EM taking it on the chin today

[saluki9]

Well, it looks like investors fascination with emerging markets might be ending quickly

I'm watching EEM on my terminal right now and EEM is down 5.6%

It's pretty broad based too, brazil down 5%, Taiwan down almost 7% FTSE China down 6.1%

So what do people here think? Has the bubble on EM burst?

 

[justin]

It's still bursting in my opinion. Meanwhile my DCA'ing continues at Vanguard with the next purchase tomorrow at a level much lower than all previous purchases.

 

[REWahoo]

This is what Vanguard had to say on May 30:

When investing in emerging markets, proceed with caution

"Emerging markets tend to have lower liquidity and higher volatility than developed markets. Generally speaking, this should translate into higher returns for portfolios with emerging-market exposure...

Over the short term, however, the risks in emerging markets can be extreme..."

It appears they were dead on regarding that last statement.

 

[brewer12345]

Eh, I'll be interested in EEM around 50. 'Til then I think the risks still outweigh the rewards.

 

[saluki9]

Eh, I'll be interested in EEM around 50. 'Til then I think the risks still outweigh the rewards.

Hmmm some big trades in the last couple minutes.

I can't imagine who thinks it's a deal at $86, probably the same people who paid $500/share for Amazon

 

[cute fuzzy bunny]

This is what Vanguard had to say on May 30:

When investing in emerging markets, proceed with caution

"Emerging markets tend to have lower liquidity and higher volatility than developed markets. Generally speaking, this should translate into higher returns for portfolios with emerging-market exposure...

Over the short term, however, the risks in emerging markets can be extreme..."

It appears they were dead on regarding that last statement.

And then right after they said that, they added EM to all of the target retirement funds. :

 

[brewer12345]

And then right after they said that, they added EM to all of the target retirement funds. :

In fairness, EM is one of the few asset classes that (has been) lightly correlated with US equity markets. Not surprisingly, that corelation has been picking up, but it is still lower than the EAFE or similar.

 

[cute fuzzy bunny]

I dont disagree with the choice. I'd like to have made it before i invested in the funds. I was noting that they issued dire warnings to keep average joes from investing in something that can be very volatile, then add it directly as a new holding to funds that were already owned...in a product family targetted at average joes.

 

[brewer12345]

I dont disagree with the choice.  I'd like to have made it before i invested in the funds.  I was noting that they issued dire warnings to keep average joes from investing in something that can be very volatile, then add it directly as a new holding to funds that were already owned...in a product family targetted at average joes.

Yeah, but remember, a diversified portfolio is more than the sum of its parts. Stuff i wouldn't dream of investing in in isolation is very attractive when combined with other exposures.

 

[justin]

VG added a 2% allocation to EM in their target 2045 (~most aggressive fund). Just a little bit to "juice" returns. Their warnings to the average Joe were probably intended to keep Joe from selling 50% of their "crappy" S&P 500 index and buying in to the hot-pick-of-the-month EM fund. I mean why settle for 6%/yr when you can get 30%/yr, right.

Vanguard does a good job of warning investors away from the hot-pick-of-the-month fund or sector. They did the same thing with energy in the last year.

 

[cute fuzzy bunny]

Yeah, but remember, a diversified portfolio is more than the sum of its parts. Stuff i wouldn't dream of investing in in isolation is very attractive when combined with other exposures.

We're talking about two completely different things.

I'm not talking about investing at all.

 

[brewer12345]

We're talking about two completely different things.

I'm not talking about investing at all.

Lack of sleep getting to you or something? I honestly don't get the apparent non sequitur.

 

[cute fuzzy bunny]

Nevermind. This is another one of our talks where I say something and you vigorously respond to something else.

Let me help one last time. If its not clear, lets just drop it.

- I think emerging market is a good, yet volatile diversifier.
- I think adding emerging markets to a portfolio is a good idea
- *I think a company that says an asset class is scary, then includes it in pedestrian offerings is slightly miscommunicating
- I think the amount that vanguard added to their target retirement funds isnt enough to make much difference anyhow
- *I'm a little disappointed at major overall changes to the structure of the targer retirement funds, including the addition of EM but more to the breakdown of equities and bonds and the change to the transition period from stocks to bonds. I'd have rather they introduced a "more aggressive" target retirement series rather than completely revamp what they had already sold.

- I am not disagreeing with EM as a diversifier.
- I am not disagreeing that a well diversified portfolio including lots of (at least historically) correlated asset classes produces beneficial results

I put a "*" next to the points I was trying to make in the prior posts. I made no comments about the quality or benefits of emerging markets in a portfolio.

 

[brewer12345]

Okey-dokey. Whatever, chief.

I more or less agree with your expanded discourse, but you'll have to excuse me if I found the statement "I'm not talking about investing at all" to be a little bit of a disconnect from what I thought we were discussing and what you then expanded on.

 

[cute fuzzy bunny]

I thought perhaps it would be useful to demonstrate/explain to you why we often get into these increasingly annoying "speaking past each other" threads where you go off on a tangent on something I didnt say and then get pissed when I keep trying to explain that what you're getting pissed about has nothing to do with what I said.

I was talking about customer communication. "This asset class is very scary and volatile"..."So we've added it to a bunch of our funds".

If I was joe-schmoe "dont know anything about investing so I bought this lifecycle fund" investor, and I read an article telling me emerging markets were very volatile and not for everyone so think real hard before you invest...then I saw the same company that issued the warning had added them to my "investing for dummies" fund, I'd be a bit alarmed.

 

[brewer12345]

Uh-huh. I think you just wanted to have the last word, a trait which I share.

 

[Nords]

Uh-huh.  I think you just wanted to have the last word, a trait which I share.

Me too.

 

[eridanus]

Uh-huh. I think you just wanted to have the last word, a trait which I share.

Hee, you guys are funny.

 

[laurence]

Me too.

Word. O0

 

[Danny]

 

[cute fuzzy bunny]

Uh-huh. I think you just wanted to have the last word, a trait which I share.

Not at all. I'd just like to have a conversation about what I was actually talking about!

 

[brewer12345]

Not at all.  I'd just like to have a conversation about what I was actually talking about!

And get the last word in.

 

[cute fuzzy bunny]

Not at all important.

I said something, you quoted it and said something completely different. I figured before it went on for three pages of how you disagree with something I didnt say or even bring up, I'd nip it in the bud. Everything after that is simple perpetuation of nothing of interest.

 

[brewer12345]

Heheh, you do realize I am having fun with you? But I will be a sport and let you have the last word on this one...

 

[cute fuzzy bunny]

No you wont. You type in another post right now mister...

I'm always having fun with you.