The Emerging Markets Bubble

http://www.portfolio.com/views/blogs/market-movers/2007/09/20/the-emerging-markets-bubble

If the Fed's cutting rates, then it must be blowing another bubble, right? But it's not going to be tech stocks or housing again, so what's left? Green technology, obviously, is bubblicious right now, but it's also tiny: investment of $6 billion this year might be up 60% from last year, but it's still a long way from the point at which a crash could cause any real damage.

In today's WSJ, Justin Lahart and Joanna Slater put forward a different asset class: emerging markets, which are now officially trading on higher multiples than their developed-market counterparts. Everybody seems to think a bubble is forming, and everybody is very excited about this: after all, bubbles have the ability to make a lot of money for a lot of people before they burst, and most people in any case tend to overestimate their ability to get out before the crash....

DRC Blogger Response:

Yes, the term "emerging markets" is often overused and mis-used especially as a broad asset class. However many countries in stage two classification for economic development have been watching many of their couterparts in stage three economies and are rapidly learning from the mistakes made.

The investment strategies of captial market investors do not necessarily mirror the social and economic necessities inherent in emerging economies. One such area for investment oportunities rests in housing finance in many stage two countries. The fundamental economic needs of nations with strong population growth will underscore the potential strength of given investments. Moreover the will of the nation to succeed in addressing the needs of its businesses will create the win-win stategies critical for an emerging market investment.

This can be most evident in housing sector investments. For many nations housing is a commitment for the longterm. Unlike the U.S. where housing needs have been replaced by housing wants and investopr speculation. Many nations are committed to addressing the fundamental needs of its people in times of population growth and global economic expansion.