23 Aug 2016

Allocating to Risky Assets

What’s the right allocation to a risky asset class like emerging markets stocks? Since the launch of the MSCI EAFE EM index that tracks emerging markets in 1988, the returns have outpaced the S&P 500 by 0.33 percent per year: 10.56 percent versus 10.23 percent.  (All data from Jan 1988 through Jun 2016). As you might expect, the extra return has come with extra risk: the emerging markets index has… Read More

19 Jul 2016

Turkey’s Failed Coup and Your Portfolio

Personally, I was a little surprised that stocks held up as well as they did yesterday after the failed coup in Turkey. Even though the political regime ultimately didn’t change, I thought that tanks rolling through the capitol would be enough to remind everyone that emerging markets (EM) are risky. Instead, the MSCI Emerging Markets index gained 0.26 percent and the two main ETFs that track EM stocks both gained 0.88 percent… Read More

15 Apr 2016

Yale Bets Big Overseas

One of my favorite reads of the year is from the Yale Investments Office, which manages their $25.6 billion endowment.  You can find the report by clicking here. Yale is routinely the best-performing endowment in the world and has earned a remarkable 13.9 percent return over the last 30 years – well above the 10.7 percent return for US stocks, 8.7 percent return for foreign stocks and 7.1 percent return… Read More

17 Nov 2015

A Big Bet on Emerging Markets

For most of last week, I was in Boston at Schwab’s IMPACT conference – my fourteenth pilgrimage that includes prominent speakers, workshops and a football field size area of vendors pitching everything under the financial services sun. This year featured more academics than usual, which I found particularly engaging.  One of the sessions was actually a debate between academic Roger Ibbotson (who also manages some money) and Rob Arnott, a… Read More

21 Aug 2015

Emerging Market Currencies Roil Stocks

In addition to the growing concerns about global economic growth, the Chinese stock market sell off and yuan devaluation and falling oil prices, markets are increasingly spooked by other emerging market currencies and stock prices. An average of 15 emerging market currencies is down about 10 percent so far this year while countries with large commodity exposure are suffering even more.  For example, so far this year, the Russian ruble… Read More

8 Jul 2015

When Bubbles Burst: China Edition

While Greece is getting all of the headlines, the bubble in mainland Chinese stocks that I wrote about in April and June is now bursting (click here or here for refreshers).  The Shenzhen index is down -38.5 percent from its peak on June 12th through yesterday and the Shanghai index is down -27.9 percent over the same time period. The following shows these two indexes in yellow and orange compared to the S&P 500 in blue… Read More

11 Jun 2015

How to Tell Emerging from Developed Markets

Last week, I wrote that the emerging market stock indexes that Vanguard tracks will be adding mainland China A-shares to their index (click here and for a refresher).  On Tuesday, MSCI, the world’s most popular index creator for non-US stock indexes announced they would not be adding Chinese A-shares to their emerging markets indexes. MSCI believes there are too many regulatory issues related to non-Chinese owners that could make owning… Read More

3 Jun 2015

Emerging Powerhouse

When the Communist People’s Republic of China (PRC) took control of China in 1949, all privately owned assets were expropriated by the government and what were once vibrant capital markets went dark until December, 1990 when eight companies started to trade publicly on the Shanghai Stock Exchange. Now, as I wrote in April, the mainland Chinese stock markets are red hot and many people believe they are in the middle of… Read More

23 Apr 2015

China’s Red Hot Market

Last Friday, Chinese regulators said that they were going to make borrowing on margin more difficult for investors in an effort to curb the recent euphoria in Chinese stocks. I have to admit that I didn’t grasp just how hot Chinese markets have been recently, partly because the Chinese stock markets are broken up into multiple segments that are hard to follow and have dramatically different returns.   The Hang… Read More

16 Apr 2015

Wither Emerging Markets?

In the first few years after the 2008 financial crisis, a lot of investors were excited about emerging markets. The story making the rounds at the time was that the US and other developed markets were in for a long period of sluggish growth while the prospects for economic growth in emerging markets were still strong. Therefore, the story went, investors should allocate money away from the US stocks into… Read More