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Emerging Markets and Commodities are hot, but will they last? | Advantage zyaada

Also despite the secular trend of emerging markets growth and sustained inflation being the only part of growth, the noise on commodities and emerging market investment vehicles in fact may not last as a 100 – year trend or a 20 year super cycle.

Why?

Man has much more to answer for and the last 100 years of invention and innovation have shown that rebuilding is not a dream and in fact with the US currency so widespread, to make the US fundamentally weaker vis a vis other growth hotspots , you would have to make he dollar enter a super appreciation cycle which it has definitely broken, guaranteeing growth for the domestic economy.

In the emerging markets, most are precluded by the lack of infrastructure and even basic process superstructure seen even in advanced nations like South Korea and Singapore with unique concentration and hyper burn cycles underwriting negative growth probabilities almost every quarter.

One Tsunami in Japan can be replicated by other such unforeseen events in any of the G20 or smaller countries and except for India and China no one else ins insulated to it. Resource Rich and Latin American economies have broken their back already and the $120 bln in outstanding Brady Bonds are almost the only international coordination they get in global trade.

The currencies and countries/markets that do get a unique global integration for their trade are otherwise occupied fending off instability in regional markets as 15 out of the 25 Euro wannabes could be counted as possible aid recipients in the next 5 years let alone 20.

Thus the concept of supercycles that last 20 years is just aggrandisement of a secular investing trend for Commodities and EMs based on high shortages and supply of the Dollar in former and growth opportunities and governance focus in the latter and a lot of tactical trends that will not let the supercycle be defined as anything more than an ephemeral construct much less than our regular penchant for Busts, Depressions and bubbles that itself lasts only 5-6 year cycles.

In the case of India and China also, global problems and that of lack of domestic strength in each respectively has already reared its head after not more than 2 good years on a trot and the world is not even invested more than 5% and 15% respectively in them

Also one QE3 could take the super inflation out to all these EM supercycle components and make them tear of f their plans for growth for more than a decade to come as they have never undergone a protracted bear cycle, much because all infrastructure , even superimposed by multilateral firms with or without success has been good for them and their growth till now, apart from fractures in resource rich economies from imbalances in domestic demand and production

5 comments on “Emerging Markets and Commodities are hot, but will they last? | Advantage zyaada

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This entry was posted on June 11, 2011 by in Amitonomics, Banking, Emerging Markets, Retail Lifestyle.

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