Published Sat, 12 Oct 2019 10:35:54 -0400 on Seeking Alpha
Want an asset class that is cheap? Take a look at emerging markets. They are dirt cheap. There are reasons, of course, but there are always reasons when something is cheap. The question is whether they are cheap enough.
Emerging markets are so far off the radar that they aren't even hated. After ten years of severe underperformance while the U.S. market has been going gangbusters they aren't even worth a thought to all but the most dedicated global investors. They just exist somewhere out there in the Oort Cloud of investing doing the usual ridiculous things such as wild inflation, debt defaults, currency collapses, illiquidity risk, and expropriation of investor assets. They have no respect for property rights. An expression of the current view of emerging markets is presented in this rather tendentious article, passed along in Tadas Viskanta's Abnormal Returns. Meanwhile, just to compound the problem, China has more or less eaten the category, becoming more than a third of the cap-weighted index.
So who needs emerging markets?
Maybe you do. You may at least wish to hold off on a quick dismissal. To a value investor there's nothing like an asset which has underperformed for ten years and disappeared from the collective mind of the market. There may also be some value in the extent that they diversify, although their lack of correlation to the U.S. market for the past ten years has been that emerging markets have gone down while the U.S. market has gone up. That could be a... Read more