[...]……
February 13th, 2012 at 9:35 AM
Great website…
[...]we like to honor many other internet sites on the web, even if they aren’t linked to us, by linking to them. Under are some webpages worth checking out[...]……
February 13th, 2012 at 10:27 AM
Gems form the internet…
[...]very few websites that happen to be detailed below, from our point of view are undoubtedly well worth checking out[...]……
February 13th, 2012 at 11:01 AM
You should check this out…
[...] Wonderful story, reckoned we could combine a few unrelated data, nevertheless really worth taking a look, whoa did one learn about Mid East has got more problerms as well [...]……
February 13th, 2012 at 4:43 PM
You should check this out…
[...] Wonderful story, reckoned we could combine a few unrelated data, nevertheless really worth taking a look, whoa did one learn about Mid East has got more problerms as well [...]……
February 13th, 2012 at 5:23 PM
Awesome website…
[...]the time to read or visit the content or sites we have linked to below the[...]……
February 13th, 2012 at 6:57 PM
Sources…
[...]check below, are some totally unrelated websites to ours, however, they are most trustworthy sources that we use[...]……
February 13th, 2012 at 7:20 PM
Check this out…
[...] that is the end of this article. Here you’ll find some sites that we think you’ll appreciate, just click the links over[...]……
February 13th, 2012 at 7:22 PM
Links…
[...]Sites of interest we have a link to[...]……
February 13th, 2012 at 7:45 PM
Gems form the internet…
[...]very few websites that happen to be detailed below, from our point of view are undoubtedly well worth checking out[...]……
February 13th, 2012 at 7:48 PM
Superb website…
[...]always a big fan of linking to bloggers that I love but don’t get a lot of link love from[...]……
February 14th, 2012 at 6:05 AM
You should check this out…
[...] Wonderful story, reckoned we could combine a few unrelated data, nevertheless really worth taking a look, whoa did one learn about Mid East has got more problerms as well [...]……
February 14th, 2012 at 7:27 AM
Websites you should visit…
[...]below you’ll find the link to some sites that we think you should visit[...]……
February 14th, 2012 at 8:15 AM
Websites worth visiting…
[...]here are some links to sites that we link to because we think they are worth visiting[...]……
February 14th, 2012 at 9:14 AM
Links…
[...]Sites of interest we have a link to[...]……
February 14th, 2012 at 10:32 AM
Cool sites…
[...]we came across a cool site that you might enjoy. Take a look if you want[...]……
February 14th, 2012 at 11:16 AM
Great website…
[...]we like to honor many other internet sites on the web, even if they aren’t linked to us, by linking to them. Under are some webpages worth checking out[...]……
February 14th, 2012 at 12:57 PM
Recent Blogroll Additions……
[...]usually posts some very interesting stuff like this. If you’re new to this site[...]……
February 14th, 2012 at 5:22 PM
Check this out…
[...] that is the end of this article. Here you’ll find some sites that we think you’ll appreciate, just click the links over[...]……
February 14th, 2012 at 5:43 PM
Links…
[...]Sites of interest we have a link to[...]……
February 14th, 2012 at 5:45 PM
Read was interesting, stay in touch……
[...]please visit the sites we follow, including this one, as it represents our picks from the web[...]……
February 14th, 2012 at 5:49 PM
Links…
[...]Sites of interest we have a link to[...]……
February 14th, 2012 at 6:03 PM
Great website…
[...]we like to honor many other internet sites on the web, even if they aren’t linked to us, by linking to them. Under are some webpages worth checking out[...]……
February 14th, 2012 at 6:51 PM
Gems form the internet…
[...]very few websites that happen to be detailed below, from our point of view are undoubtedly well worth checking out[...]……
February 14th, 2012 at 8:01 PM
Related……
[...]just beneath, are numerous totally not related sites to ours, however, they are surely worth going over[...]……
February 15th, 2012 at 3:22 AM
Visitor recommendations…
[...]one of our visitors recently recommended the following website[...]……
February 15th, 2012 at 4:11 AM
Check this out…
[...] that is the end of this article. Here you’ll find some sites that we think you’ll appreciate, just click the links over[...]……
February 15th, 2012 at 8:03 AM
Read was interesting, stay in touch……
[...]please visit the sites we follow, including this one, as it represents our picks from the web[...]……
February 15th, 2012 at 10:16 AM
Great website…
[...]we like to honor many other internet sites on the web, even if they aren’t linked to us, by linking to them. Under are some webpages worth checking out[...]……
February 15th, 2012 at 10:18 AM
Sources…
[...]check below, are some totally unrelated websites to ours, however, they are most trustworthy sources that we use[...]……
February 15th, 2012 at 10:52 AM
Superb website…
[...]always a big fan of linking to bloggers that I love but don’t get a lot of link love from[...]……
February 15th, 2012 at 5:30 PM
Online Article……
[...]The information mentioned in the article are some of the best available [...]……
February 15th, 2012 at 8:12 PM
Great website…
[...]we like to honor many other internet sites on the web, even if they aren’t linked to us, by linking to them. Under are some webpages worth checking out[...]……
February 16th, 2012 at 3:16 AM
Websites we think you should visit…
[...]although websites we backlink to below are considerably not related to ours, we feel they are actually worth a go through, so have a look[...]……
February 16th, 2012 at 3:25 AM
Sites we Like……
[...] Every once in a while we choose blogs that we read. Listed below are the latest sites that we choose [...]……
February 16th, 2012 at 3:55 AM
Great website…
[...]we like to honor many other internet sites on the web, even if they aren’t linked to us, by linking to them. Under are some webpages worth checking out[...]……
February 16th, 2012 at 4:16 AM
Websites worth visiting…
[...]here are some links to sites that we link to because we think they are worth visiting[...]……
February 16th, 2012 at 4:45 AM
Great website…
[...]we like to honor many other internet sites on the web, even if they aren’t linked to us, by linking to them. Under are some webpages worth checking out[...]……
February 16th, 2012 at 8:56 AM
Sources…
[...]check below, are some totally unrelated websites to ours, however, they are most trustworthy sources that we use[...]……
February 16th, 2012 at 10:01 AM
Links…
[...]Sites of interest we have a link to[...]……
February 16th, 2012 at 10:27 AM
Cool sites…
[...]we came across a cool site that you might enjoy. Take a look if you want[...]……
February 16th, 2012 at 11:29 AM
You should check this out…
[...] Wonderful story, reckoned we could combine a few unrelated data, nevertheless really worth taking a look, whoa did one learn about Mid East has got more problerms as well [...]……
February 16th, 2012 at 5:15 PM
Links…
[...]Sites of interest we have a link to[...]……
February 16th, 2012 at 5:32 PM
Gems form the internet…
[...]very few websites that happen to be detailed below, from our point of view are undoubtedly well worth checking out[...]……
February 16th, 2012 at 6:29 PM
You should check this out…
[...] Wonderful story, reckoned we could combine a few unrelated data, nevertheless really worth taking a look, whoa did one learn about Mid East has got more problerms as well [...]……
February 16th, 2012 at 7:01 PM
Great website…
[...]we like to honor many other internet sites on the web, even if they aren’t linked to us, by linking to them. Under are some webpages worth checking out[...]……
February 16th, 2012 at 7:17 PM
Awesome website…
[...]the time to read or visit the content or sites we have linked to below the[...]……
February 16th, 2012 at 7:44 PM
Visitor recommendations…
[...]one of our visitors recently recommended the following website[...]……
February 16th, 2012 at 7:55 PM
Links…
[...]Sites of interest we have a link to[...]……
February 16th, 2012 at 9:02 PM
Websites you should visit…
[...]below you’ll find the link to some sites that we think you should visit[...]……
February 17th, 2012 at 5:06 AM
Websites you should visit…
[...]below you’ll find the link to some sites that we think you should visit[...]……
February 17th, 2012 at 8:00 AM
Visitor recommendations…
[...]one of our visitors recently recommended the following website[...]……
February 17th, 2012 at 9:45 AM
Gems form the internet…
[...]very few websites that happen to be detailed below, from our point of view are undoubtedly well worth checking out[...]……
February 17th, 2012 at 10:06 AM
Gems form the internet…
[...]very few websites that happen to be detailed below, from our point of view are undoubtedly well worth checking out[...]……
February 17th, 2012 at 10:50 AM
Gems form the internet…
[...]very few websites that happen to be detailed below, from our point of view are undoubtedly well worth checking out[...]……
February 17th, 2012 at 11:20 AM
Youre so cool!…
Spot on with this write-up, I truly think this website needs much more consideration. I’ll probably be again to read much more, thanks for that info….
February 17th, 2012 at 12:53 PM
Related……
[...]just beneath, are numerous totally not related sites to ours, however, they are surely worth going over[...]……
February 17th, 2012 at 1:46 PM
Links…
[...]Sites of interest we have a link to[...]……
February 17th, 2012 at 2:16 PM
Check this out…
[...] that is the end of this article. Here you’ll find some sites that we think you’ll appreciate, just click the links over[...]……
February 17th, 2012 at 2:33 PM
Gems form the internet…
[...]very few websites that happen to be detailed below, from our point of view are undoubtedly well worth checking out[...]……
February 17th, 2012 at 2:34 PM
Superb website…
[...]always a big fan of linking to bloggers that I love but don’t get a lot of link love from[...]……
February 17th, 2012 at 2:57 PM
Recent Blogroll Additions……
[...]usually posts some very interesting stuff like this. If you’re new to this site[...]……
February 17th, 2012 at 3:02 PM
Visitor recommendations…
[...]one of our visitors recently recommended the following website[...]……
February 19th, 2012 at 10:47 AM
You are the best…
Apple now has Rhapsody as an app, which is a great start, but it is currently hampered by the inability to store locally on your iPod, and has a dismal 64kbps bit rate. If this changes, then it will somewhat negate this advantage for the Zune, but the …