Ignore the Know-Nothings Pushing Emerging Markets Now More than Ever

Ignore the Know-Nothings Pushing Emerging Markets Now More than Ever

Every couple of hours, CNBC brings in a money management type to ask them what they are buying (and selling).   Anyone who has been watching CNBC for more than a decade knows that this is a good time to hit the mute button.

Sometimes, however, I leave the sound on just to see what direction the fish are swimming in.

Over the last couple of days, I’ve seen the swimming going in a direction that is wholly absurd and brings with it the risk of immediate and catastrophic losses.

I have written about the fascination of know-nothing money managers with emerging markets before and I have highlighted how last year Brazil’s crash occurred just after all of these people said to buy

More importantly, I have warned about an impending EM meltdown.   Turkey and Argentina have already begun crashing, but this will be a long interconnected process that will take years to play out.   

Anyone who believes that the valuations in emerging markets have become compelling should read this recent Wall Street Journal piece which points out that the valuations in Turkey and Argentina remain above US levels even after those countries have begun crashing.  And, those who insist that emerging markets are now independent of each other and that the contagion of a  1998-style crisis will not occur would do well to read Satyajit Das of Bloomberg.

When someone appears on CNBC or in your face and tells you that “this time is different”, mute it or show them the door.

Image: Courtesy: TribuneIndia.com

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