The emerging-market bubble

By Felix Salmon
November 25, 2009
Paul) I think is too meek: of course the current emerging-markets boom is debt-financed. And boy does it look bubblicious, what with the Bovespa having doubled in the past 12 months and rapidly approaching its all-time high. I'm a believer in the long-term future of Brazil, and even count a Brazilian ETF among my few investments. But at this point any investment in emerging markets looks very much like a speculative momentum play: don't invest anything you can't afford to lose.

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This chart (via Paul) I think is too meek: of course the current emerging-markets boom is debt-financed. And boy does it look bubblicious, what with the Bovespa having doubled in the past 12 months and rapidly approaching its all-time high. I’m a believer in the long-term future of Brazil, and even count a Brazilian ETF among my few investments. But at this point any investment in emerging markets looks very much like a speculative momentum play: don’t invest anything you can’t afford to lose.

3 comments

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Brazil is the eternal Country of the Future. Its enormous natural bounty notwithstanding, it will always be hobbled by its intractable social problems, born of demographics.Hot streaks do tend to come to a screeching halt, but EM nations have a lot going for them. Taken collectively, they have young populations, huge pools of savings and reserves, export and commodity-based economies, and pent-up demand just waiting to be unleashed. In other words, they have a future.

Posted by Mike | Report as abusive

Brazil isn’t that young, you know. Its baby boom population is of working age right now, but its current birthrate is below the replacement level — far lower than in the U.S.Which would be great news for the next 20 years, if only the baby boom population entering the workforce now had received an education that permitted them to enter the modern economy.

Posted by Dan | Report as abusive

The Dot-com bubble was debt-financed? That’s a new one.

Posted by right | Report as abusive