Different Rules

One of the important props supporting Core/Periphery Disease is that one uses different rules for assessing developed and developing country risks.  This is reflected in my preferred definition of emerging markets, as follows.  All countries are risky; the emerging markets are those where this risk is perceived and priced in.  Developed markets are those where sovereign default, corruption and political risks in particular are not priced in, even when they are clearly visible.


The rest of this blog can now be found via this link on the New Sparta Asset Management website. The site also includes content and articles from other prominent Emerging Market economists, along with research and recent developments from the company’s current sectoral  interests.


Constitutional Advice for President Obama

President Obama has weighed into the Brexit debate. Whatever the President’s personal views, I suspect that the main focus for Washington’s interest, still heavily influenced by the zero sum strategic thinking of the likes of Henry Kissinger and Samuel Huntington, is the desire to have a strong Europe to be a counterweight to Russia and take on more of the costs of global governance in Eastern Europe, the Middle East and North Africa.


The rest of this blog can now be found via this link on the New Sparta Asset Management website. The site also includes content and articles from other prominent Emerging Market economists, along with research and recent developments from the company’s current sectoral  interests.

Tags: ,

An Inconvenient Fact – EM is Rallying

“Everyone is entitled to his own opinions, but not his own facts.”

Daniel Patrick Moynihan (attributed)

Emerging markets are rallying. That is a fact. Emerging market bonds have just experienced their largest rally in seven years. The bond market (JPMorgan EMBI GD index) is up over 13% in dollars. The equity market (MSCI EM index) is also up around 7%, easily beating developed market equivalents. Investor inflows into EM bond and equity ETFs stand at $4.5 billion from the start of the year to mid-April. Short interest is also significantly down.


The rest of this blog can now be found via this link on the New Sparta Asset Management website. The site also includes content and articles from other prominent Emerging Market economists, along with research and recent developments from the company’s current sectoral  interests.

Tags: , ,

Pawnbroker for all seasons (PFAS)

Mervyn King makes many of the same observations in his book “The End of Alchemy” as I do in my own, not least: the focus on the difference between uncertainty and risk (he calls it “radical uncertainty”); the importance of different world views (he calls them “narratives”) and how shifts in them create crises; and the origins of the 2008 global financial collapse. Whereas my book is also a critique of finance theory and asset allocation, Lord King goes into more detail on policy choices in the developed world.  I find myself agreeing with almost everything he says.


The rest of this blog can now be found via this link on the New Sparta Asset Management website. The site also includes content and articles from other prominent Emerging Market economists, along with research and recent developments from the company’s current sectoral  interests.


 

Tags: , ,

Western Central Banks – Can they Win?

Western central banks are between a rock and a hard place. What does that mean?  Mervyn King, governor of the Bank of England during the 2007-9 crisis, talks about time inconsistency in his recent book “The End of Alchemy”* (p.185):

“Suppose businesses and markets believed that inflation would indeed be higher in the future and that the resulting lower real interest rate did indeed stimulate the recovery. The central bank would then be faced with the following dilemma. Should it proceed to allow inflation to rise above the target despite the recovery, or should it be grateful for the recovery and then set policy to keep inflation on track to meet the target?


The rest of this blog can now be found via this link on the New Sparta Asset Management website. The site also includes content and articles from other prominent Emerging Market economists, along with research and recent developments from the company’s current sectoral  interests.

Tags: ,

Is the Global Economy at a Turning Point?

While there are political crises in some emerging markets at present (Brazil and South Africa come to mind), two factors should be borne in mind.

Firstly, the vast majority of emerging markets are healthy and robust, with growing economies and not highly indebted.  If the developed world has a repeat of 2008/9 however, there are few places within the QE economies to hide.


The rest of this blog can now be found via this link on the New Sparta Asset Management website. The site also includes content and articles from other prominent Emerging Market economists, along with research and recent developments from the company’s current sectoral  interests.

Tags: , , , ,

Risk and Return in a Non-Normal World

Over several recent blogs I have been exploring the implications of the break-down in the laws of supply and demand (as normally conceived in goods markets) when it comes to asset prices.  Whereas the price rise in a good tends to reduce demand, yet with financial assets just the opposite can happen.  The result can be pro-cyclicality, absence of market stability or equilibria, no fair or mean prices for assets, and also no normal distribution – in short a non-normal world.


The rest of this blog can now be found via this link on the New Sparta Asset Management website. The site also includes content and articles from other prominent Emerging Market economists, along with research and recent developments from the company’s current sectoral  interests.

Tags: , ,