Henry, very well stated on both accounts. I agree that the structural problems with investing in emerging markets are not likely to be solved by slogans, and I admire your understanding of the root of those problems. Obviously in your position, that understanding is very much a requirement.
Your comment about risk premium is well taken. Flippantly, I would rather see the banks making subprime auto loans with the money. Then they would at least realize that they are bearing the risk for that premium, not the taxpayers.
I don't mean to trivialize the complexity of investing in emerging markets and the myriad of structural and cultural differences that it entails. However, I still have a great deal of indigestion about the Fed's policies. No, I don't think AG is consciously making deflationary policies, but on the other hand, he doesn't appear to see the devastation that a rich dollar has wrought overseas.
As Jude Wanniski has argued (http://www.polyconomics.com) Greenspan only seems to trust the dollar gold price as an inflation indicator when it is going UP. Apparently he feels it loses its predictive value when the price is plummeting.
When he lets the dollar get so out of hand, the debtors in those emrging market currencies (which are pegged to the dollar) go from bad to worse. The lending practices let the situation slip. Al let it get worse. He needs to cut rates to weaken the dollar.
Then it's time for those Emerging Market mutual funds...
JS |
