Extracting Growth Alpha in Emerging Markets

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Comments of the Day

10 December 2020

 

Video commentary for December 9th 2020

 

Eoin Treacy’s view

A link to today’s video commentary is posted in the Subscriber’s Area. 

Some of the topics discussed include: gold pulls back, mega-cap tech weak, Dollar steadies, Asian markets continue to outperform, emotionality of crowds

 

Extracting Growth Alpha in Emerging Markets

This report from Jennison Associates may be of interest to subscribers. Here is a section:

Generally speaking, an investor’s primary motivation for making a portfolio allocation to emerging market equities is the desire to tap into superior structural growth. However, equity market returns rarely correlate tightly to economic growth. There are many attractive secular growth companies in emerging markets—and they exist regardless of the economic growth conditions of their domestic economies. Investors wanting to tap into the powerful long-term benefits of superior structural growth trends can benefit from seeking out highly active strategies. In our experience, a strategy succeeds by continuously seeking out innovative companies with superior growth trajectories. A clear and consistent investment philosophy and repeatable investment process can help to ensure that a portfolio reflects bottom-up decisions that incorporate the superior growth available in EM equities.

The growth opportunity set is bigger than is generally thought. EM companies face challenges and problems different from those of their developed market counterparts, but their distinct circumstances often spur them to innovate and disrupt existing practices. EM companies are moving up the value chain, from export-oriented business models built on low-cost labor and cheap manufacturing to higher-value-added businesses based on technological and scientific innovation. Low recognition of these dynamics by investors and indexes creates an opportunity for growth-minded investors. Add to the mix companies that execute well to exploit a superior economic growth backdrop, and the opportunity set expands.

 

Eoin Treacy’s view

A link to the full report is posted in the Subscriber’s Area.

China’s success in developing domestic champions has truly impressive and they are now among the largest companies in the world by market cap and revenue. Success in expanding internationally has been limited in the technology sector to the Chinese diaspora because the global market tends to be much more competitive than the sheltered environment domestically.

 

Email of the day on net central bank selling of gold

You periodically remind us of some of David’s good advice, such as “Don’t fight The Fed”.   The Gold Hub recently reported that central banks around the world were net sellers of gold in Q3. (See attached chart.)  It is easy to see why these institutions want to discourage gold investors.  Are we fighting not only the Fed but every other government in the world?

 

Eoin Treacy’s view

Thank you for this question. Gold has been in a corrective phase since late August and sentiment has seen a significant reversal. If we remember only a few months ago investors were revelling in the idea that gold was the only asset worth owning. Today there is a lot of questioning about whether it worth owning at all.

 

Email of the day – on how we meet in the middle

I have a simple view. There are many political systems that determine how the wealth in a society(economy) is distributed. There is only one economic system that works, and it is called capitalism

And

In an economic system that works there can’t be any ‘working poor’…

 

Eoin Treacy’s view

Neither of these emails represent the extremes of the current discussion on how rewards should be divided and social inclusion. However societies decide to settle their differences is going to shape the evolution of the financial markets and geopolitics for decades to come.

 

Email of the day on vaccines and uptake potential

This article, quite long but worth reading, is by one of my favourite health professionals, Jon Barron.  He is not an anti-vaxxer nor an pro-vaxxer. He provides   a very in-depth  look into the captioned  subject.  If you’re interested in the subject matter, he provides warts and all. You must read the latter part of his article where he suggests using air ionisers to kill airborne viruses. Makes sense to me.

 

Eoin Treacy’s view

Thank you for this informative article by Jon Barron which may be of interest to subscribers. Here were two particularly relevant sections on the side effects of vaccines and the relative risk of fighting an infection unaided:

The CDC reports 1.31 cases of anaphylaxis per million flu shots given and a comparable one or two people in a million will develop GBS. (About 161 million Americans get a flu shot each year.) So, we’re talking approximately 210 cases of anaphylaxis per year in the US, and since anaphylaxis has a fatality rate of between 0.25% and 0.33%, we’re talking about one death every two or three years. As for GBS, a small number of people are permanently impaired, and approximately 3% -5% die.

In other words, somewhere between 4-15 people die every year as a result of getting the flu vaccine, with maybe 300-400 suffering serious injury. Weighed against that is the fact that somewhere around 55,000 people die every year in the US from the flu itself, with most of those deaths occurring in the unvaccinated. Now, to be fair, although complications from flu vaccinations are rare given the number of flu vaccinations administered each year, if you or someone you love is the one who gets injured or dies, then rarity is probably not a mitigating factor in your mind. Incidentally, total compensation paid out over the life of the government’s National Vaccine Injury Compensation Program (NVICP) is about $3.6 billion. That’s a lot of serious side effects. And as I’ve discussed previously, the flu vaccine consistently tops the NVICP’s list of claims made and paid out for injuries and deaths resulting from the side effects of vaccination.3

The bottom line is that the flu vaccine is neither as harmful or ineffective as antivaxxers claim nor as safe or effective as the medical community pronounces. Both sides have lied to you. Unfortunately, this makes any rational discussion about vaccines impossible.

And

Having this kind of reaction to the second dose simply shows that your body is responding the way it should, that the vaccine is working, and that you are building long-term defenses against the virus.

As to any long-term side effects from the COVID vaccines, we will have to wait and see. The bottom line, though, when it comes to safety, is that getting your immunity through vaccination is probably a whole lot less risky than getting your immunity through natural infection (285,000 dead and counting, not to mention several million long haulers). Anyone who likes to gamble will understand where the better odds lie here.

 

Eoin’s personal portfolio – trading and investment positions increased December 1st

Eoin Treacy’s view

One of the most commonly asked questions by subscribers is how to find details of my open traders. In an effort to make it easier I will simply repost the latest summary daily until there is a change.

 

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