Source: Yahoo Finance

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Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

14 Responses to “Bullish on Europe and Emerging Markets”

  1. 4whatitsworth says:

    VGK, EEM, and XLF is what I am averaging into and I believe we are early in EEM. I hope the strengthening dollar plays well with this strategy, I am watching that carefully. I may be spending too much time on your blog because I am starting to agree with everything.. AKA the mini me syndrome!

  2. Stock Soup says:

    hey, you might consider DFE as a choice for Europe ETF as small caps tend to outperform early cycle. And it tracks dividend payers which I really like in case things get bumpy. Performing excellent so far.

    can I respectfully disagree with your EM analysis? I know academic research broadly backs the idea of buying cheap countries, but that is statistical, and not always. I believe the EM down turn is secular. They are de-leveraging and tracking way behind the US and Europe in that matter. Look at China trying to stamp out the shadow lenders. Also they still have tremendous over capacity and China ain’t buying those commodities this year. Inflation. All of the above is driving those protests in the street, from Turkey to Brazil, not the Olympics.

    now that I disagreed I feel it prudent to say that I super-enjoy and respect your work and think what your doing grinding home the allocation message is awesome! ‘hoping I added to the conversation

  3. theexpertisin says:

    I significantly over weighted mega cap European based companies with a strong presence in developing countries last August. I remain comfortable with this choice.

    I always appreciate Mr. Ritholtz sharing his portfolio opinions. He has a habit of being correct with his assessments.

  4. pjmason says:



    I have always respected your opinions, whether or not I agree with them, because they are well thought out and backed up with data. I am an investment manager and have “skin in the game”. This media appearance is disappointing to me. Holding XLF and especially BAC in your clients portfolios seems to go against one of your investment tenants:

    “If the first rule of investing is know what you own, than how can anyone credibly own a major money center bank? The answer, at least for me, is that you cannot — owning bank stocks is not investing, it is pure speculation.”

    Now a good investment manager should adapt and change their opinion if the data and investment landscape warrants it. Can you clarify why your views changed on this sector? I for one cannot see more clarity in big banks at this time.


  5. mpetrosian says:

    VGK is my euro pick, but I’m not sure about EEM for emerging mkts. Others like DVYE have screened better for me on several metrics.

  6. Willy2 says:

    My indicators say “Sell Europe, EM & the US”.

    • Willy2 says:

      These indicators gave mixed signals during 2013 but they all seem to have turned into the wrong directions.

    • When did you first make this call ?

      • Willy2 says:

        I’ll share some of my thoughts:

        - Signals from the credit markets are MUCH more important than those from stockmarkets because credit markets are (MUCH) larger.
        - I look predominantly at US indicators because the USD is the world’s reserve currency (think commodities priced in USD) and the largest economy. One of my indicators is the US yield curve.
        - Rates – on average – are higher in EMs than in e.g. Europe & the US. So, when the FED & ECB started “printing money” (from 2009 onwards) we saw e.g. the USD weaken and the EMs rebound. (=reach for higher yield).
        - On top of that EMs are still predominantly commodity exporters, exporting to industrialized countries (US, Europe, Japan & China.)
        - The US yield curve flattened again starting in april, may of 2013 but the EMs didn’t benefit too much. Instead Europe & the US benefited the most. (suggests increased risk aversion). A flatning US yield curve means that investors buy more bonds with longer duration (=higher yield) than bonds with shorter duration. And (I admit) I was blinded by “Confirmation bias” because another indicator kept drifting lower during 2013.
        - The US yield curve has been – more or less – flat since say september 2013, and seems to be putting in an inverse “head & shoulders” pattern and could turn to steepening again. Combined with other bullish sentiment indicators makes me VERY curious/suspicious why the yield curve didn’t flatten more.
        This divergence could mean investors could be changing their minds about risky investments. (e.g. sell the 30 year t-bond and buy the e.g. 5 year t-bond (= less price risk)). And that also means “Sell EM bonds”.
        - Guess what happened in (2001+2002) & (2007+2008) ? Yes, the US yield curve(s) also steepened.

      • Willy2 says:

        Also compare EMB with HYG (perhaps LQD is a fairer comparison).