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If there's one single life-encompassing economic event this decade, it will be the emerging market financial crisis. The chart in the article clearly shows eme
by joefranklinsrs 8y ago
If there's one single life-encompassing economic event this decade, it will be the emerging market financial crisis. The chart in the article clearly shows emerging market ex China going from 16 trillion to 29 trillion in 10 years. And China has incredibly gone from 7 trillion to 40 trillion debt in 10 years - 300% debt to GDP (not even counting another 20 trillion shadow debt, which would make it incredibly 450% debt to GDP!!) ((and if you take into account fake GDP that Chinese provinces have reported, and that authoritarian governments typically fake their economic growth, and reduce the reported GDP by 20%, it's a jaw dropping 600% debt to GDP !!!))
The emerging market crisis will accelerate pretty quickly, as soon as one or two more fed rate hike occurs, or as soon as more tariffs get levied on China from US, or any of the other black swan event that may occur (hyperinflation in other emerging markets, internal politics struggle or death of Xi Jing Ping in China, etc) . Interesting times we live in. Stay safe.
- AznHisoka 8y agoSo, should I be in 100% cash right now?
- joefranklinsrs 8y agoMy opinions are not of financial advice :) You can make money on a downturn as well as an upturn
- coltonv 8y agoDon't try to time the market unless you dont have any cash savings. Have enough cash to last 6-12 months without a job and invest the rest. You'll do better that way than trying to time the market.
- toomuchtodo 8y ago12 months. 6 months is not enough in an extended recession. Disclaimer: 2008 GFC experience (company folded, had to walk away from primary residence, etc, took 8+ months to find another job while burning through mortgage payments, medical/living expenses). Experience described in this comment and those below are so others can make more informed decisions than I did.
- cm2187 8y agoIf the assets are liquid enough, 6 months may be enough to sell them.
- toomuchtodo 8y agoMy money market fund withdrawals were halted temporarily when the NAV broke the buck. I have 1 month cash on hand in a safe, the rest of it is in an FDIC high yield savings account I have access to immediately with a debit card. Liquidity is a sliding scale when the economy is melting down. Fool me once.
- badloginagain 8y agoBiggest thing is to reduce spending. The closer to zero you can get on spending, the longer you can survive. I dont live in a place where I can afford a home, and Im actually seeing that as an advantage at this point- my investments are relatively liquid compared to a house, especially in a depressed/shocked market. It's not an asset until its sold- no mortgage, no problem.
- toomuchtodo 8y agoNot paying for my mother's prescriptions and medical care she needed to survive wasn't an option. I had to pick between the house and her care, and the house went. No regrets about the decision.
- AnimalMuppet 8y agoRight perspective. You did the right thing even when it was financially painful. Props to you.
- toomuchtodo 8y agoThanks, I really appreciate that.
- 8y ago
- paulpauper 8y agono, but you should avoid foreign stocks and emerging markets. I think the S&P 500 has a lot of juice left
- anonymous5133 8y agoS&p 500 still have significant exposure to emerging markets.
- somebodythere 8y agoCouldn't you short EM to hedge this?
- sahaj 8y agoDon't short if can't afford to. Remember shorting has unlimited risk. What you should do is buy a put option, if possible.
- joering2 8y agoNot cash in form of paper money or coins, but rather silver coins, preferrably 80% pure. These are sold by bags by main silver sellers such as Monex. The point being if economy goes to shit that beautiful $100 bill you can spend to feed your family with lobsters will be worth as much and only as much as the paper it was printed on (hint - close to zero). In such times we will revert back to hard currency - gold and coins. But don’t buy gold bullion - it will be hard to buy bread with a 15gr gold bullion bar and noone will care to give you change. Hence best are 80% silver bags as a form of daily purchasing power.
- germinalphrase 8y agoThe only scenario in which I can see my local grocery store accepting silver coins is in such a situation that my local grocery won’t continue to exist. I’m sure there are some $100 bills to be made by speculating on precious metals, but my local Kroger is never going to be cutting silver coins in half to make change.
- paulie_a 8y agoSilver is just as valuable as that piece of paper. It really has very little inherit value. Just because it's shiny doesn't make it truly valuable. gold is the same thing. Both have some limited manufacturering usages but at the end of the day they are shiny, similar to that very pretty piece of paper.
- turtlecloud 8y agosounds like the answer is bitcoin :) whatever we put our faith in has value, and I envision our future generation putting their faith behind BTC. Of course, the normies will prob use something else - prob another crypto backed by BTC.
- joering2 8y agoPlease no. I am talking about the times in which we go back to basics. You can't be able to freely travel, not to mention communicate, etc (this is the scenario OP draws as when the currency collapse); how can you think there will be sustainable high speed internet connecting miners to sustain a bitcoin blockchain.
- pjc50 8y agoAs a Brit I feel somewhat fuckup-proofed by being long US equity funds. Both EM collapse and Brexit £ collapse would benefit them. I still have a couple of gold sovereigns from the last financial crisis, at roughly the same value I bought them. Mostly as a reminder to ignore the goldbugs.
- paulpauper 8y agoemerging market crisis already happening in Russia, Turkey and Venezuela
- rm_-rf_slash 8y agoCould you provide information about Russia? I don’t see anything recent suggesting they are in a crisis. Turkey is in a classic emerging market debt crisis, whereas Venezuela is a somewhat special case where oil prices are high and they have enormous reserves but they’re terribly mismanaged (to provide a huge understatement). Not saying you’re wrong about Venezuela, but they’re not the typical textbook case of an emerging market debt problem.
- opportune 8y agoActually the current price per barrel is almost half of what Venezuela needed to remain competitive, because even though they have enormous reserves, they are hard to extract. Since their primary export (and thus the commodity that makes up the majority of forex to/from Bolivares) is crude oil, the only possible response to this was massive inflation.
- useful 8y agoI don't know how accurate this is or if the research is actually from Morgan Stanley. Russia is not in a crisis... https://www.zerohedge.com/news/2018-08-30/which-emerging-markets-will-run-out-money-first-here-answer https://www.zerohedge.com/news/2018-08-30/which-emerging-mar...
- badloginagain 8y agoWhat's happening in Turkey? I've only really heard about the political shenanigans going on in the last couple years
- dmoy 8y agoAt the very least, 15%+ inflation, currency issues.
- 8y ago
- gzu 8y agoI wonder how well this comment will age. Interesting times indeed.
- barrkel 8y agoThe debt only matters when people call in their chits. Debt, similar to money, us a claim on future production. As long as people are willing to wait, and not get paid too much for waiting, everything will work out ok. We'll see if interest rates stay low long enough.
- bdkoepke 8y agoEmerging and international developed markets performed extremely well last year. Part of the under-performance this year is from the US dollar rising. On an enterprise value basis the US looks more expensive than both international and emerging markets[1]. [1] https://allocatesmartly.com/asset-allocation-roundup-2/?aff=634 https://allocatesmartly.com/asset-allocation-roundup-2/?aff=...
- beat 8y agoBefore freaking out about CHINA IS DOOMED, look at the historic record. From 1957 to 2017, per capita GDP in China grew from $68.24 to $8830.17. That's over a thousand times more productive. You can angst about faked numbers or whatever all you like, but the trends are plainly obvious here. China's economy has grown consistently at an extraordinary rate for a long time now, and there's no obvious evidence that a collapse is just around the corner.
- taurath 8y agoIn case anyone was wondering, $68 in 1957 is equivilent to $607 in 2018.
- AnimalMuppet 8y agoAnd it was over a hundred times more productive (rather than a thousand), even with the original numbers. With the inflation-adjusted numbers, it's over ten times more productive. (Still nothing to sneeze at...)
- beat 8y agoThe numbers were already inflation-adjusted. Even given my percent-vs-times goof (my bad), the Chinese economy is 130 times more productive than it was 60 years ago. People are assuming the numbers weren't inflation-adjusted because it's so hard to believe. But it's true.
- doctorpangloss 8y agoAt what real economic cost? GDP, we’ve discovered, is an accounting method that doesn’t account for climate change, for example. Maybe that doesn’t agree with your politics. How about all the people harmed by China’s wars? What about its own victims, like victims of the Great Leap Forward? The latter happened within its borders, but that reduces the denominator. A one child policy reduces the denominator too. What would China’s population be today, its per capita GDP, if the denominator was larger? Fine, don’t angst about faked numbers. But do you seriously believe that the GDP per capita isn’t massively hacked to the benefit of the CPC? And even then, is the average Chinese still being below the American poverty line something to celebrate? Just because the number has grown doesn’t mean it would not have been higher in a free society.
- daxorid 8y agoI'm not sure if you've been paying attention to equity prices. EM crisis, yield curve flattening, currency volatility, upcoming rate hikes, near-record P/E ratios, NONE OF IT MATTERS. Investors are bidding the ES and the QQQ to infinity no matter what the economic reality on the ground is.
- kingkawn 8y agoseems like its in china's longterm strategic interest to derive as much infrastructure and domestic development as possible from the international economy and then eventually crater it to defeat their international political enemies
- fungi 8y agoIs China's debt like Japan or Greece... i.e. does it owe itself (like japan) or someone else? If it owes itself would that not contain the fallout of a debt crisis?