One of the themes of my book “The Great Super Cycle” is emerging markets.
As with gold and commodities, I think that these nations will do very well in the coming years. Again, this is a long-term play. Emerging markets have lagged for nearly a year now.
However, you have to expect this sort of weakness from time to time. For example, the Bombay Stock Exchange of India is one of the best-performing indexes of the past 13 years, yet it has seen two corrections of 50 percent or more during that time.
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Right now, many emerging markets are being hit hard, along with the sell-off in North American markets.
However, the emerging markets don’t have the same problems of North American economies. Most of the emerging-market economies are very underleveraged with little debt and few problems at the consumer level. These nations are still in the midst of long-term growth.
The recent spike in commodity prices did hurt because their poor populations are much more sensitive to rises in these prices. However, as the nations become richer and more urban, they will be able to absorb these price shocks better.
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In addition, their markets aren’t expensive. Another interesting note about these markets is that for about the past three years, they have led the developed markets.
Emerging markets bottomed in the fall of 2008 while developed markets continued to fall into March 2009.
This past year they peaked out earlier. So while I expect a bear market in developed markets could last into 2012 or even 2013, I would expect that many emerging markets will bottom later this year or early next year.
If they do drop another 10 percent or 20 percent — or even 30 percent — I would highly suggest you buy countries such as India, Brazil, Indonesia, South Korea, Taiwan, Chile and Peru on any such dip.
About the Author: David Skarica
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