Anyone watching the emerging markets?

[dcarrigg]

Strong dollar + interest rate increases + deep debts + dollar denominated debts are going to do some funny things.

Turkey looks ready to pop. Has for a while.


Meanwhile, Brazil and others in SA aren't looking as bad, but not so great either:

[jk]

Re: Anyone watching the emerging markets?

have any overall opinion on the dollar? bull market or countertrend rally?

[touchring]

Re: Anyone watching the emerging markets?

Strong dollar + interest rate increases + deep debts + dollar denominated debts are going to do some funny things.

From what I can see, the US is bailing out the emerging economies by consuming excessively because after 20 years of bubble economy, everyone is so bogged down by high mortgages, there isn't much left to buy the plastic and electronic crap that stores like Amazon sells.

China is a good example where apartment prices in tier 1 cities have gone up like 1000% since 20 years ago. Wages have not gone up by 1000%.

The majority of Chinese are too broke after paying for the 25-30 year salary mortgages. The majority can only afford 1 kid, many can't even afford to get married. There maybe a small 1-2% political and business elites that buys a lot of luxury goods from Europe but they cannot replace the American middle class. Apple products are an exception.... https://www.independent.co.uk/life-s...-10501755.html

[dcarrigg]

Re: Anyone watching the emerging markets?

have any overall opinion on the dollar? bull market or countertrend rally?

This year has been about the highest we've seen it since before the 2003 Iraq War. And I agree with grg's premise--there's still nothing safer out there.

Stocks and real estate are already expensive. Other currencies don't look good either. Just going by mega-region, very few bright spots. SA looks awful. EUR looks bad. ME looks like a tinder box. ASIA's okay but weaker than in the recent past, etc.

Process of elimination makes me suspect that means at least in the short-med run there should be a lot of demand for dollars. More than there is today. Seems like the fed plans on continued slow rate hikes.

[touchring]

Re: Anyone watching the emerging markets?

ASIA's okay but weaker than in the recent past, etc.

If the US continues buying plastic and electronic crap, East Asia will be doing ok, until the demographic time bomb hits in about 10 years. They would have to think of a way to reduce the proportion of over 60s by then.

https://www.statista.com/statistics/...se-population/

[thriftyandboringinohio]

Re: Anyone watching the emerging markets?

If the US continues buying plastic and electronic crap, East Asia will be doing ok, until the demographic time bomb hits in about 10 years. They would have to think of a way to reduce the proportion of over 60s by then.

https://www.statista.com/statistics/...se-population/

Thanks touchring.

The low cost regions of the world are coming up the curve rapidly, moving from cheap and easy consumer goods through electronics and medical device up to complex durable goods. I think that has always happened. When I was a teenager we thought that way about Japan, and in the 1700s and 1800s England thought that way about the United States.

Today these three cars are manufactured entirely in China: the Buick Envision, the Cadillac CT6 Plug-in Hybrid, and the Volvo S60 Inscription.

I fully expect that in the next few years Southeast Asia will be manufacturing tricky chemical feed stocks and pharmaceuticals, complete jet airliners, and all manner of complex goods. It's inevitable that when places build factories making cheap commodity junk, the people in those factories learn how to make the more advanced products. In my lifetime I might fly in a wide body jet airliner designed and manufactured entirely in China, Vietnam, or Indonesia.

It always seemed dumb to me to think we could offshore the manufacturing of low value goods but keep the design work and manufacturing of high-value goods at home. That's not how the world works.

[dcarrigg]

Re: Anyone watching the emerging markets?

Med-long term I think you have a point. Short-mid term, China's slowing some, Japan's slowing down, and Korea's flatlining. Hard for the region to attract a lot more short-term capital that way.

Other long-term thing to consider is that the longterm slope for world growth is downward since the 60s. Last year was the worst year since 2008-2009 or 2001 before that. We haven't cracked 3% worldwide since 2011. If China were not the enormous growth engine it has been, there would be almost zero movement in net world poverty or economic growth for the past couple decades at least. Half of world growth last year was China. Without it, the figure would have been a paltry 1.2%, which is just about negated on a per capita basis with the 1.1% population growth rate.

[jk]

Re: Anyone watching the emerging markets?

It always seemed dumb to me to think we could offshore the manufacturing of low value goods but keep the design work and manufacturing of high-value goods at home. That's not how the world works.

the "platform company" model is just keep the design work and the marketing. period. think apple.

[touchring]

Re: Anyone watching the emerging markets?

The low cost regions of the world are coming up the curve rapidly, moving from cheap and easy consumer goods through electronics and medical device up to complex durable goods. I think that has always happened. When I was a teenager we thought that way about Japan, and in the 1700s and 1800s England thought that way about the United States.

The China today is nothing like the Japan of the 70s or 80s, it's more like Japan of the early 1900s.

[seobook]

Re: Anyone watching the emerging markets?

Not sure if I found the video from a thread here or on another site, but Santiago Capital's Brent Richardson argued that lifting US rates will drink the QE milkshake of other central banks around the world & drive the dollar significantly higher. He also compared current set up to people who want to compare current situation to 1929 & stated even after the yield curve inverts we'd likely have a period of explosive speculation driving a blow off top between now and then.

[GRG55]

Re: Anyone watching the emerging markets?

A single picture that goes a long way to explain why the Fed's taper has so far not caused significant disruption to global liquidity or capital markets. The others are more than making up for it. So far.

It will be interesting to see if Draghi does "whatever it takes" in light of the Italian bond market upheaval now underway.

[jk]

Re: Anyone watching the emerging markets?

Not sure if I found the video from a thread here or on another site, but Santiago Capital's Brent Richardson argued that lifting US rates will drink the QE milkshake of other central banks around the world & drive the dollar significantly higher. He also compared current set up to people who want to compare current situation to 1929 & stated even after the yield curve inverts we'd likely have a period of explosive speculation driving a blow off top between now and then.

there's a lot of short term this vs long term that here. given $ debt loads, i wonder how long the economy can stand up to higher u.s. rates. his own calculation points to a minimum of $1.3trillion/yr in interest only debt service, and then he says the real number is likely double that. yes, that creates a lot of demand for dollars. otoh, a lot of those rates are floating or periodically reset. he is sanguine about the economy's resilience in that scenario but i question it. also, at what point does the market get scared by the expanding u.s. deficit, with trillion dollar or more debts even when the economy is supposedly growing. i think he's also a little glib in dismissing the significance of inflation.

lately the dollar has been rising, in the intermediate past it was falling. i'm becoming an agnostic for the short term. i don't see how the dollar retains purchasing power in the intermediate-long term.

[jk]

Re: Anyone watching the emerging markets?

higher rates anyone?




Credit-card loans that are more than 90 days delinquent rose to 8% of total balances in the first quarter from 7.5% a year earlier, according to Fed data. The portion of delinquent auto loans rose to 4.3% from 3.8%. https://www.wsj.com/articles/a-worrying-turn-ahead-for-auto-loans-1527586200 …

[seobook]

Re: Anyone watching the emerging markets?

there's a lot of short term this vs long term that here. given $ debt loads, i wonder how long the economy can stand up to higher u.s. rates. his own calculation points to a minimum of $1.3trillion/yr in interest only debt service, and then he says the real number is likely double that. yes, that creates a lot of demand for dollars. otoh, a lot of those rates are floating or periodically reset. he is sanguine about the economy's resilience in that scenario but i question it. also, at what point does the market get scared by the expanding u.s. deficit, with trillion dollar or more debts even when the economy is supposedly growing. i think he's also a little glib in dismissing the significance of inflation.

lately the dollar has been rising, in the intermediate past it was falling. i'm becoming an agnostic for the short term. i don't see how the dollar retains purchasing power in the intermediate-long term.

I believe he was of the belief that Dollar denominated debt would become a problem for EMs quicker than it would for the domestic economy.

I think his view is probably somewhat inline with what you just wrote about intermediate-long term, as he believes gold shines some point after there is a likely blow off top in equities.

A lot of steps in his sequence, but I think it was something like: 2017 reform on corporates pulled corporate cash back in, Fed implements QT & lifts rates, which drives interest rate differential, sucks QE funds from other central banks into the US, as other parts of the global economy run into speed bumps more capital flows into the US to both chase returns and as safety trade, as rates rise it creates additional incremental dollar demand from the dollars that must be used to pay off dollar denominated debts, at some point yield curve inverts, blow off top in equities something like a year or two later, then gold becomes the big winner sometime after that

[jk]

Re: Anyone watching the emerging markets?

I believe he was of the belief that Dollar denominated debt would become a problem for EMs quicker than it would for the domestic economy.

I think his view is probably somewhat inline with what you just wrote about intermediate-long term, as he believes gold shines some point after there is a likely blow off top in equities.

A lot of steps in his sequence, but I think it was something like: 2017 reform on corporates pulled corporate cash back in, Fed implements QT & lifts rates, which drives interest rate differential, sucks QE funds from other central banks into the US, as other parts of the global economy run into speed bumps more capital flows into the US to both chase returns and as safety trade, as rates rise it creates additional incremental dollar demand from the dollars that must be used to pay off dollar denominated debts, at some point yield curve inverts, blow off top in equities something like a year or two later, then gold becomes the big winner sometime after that

that's quite an intricate scenario.
i think the u.s. consumer is in no better shape than the em's.