Plant a tree

DOUG By Guest Blogger Doug Rowat

There’s an old Chinese proverb (I guess they’re all old) that says “if you plan for one year, plant rice. If you plan for 10 years, plant trees.” Well, after this disastrous year, emerging market investors are probably pretty tempted to plant nothing. In other words, give up on the region entirely.

And how painful has it been for emerging market investors this year? Well, the MSCI Emerging Market Index is down 16% and the CSI 300, the benchmark for China A-share equities, which has taken the brunt of the punishment, is down 21%.

With commodity prices plunging, Donald “the Tariff Man” Trump taunting China continuously, rising US interest rates and a strong US dollar, both of which are negative for emerging market economies because of their significant amounts of dollar-denominated debt, and an overall risk-off market sentiment at the moment, emerging market equities are easy to hate. But extreme bearish sentiment presents opportunities.

The long-term thesis for investing in emerging markets is well-known but worth repeating. Emerging market populations are young, emigrating rapidly to urban areas and voraciously adopting developed-world technology. For instance, about 58% of China’s population has Internet access, up from only 23% 10 years ago, according to CNNIC. And China has already surpassed the US in total retail sales. Think of what China’s retail sales numbers will look like when it reaches the US’s 89% Internet adoption rate in the coming decade.

As China accounts for roughly 30% of the MSCI Emerging Market Index, it’s also worth focusing on this country’s mind-boggling urbanization rate. In the 1970s, the percentage of China’s population living in urban centres hovered at only the mid-teens. Now it sits at 58%. Yet, with more than 40% of China’s population still living in rural areas, the ‘citification’ trend still has plenty of room to run.

And China urbanization has an incredible trajectory, with rates likely to approach developed-world levels within the next 10 years. The below chart compares China’s historical pace of urbanization to Canada and the US’s—in this race, developed countries have the lead, but China is, effectively, Usain Bolt. The economic advantages of more urbanization are significant: more jobs are created, salaries can ramp-up five-fold, and demand for material goods and housing both rise dramatically.

Urban population (% of total)

Source: United Nations Population Report

So, to think emerging markets are simply going to disappear under the weight of their short-term economic problems is naïve and overly pessimistic. When the MSCI launched its first comprehensive emerging markets index back in 1988 only 10 countries were worthy of representation and encompassed only 1% of the world’s market cap. Today this index includes 24 countries and 11% of the world’s market cap. Emerging market investing is here to stay.

But, from a timing perspective, should investors buy now? Well, valuation is a notoriously poor predictor of entry points, particularly for short-term investors, but regardless, I would still argue that current valuations are compelling. For example, the price-to-book (P/B) differential between the MSCI Emerging Market Index and the S&P 500 is as wide as it’s been in 10 years.

MSCI Emerging Market Index P/B discount to S&P500 continues to widen

Source: Bloomberg

And let’s take a closer look at this spread. Naturally, emerging market equities historically trade at a P/B discount to US equities given their higher risk profile. However, the discount widened to more than DOUBLE its 10-year average (white line below) before contracting in recent months. Given the still-considerable spread, I wouldn’t be surprised to see the discount continue to contract. But if your investment horizon is 10 years or more, then whether to invest now or later amounts to splitting hairs. Emerging markets, simply put, are cheap.

MSCI Emerging Market Index P/B minus S&P500 P/B

Source: Bloomberg. White line = 10-year average

Relatively speaking, emerging markets have had a sub-par past 10 years with the MSCI Emerging Market Index returning 8.7% annually (total return) versus the MSCI World Index up 11.1%. However, a 20-year time frame paints a different picture, with the MSCI Emerging Market Index returning 8.9% annually versus the MSCI World Index returning only 5.4%. If you believe in long-term cycles of under- and outperformance, the next decade could belong to emerging markets.

And, if you had to choose an area to invest in for the next 10 years, given its impressive economic and demographic fundamentals, long-term outperformance and inexpensive valuation, you could do worse than to pick emerging markets. As it stands now, emerging market equities are not being fairly represented in MSCI indices based on their corresponding share of world GDP. It could be argued, in other words, that the market is not giving emerging market equities their proper due based on their global economic contribution:

GDP share and market share for EM

Source: MSCI, IMF

Eventually, emerging markets will rally, likely strongly. And if you’ve decided to abandon this area of the market entirely because of a few threatening Trump tweets, you’ll miss out on the recovery. And you’ll have no one but yourself to blame.

You’ll be reminded of another Chinese proverb: “if your face is ugly, don’t blame the mirror.”

Doug Rowat, FCSI® is Portfolio Manager with Turner Investments and Senior Vice President, Private Client Group, Raymond James Ltd.

 

68 comments ↓

#1 For those about to flop... on 12.15.18 at 3:05 pm

Pink Pumpkins being carved in New Westminster.

This year I have had an increasing amount of cases marked as sold, only to come back on the market.

Spread across the price brackets from luxury to what is known in this city as budget.

This house was one of the ones I listed in my ” Just gimme a chance” post,where I pointed out some of the recent sales with no information on the sale on offer.

Maybe that’s why it wasn’t given the all clear for public consumption.

Anyway, I’m sure these guys are choked at having to find another buyer in this market but that’s where they’re at.

The details…

341 Johnston st, New Westminster.

Paid 1.29 October 2017

Originally asking 1.54

Now asking 1.39

Assessment 1.01

So it’s only assessed at a smidge over a mill and unfortunately because it was marked as sold on Zolo but not cleared on Zealty I never got to sell the the folding purchase price.

They probably thought they had gotten out of jail and now they have to eat coal…

M44BC

https://www.zolo.ca/new-westminster-real-estate/341-johnston-street

$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$

Feel free to make a small donation for cancer research.

Flop For Fox Fund…

http://www.terryfox.org/get-involved/ways-to-give/

#2 For those about to flop.. on 12.15.18 at 3:13 pm

Robax,I have learnt another Chinese proverb recently.

If Vancouver real estate change in price,don’t blame Flop…

M44BC

#3 Stan Brooks on 12.15.18 at 3:29 pm

Spot on on emerging markets.

I know that you had some inner beauty hidden there somewhere.

BTW ugly is in the eye of a beholder.

But when ‘investing’ keep in mind the following:

https://ca.finance.yahoo.com/news/canada-leads-g7-ease-paying-taxes-190620462.html

https://ca.finance.yahoo.com/news/house-rich-money-poor-deal-debt-youve-warned-195443428.html

The most important investment decisions will be made for you by somebody else, not by you.

You will be the seating duck, the roasted turkey no matter what you think or do or how free you think you are.

#4 Stan Brooks on 12.15.18 at 3:30 pm

sitting duck damn it

#5 reynolds531 on 12.15.18 at 3:49 pm

Doug any comments on the lack of governance or foreign shareholder rights in China?

#6 Deplorable choices on 12.15.18 at 4:02 pm

Preferreds and emerging markets ….. that giant sucking sound… the gifts that keep on taking …. they are cheap for a reason…. any decade now!

#7 Shawn on 12.15.18 at 4:22 pm

I agree. There’s deep value in emerging markets currently. Due to the fact as a group they’re more volatile than the S&P500 and bear markets are more frequent it’s best to buy the group and forget about it.

VEE in $CAD is the best way to gain exposure.

#8 AK on 12.15.18 at 4:40 pm

“Donald “the Tariff Man” Trump taunting China continuously”
=====================================
Why does the Trump Administration continue to get trashed and nobody is doing anything about the Chinese dumping knock offs in the North American markets. ?

#9 dakkie on 12.15.18 at 4:43 pm

The Bubble Bursts: Vancouver Home Prices Plunge 8.5%, Biggest Annual Drop Since 2009

http://www.investmentwatchblog.com/the-bubble-bursts-vancouver-home-prices-plunge-8-5-biggest-annual-drop-since-2009/

#10 crossbordershopper on 12.15.18 at 5:01 pm

with so many canadian stocks down 20 to 80 percent over the past year to 6 years, some new 20 year lows. why go elsewhere to loose money, you can loose money at home without much trouble.
the question goes, so how did you loose money, oh ya well i bought this canadian oil stock that has gone from 40 to 4. oh ya trudeau, no pipeline that sucks.
or the question is oh ya, some chinese company there in some internet software thing, and pop its down bigtime.
answer ya, cant trust those chinese.
same result, its just easier to loose money at home, most people have more experience at it.
why dont these millionaire advisors talk about the return of every single stock, forget about the micro resource ones, im talking about a return of all stocks as an average, not just a few that everyone saids is the market. you will see very very poor results. many many stocks are down bigtime.
from agf management to zcl composites and everything in between the canadian market totally sucks.

#11 Doug Rowat on 12.15.18 at 5:05 pm

#8 AK on 12.15.18 at 4:40 pm
“Donald “the Tariff Man” Trump taunting China continuously”
=====================================
Why does the Trump Administration continue to get trashed…

He doesn’t taunt? Let’s ask “horseface” or “Adam Schitt” what they think of that. And he called himself “Tariff Man”.

–Robax

#12 tccontrarian on 12.15.18 at 5:11 pm

“But extreme bearish sentiment presents opportunities.”

That’s a big part of contrarian strategies. Been gobling up EM ETFs last few days as well.

Glad to see I’m making a positive contribution here…you’re welcome! :)

TCC

#13 not 1st on 12.15.18 at 5:25 pm

Dougs articles sounds like it came from 1998.

#14 Shawn Allen on 12.15.18 at 5:34 pm

Cities Create Value

Doug said: “The economic advantages of more urbanization are significant: more jobs are created, salaries can ramp-up five-fold, and demand for material goods and housing both rise dramatically.”

**************************************
Some would argue that Cities are supported by rural and resource areas that create the real wealth.

But a recent book “Triumph of the City” details how Cities and not rural areas are the big wealth creators. Knowledge and productivity improvements, even agricultural advances, come from Cities. Even highly urban countries like the USA continue to become more urban according to the book and the graph above. Communication advances have not led to people moving to rural areas. They still cluster.

Higher wealth per person is definitely correlated with higher urbanization.

Other than Detroit I don’t know if many large Cities have declined much in population in modern times.

#15 Shawn Allen on 12.15.18 at 5:37 pm

Whoops, many Cities have declined in population…

Quite a few in decline. But the people on average must have moved to other Cities.

http://demographia.com/db-intlcitylossr.htm

#16 For those about to flop... on 12.15.18 at 6:21 pm

Q&A

O.k so it’s not really a Q and A but I thought this persons observations were important enough to pass on.

———————————————————————————–

“Hello Pink Snow, I just found your blog a few weeks ago and I am fascinated! I grew up here in Vancouver (in Coquitlam) but left for 10 years. Now I’m back with a young family (since 2015) and we are in a Vancouver special basement rental which just fits us all. We didn’t buy when we got back because we had no money and it all seemed nuts, but now we are a bit better off but clearly it would be insane to do it now as well. I’m writing because I keep track of real estate particularly in Champlain Heights. Just noticed that a bunch of townhouses recently sold in the Camano/Quatsino roads are no longer on the Zealty Map. They went for less than 700, think most recently for 680. Conveniently those are gone, but one that sold in June for over 800 still up. Dodgerama!!!! We need an archived version of Zealty map. Thanks for your amazing blog. Stay safe! Cheers.”

————————————————————————————

So I looked into what this person was talking about and there was a noticeable gap between two seemingly similar properties in a relatively short amount of time.

What I found…

7156 Quatsino Dr,Vancouver.

37 year old Townhome.

1,850 sq ft

Sold in June 2018 for 844k.

https://www.zolo.ca/vancouver-real-estate/7156-quatsino-drive

Just around the corner…

7232 Camano Rd,Vancouver.

39 year old Townhome.

1,850 sq ft.

Sold in November 2018 for 680k

https://www.zolo.ca/vancouver-real-estate/7232-camano-street

Dunno what else I can do than pass on that information and thank you for the nice letter.

Good luck to you and your family and I will try to help out in the future in some small way.

You can call me Pink Snow,but most people have settled on calling me a Flop.

I don’t mind, it’s for a good cause…

M44BC

#17 whiplash on 12.15.18 at 6:22 pm

The Donald is picking on poor China. The media is consumed with Huawei lately and the incarceration of the CFO in Canada and security breaches with cell phones.

Peel back a few layers of the big onion on national security and it stinks to high heaven. Enter China Telecom, right now they conveniently have 10 strategically placed Chinese controlled internet points of presence across the internet backbone of North America. Seattle, San Jose, Los Angles, Dallas, Chicago, New York, Washinton, Miami, Vancouver, Toronto. How easy would it be to hijack, divert and copy data coming and going in and out of the US and Canada. Talk about long term espionage. How many points of presence does the USA (At&T, Version etc) have in China–none, zero. Where was Obama, he shit the bed on this one, he” forgot” to include hijacking internet traffic in the anti theft agreement he signed in 2015 with China.

#18 Looney Baloney on 12.15.18 at 6:39 pm

Paging jess and the other guy..
19,000 additional texts were recovered from FBI lovebirds Lisa and strojk (smokey is this guy your cousin?)’s phones. Mueller’s team scrubbed them! Holding my breath for cnn to report on this in 3.. 2.. 1..

#19 TurnerNation on 12.15.18 at 6:52 pm

So Gartho drives a Tugboat.
Rowat sculls a Junk.
Affluenza covets his Porch?

#20 akashic record on 12.15.18 at 6:55 pm

#11 Doug Rowat on 12.15.18 at 5:05 pm

#8 AK on 12.15.18 at 4:40 pm
“Donald “the Tariff Man” Trump taunting China continuously”
=====================================
Why does the Trump Administration continue to get trashed…

He doesn’t taunt? Let’s ask “horseface” or “Adam Schitt” what they think of that. And he called himself “Tariff Man”.

–Robax

Way to go to avoid the actual question: “Why … nobody is doing anything about the Chinese dumping knock offs in the North American markets?” Or fentanyl.

Horceface is obviously busy with the more important Russians and Robax never says a thing about Adam Schitt, as if he had zero impact on America. Maybe he doesn’t.

#21 AK on 12.15.18 at 7:10 pm

#11 Doug Rowat on 12.15.18 at 5:05 pm
“He doesn’t taunt? Let’s ask “horseface” or “Adam Schitt” what they think of that. And he called himself “Tariff Man”.
–Robax”
====================================

Come on, Doug. Democrats do plenty of taunting as well. (Maxine Waters)…

Anyway, the main point here is that this Administration is trying to tackle a problem that has been going on for a couple of decades now.

#22 NoName on 12.15.18 at 7:11 pm

For instance, about 58% of China’s population has Internet access, – DR

Without access to staples websites like bloomberg and pornhub, what’s the point of having that kind of “internet”?

#23 Chairman Mao on 12.15.18 at 7:27 pm

IHCTD9 on 12.15.18 at 12:50 pm
“I was reading a few interesting articles about China the other day.Compounding this is the huge numbers of Chinese Women who take foreign Men as husbands.”

I have a decade of experience with Chinese students studying in Canada. During this decade I have not seen one, repeat one, Chinese female student dating a local Canadian student. The Chinese still date each other in our school.

#24 Proverb on 12.15.18 at 7:29 pm

“The best day to plant a tree is 100 years ago.

The second best day to plant a tree is today.”

This applies to stock market investments as well.

#25 Tony on 12.15.18 at 7:40 pm

Re: #3 Stan Brooks on 12.15.18 at 3:29 pm

All world markets are in nosebleed territory with the exception of Russia.

#26 Doug Rowat on 12.15.18 at 8:30 pm

#21 AK on 12.15.18 at 7:10 pm
#11 Doug Rowat on 12.15.18 at 5:05 pm
“He doesn’t taunt? Let’s ask “horseface” or “Adam Schitt” what they think of that. And he called himself “Tariff Man”.
–Robax”
====================================

Come on, Doug. Democrats do plenty of taunting as well. (Maxine Waters)…

Anyway, the main point here is that this Administration is trying to tackle a problem that has been going on for a couple of decades now.

Who’s Maxine Waters? And the main point–the only point of this post, actually–is that emerging markets are a good long-term investment.

–Doug

#27 Long-Time Lurker on 12.15.18 at 8:30 pm

#83 IHCTD9 on 12.15.18 at 12:50 pm
I was reading a few interesting articles about China the other day. Apparently China has the worst sex ratio in the world, WAY too many Men….

>Is male to female ratio imbalance the same in Taiwan as well?

Taiwan is like a miniature China before communism and the cultural revolution. The Nationalists fled there when the Communists won on the Chinese mainland. People from all over China fled with them so they speak multiple Chinese dialects there. The US supported the Nationalists (Chiang Kai-Shek) and still do. They have a functioning democracy there.

There’s a reason for the big gender imbalance in China. It’s not nice to talk about though.

I forgot who made the conspiracy conjecture here that Ms. Meng got caught to stay in North America but now I’m wondering — “The Hunt for Red October”? (A good movie with Sean Connery.)

#28 Long-Time Lurker on 12.15.18 at 8:35 pm

>Dalai Lama dreams:

https://www.tibetsun.com/opinions/2018/04/23/dalai-lamas-return-to-tibet-is-tibet-on-the-hara-kiri-path

…Dr Sangay referred to this as the last among the three dreams which, he claims, the Dalai Lama had seen on the eve of his daring escape from the hands of Chinese army to India in 1959, and which has yet to be fulfilled.

According to Dr Sangay the first dream was about bloodshed. It turned real when Chinese army killed thousands of Tibetan in the Tibetan uprising against the Chinese, he said. The second dream of the Dalai Lama was about him meeting people in white clothes, which also turned out to be true when the Dalai Lama met Indian leaders like Dr Rajendra Prasad and Pandit Nehru wearing white khadi. And the third dream was of the Dalai Lama returning to the Potala palace ‘filled with light’ to ‘reunite with Tibetan people’…

…In response to China’s invitation to return or visit Tibet ‘to see truth with his own eyes’, a highly sceptical Dalai Lama offered only to send his representatives to first have a feel of the ground reality inside Chinese-controlled Tibet. For he had too many example of Chinese walk-back on their promises to accept this invitation on the first go. One of the worst examples before him was that of the Uyghur leaders who were invited in 1949 for a ‘friendly’ and ‘heart to heart’ exchange of views with Chairman Mao. This was in response to fierce resistance offered by the Uyghurs to Mao’s PLA against China’s takeover of their country ‘Republic of East Turkistan’ which was later rechristened as ‘Xijiang’ by its colonial masters in Beijing. The plane carrying the cream of all major Uyghur clans exploded mid-way, and the resistance mellowed down as expected….

>Given the Chinese Communists’ known “duplicity,” what could get the Dalai Lama back into the Potala Palace in Tibet? The inherently flawed system of communism which no country is really practicing anymore? (Red China, Vietnam, Cuba.)

#29 mark on 12.15.18 at 8:36 pm

Thoughts on Fortress, Garth? Interesting, but sadly not surprising, read in the G&M.

#30 Crazyfox on 12.15.18 at 8:36 pm

You mentioned Trump so…

I thought Trump might leg out his full term seeing as how impeachment needs 2/3rds vote from the Senate and Republicans hold 53 seats. But then, there are a strong number of serious investigations that have begun as well as a Dem congress having its turn with subpoena power. The key question is what Muller will report in one fashion or another to the public, and when.

If it can be proven in court that a deal was struck to remove Russian sanctions in return for a Trump tower in Moscow, not to mention collusion with Russia to interfere with the 2016 election on Trump’s behalf, without question Trump will be impeached and if it fleshes out to be as traitorous as it looks optically, it will roil the markets that are coming off of a long 9 year bull run as Trump’s trade and foreign relation policies already have:

http://www.multpl.com/shiller-pe/

One simply cannot ignore what the chart is telling us in terms of trend and historical relevance. Couple that with a greedy corrupt traitor in the WH and you have a shit show in politics, the markets, judicial appointments, foreign relations and trade that will be measured in years.

Trump gets impeached, who replaces him? Pence? Mike Pence could be impeachable depending on how it goes down and if he isn’t, he’s a Trump pick and big donor hire. Every Trump political pick and government appointment will have a long lasting ugly stain. I simply can’t see how this won’t force a downward market trend to continue.

I doubt that we are headed back to 15 on the chart with Trump gone, but its possible inside 2 years especially if Trump is still in office up to the 2020 election. I would expect political instability to be the #1 story for U.S. markets next year and this will reverberate through emerging markets until this passes… likely sometime in July, August, September of 2020 when a frontrunner emerges to return order back to the WH.

#31 prairie person on 12.15.18 at 8:38 pm

Just did a one year chart on the DOW and on the TSX. If those were individual stocks, I’d say they’re done and to salvage what you can. I’ve never seen the charts show such a decisive downturn. No hesitation. Does anyone else keep an eye on those two rather than just on individual stocks, etc.? The DOW a classic lower highs, lower lows. And, yes, I know, don’t panic, don’t jump out of t he plane. It will right itself. I’m not sure what it is that will pull it out of this dive. I keep track of a couple of portfolios. Everything on Friday was down, not necessarily much, but it is spooky to all red. At the same time, some analysts are starting to say bargains are appearing. A&W down? Fortis down? Going to be a lot of pension funds that are hurting. I remember 2008. The pension fund where I was working was down around fifty percent. Even some aggressive financial advisors have been saying there is nothing wrong with a good sized cash position.

#32 Doug Rowat on 12.15.18 at 8:45 pm

#20 akashic record on 12.15.18 at 6:55 pm
#11 Doug Rowat on 12.15.18 at 5:05 pm

#8 AK on 12.15.18 at 4:40 pm
“Donald “the Tariff Man” Trump taunting China continuously”
=====================================
Why does the Trump Administration continue to get trashed…

He doesn’t taunt? Let’s ask “horseface” or “Adam Schitt” what they think of that. And he called himself “Tariff Man”.

–Robax

Way to go to avoid the actual question: “Why … nobody is doing anything about the Chinese dumping knock offs in the North American markets?” Or fentanyl.

Because the post isn’t about Chinese knock offs. But I applaud your effort to rid the world of Hike and Adidos sneakers.

–Doug

#33 Newcomer on 12.15.18 at 8:53 pm

Doug,

Investing in China often involves investing in state owned businesses, which brings up some moral questions. I’d be interested to see a post on how, in general, people can invest in places like China without supporting bad things.

#34 yvr_lurker on 12.15.18 at 9:07 pm

Must admit I have little faith that the market is going to rebound in the short term (i.e. the next 6 months or so). TSX is fast on the way to 14000, a rather precipitous decline in the past year. DC pension in fully balanced down 3% for the year, but I have little control on what strategy to follow with this. However, made the correct move in August when I am put our 400K extra into a HISA, and will do the same when the 6 month term expires, and then re-evaluate next summer. RESP of 60K now in a four year 3.35% GIC which comes due right when my kid will need it. Much safer route in these very volatile times where the seemingly weekly small world hiccups send the market in a tailspin. I have little confidence that this volatile period will end soon. Rather be safe than have Mr. Market vaporize the hard-earnized savings.

#35 AK on 12.15.18 at 9:15 pm

#26 Doug Rowat on 12.15.18 at 8:30 pm
“And the main point–the only point of this post, actually–is that emerging markets are a good long-term investment. ”
–Doug
====================================I totally agree with you.

I was responding to your following statement.

“With commodity prices plunging, Donald “the Tariff Man” Trump taunting China continuously”

#36 KLNR on 12.15.18 at 9:21 pm

@#29 mark on 12.15.18 at 8:36 pm
Thoughts on Fortress, Garth? Interesting, but sadly not surprising, read in the G&M.
______________________

I remember when they were schilling their product on AM radio years ago. Can’t say I’m surprised at the outcome.
As they say, if it sounds too good to be true it probably is.

#37 For those about to flop... on 12.15.18 at 9:51 pm

Doug, it was good to see you call yourself Robax.

I gave you that nickname with no spite,just because Ryan drew the short straw and went first, and then you came across as a bit little more relaxed and had a similar sounding surname.

I call your boss Thor Turner because he drops the hammer on people.

Robax is not the worst nickname,nor is InfLewenza, although Ryan doesn’t seem to cherish it,same thing,no malice intended.

You could have ended up being called Flop…

M44BC

#38 IHCTD9 on 12.15.18 at 10:00 pm

#23 Chairman Mao on 12.15.18 at 7:27 pm
IHCTD9 on 12.15.18 at 12:50 pm
“I was reading a few interesting articles about China the other day.Compounding this is the huge numbers of Chinese Women who take foreign Men as husbands.”

I have a decade of experience with Chinese students studying in Canada. During this decade I have not seen one, repeat one, Chinese female student dating a local Canadian student. The Chinese still date each other in our school.
———-

Of course, especially if these kids were actually born in China, #1 preference for mates for everyone alive is someone of their own race and culture, even nationality.

I also don’t think there is a whole lot of mixing going on in places like the GTA/YVR compared to the US where fully 3 out of 10 Asian Women marry a non Asian guy. That’s a huge statistic, and it’s actually causing a lot of angst in the Western born Asian Male community down there (Google WMAF if you think I’m full of it).

Out here in small town Ontario, at least half, probably more than half of the Asian Women I see are with local White dudes. Most of these Women are Western born though. The ones that aren’t are definitely not brand new to the country. A big part of this is probably because there are basically zero young Asian Males out here, they fly the coop ASAP when they’re old enough. Meanwhile, many of the females shack up and stay, and more come from other areas and do likewise.

Maybe the difference is how long they’ve been here in Canada.

#39 Rene McCracken on 12.15.18 at 10:31 pm

Doug, how much have you added to the ol’ emerging markets in your re-balanced for 2019 portfolio? I’d predict another 5% into emergings and -5% from USA Markets.

Also interesting that you didn’t mention developed ex-North American Markets. They have also been compressing lately.

#40 Capt. Serious on 12.15.18 at 10:33 pm

EM equities are exactly what one is looking for as a long term growth play. Sure, they will be volatile, but you don’t get high returns without risk. The painful thing this year has been buying the dip too early.

#41 Rexx Rock on 12.15.18 at 11:00 pm

Tis the season to short!Bank stocks ,tech,home builders,retail and oil.The list is endless.Wait for a big rally coming soon,the plunger team will come back,they always do.Things will get nasty and the central bank maybe forced to cut interest rates back to zero!Bubble and bust.It works every time.History repeats itself.The stock market will have a bear market but when you have a money printing machine what could go wrong?Good luck with your investments.
Its funny to see a yellow vest movement here.Canadians have no backbone,sheep to slaughter.T2 is way worse than Macron and people love him in Canada.

#42 Roman on 12.15.18 at 11:32 pm

Raises hand: I have no idea what those economic indicators mean and I can care less what China’s population watching on their local china youtube, but I’ve traded emerging markets this year (EEM) and return on capital is green and nice.

2-3 dollar wide call spreads worked very well this year.

#43 Frank on 12.15.18 at 11:37 pm

The major risk to Canada Pension Plan is their 8% Chinese investment. And they wish to increase it.

The SEC and Public accounting board in the US is still trying to get access to the accounting working papers for all the Chinese companies listed in the US.

Simple people promote Chinese stock or ETFs. The largest market cap is Ali Baba. Read the fraud warnings in the notes to financial statements in their annual report. Nobody other than insiders in China own the stock. You trade an entity without assets. Have more fun, burn your money.

#44 IHCTD9 on 12.15.18 at 11:48 pm

#27 Long-Time Lurker on 12.15.18 at 8:30 pm
#83 IHCTD9 on 12.15.18 at 12:50 pm
I was reading a few interesting articles about China the other day. Apparently China has the worst sex ratio in the world, WAY too many Men….

>Is male to female ratio imbalance the same in Taiwan as well?

Taiwan is like a miniature China before communism and the cultural revolution. The Nationalists fled there when the Communists won on the Chinese mainland. People from all over China fled with them so they speak multiple Chinese dialects there. The US supported the Nationalists (Chiang Kai-Shek) and still do. They have a functioning democracy there.

There’s a reason for the big gender imbalance in China. It’s not nice to talk about though.
————-

I Googled it, Taiwan is in much better shape on the sex ratio front, 99 males for 100 females.

I know that reason, same thing in India, since 1901, their male skew has increased 10x.

I expect that as China and India become more Westernized that this will self correct, but we’re looking at decades minimum.

Here’s a good article from the South China Morning Post that doesn’t pull any punches on the issue:

https://www.scmp.com/magazines/post-magazine/long-reads/article/2142658/too-many-men-china-and-india-battle-consequences

#45 Smoking Man on 12.16.18 at 12:05 am

For all you freek show celebrity worshipers.

Come to Funner California. All the Hollywood weirdos come here on the weekends. David Hasselhoff is the mayor.

Meet Arnold, the terminator. Told him in Smokey from GF. He wanted a selfie with me.

I flipped him the bird.

Amazing, this pathetic blog has reach.. Well done Garth.

#46 Mr Wang on 12.16.18 at 1:12 am

So Doug, your thesis is that if we continue to subsidize China with big cash gifts ( No global warming restrictions , taxes or penaties) and keep operating massive trade deficits for their benefit and allow them to continue to steal all investments in technology infrastructure from developed countries ( it isn’t just a Canada or US problem , Europe is complaining about having played into the technology transfer scam for decades and are only now speaking out with the voice Trump has given them), allow spying, espionage, corruption, using the G7 as a pressure valve for their unwanted population growth which they refuse to subsidize with domestic policy, all that, and more, and in just a few short years, China will fly past us in urbanization ( whatever that means in China) and that means we’ll win some kind of prize? Are we to allow the beggars of Canada to continue to suffer while Liberal largesse pays countries like China to succeed where we can’t? Sorry Doug, but China has lost a decade of development in the last year because of Trump’s exposing their tactics and putting a stop to unbelievable unfair practises. If Trump gets a second term and all G7 countries finally stand up and dpeak out against China’s nefarious regime, then Chinas economy could very easily retreat two decades or more. Without us they are nothing. It’s only because of our weak and naive leadership that China has basically had a free ride on our shoulders into the modern era. The dollar store economy they’ve relied on has capped their potential. Without the theft and subsidies they will see no progress as nothing organic has come from China in the entire history of development since we dragged them out of the mud in 1985. I disagree with your thesis for those reasons. We lost millions upon millions of jobs to China in the name of sustainable development. It’s time to stop beggaring our own for the sake of the globalist socialism.

#47 Smoking Man on 12.16.18 at 1:14 am

Fear, its a crippling disposition.

No fear no gain. It’s an addiction for me. Can’t get enough of it. And it always works out.

I’m looking at a dwarf can’t tell if he’s Asian or Russian. Those wired eyes that are attached to people down syndrome.

Dude is killing with the ladies. They say his dead folks left him a billion . I’m thinking it’s bull shit. He’s got moves. Charged me 5 bucks for taking his photo.

#48 Changeemall on 12.16.18 at 7:12 am

Forget long term investment. As the end of the debt super cycle approaches, USD will continue to straighten smashing emerging markets for years to come. Eventually the entire Ponzi scheme will collapse.

#49 Bezengy on 12.16.18 at 7:57 am

China? It was carefully explained to me a very long time ago that there is nothing better for a country than a good dictator, the problem is there has never been a good dictator.

#50 jess on 12.16.18 at 7:58 am

Looney Baloney

the deeper roots

lookback:
https://www.nytimes.com/2016/06/06/us/panama-papers.html

“a large scale, intercontinental money laundering and wire fraud scheme,” the Department of Justice announced.

….e.g. why they feared “the socialist
In early 2017 and after reporting on the Panama Papers by ICIJ’s media partner The New York Times, Ponsoldt started cooperating with law enforcement. The DOJ stated that Ponsoldt allowed U.S. law enforcement to monitor his telephone conversations with Mossack Fonseca’s Brauer in which the men discussed past tax evasion and how to avoid paying taxes in the future.

In July 2017, Ponsoldt worked with an undercover U.S. government agent who posed as a U.S. financial adviser.

https://www.icij.org/investigations/panama-papers/what-the-panama-papers-tell-us-about-the-clients-in-the-latest-bombshell-charges/

https://www.nytimes.com/2016/06/06/us/panama-papers.html
https://www.nytimes.com/interactive/2016/06/05/world/americas/panama-papers-us-taxes.

one of five -Operating in more than 21 jurisdictions, Mossack Fonseca is considered one of the world’s five biggest wholesalers of offshore secrecy.
https://www.icij.org/investigations/panama-papers/explore-panama-papers-key-figures/

#51 Doug Rowat on 12.16.18 at 8:02 am

#31 prairie person on 12.15.18 at 8:38 pm

Just did a one year chart on the DOW and on the TSX. If those were individual stocks, I’d say they’re done and to salvage what you can. I’ve never seen the charts show such a decisive downturn…. And, yes, I know, don’t panic, don’t jump out of t he plane. It will right itself. I’m not sure what it is that will pull it out of this dive. I keep track of a couple of portfolios. Everything on Friday was down, not necessarily much, but it is spooky to all red…. I remember 2008. The pension fund where I was working was down around fifty percent. Even some aggressive financial advisors have been saying there is nothing wrong with a good sized cash position.

I can tell you’re aching to time markets. But if you’ve “never seen the charts show such a decisive downturn” but also “remember 2008” then don’t start timing now.

Your odds of earning an annualized profit by investing in US markets over 10 years are about 90%–even higher if you maintain a balanced portfolio. These are about the best odds you’re going to get anywhere.

And if you’re still tempted to time markets read my last blog post:

https://www.greaterfool.ca/2018/12/01/chill-4/

–Doug

#52 HAM R Us on 12.16.18 at 8:32 am

China Just Launched A Daring Mission To Land On The Far Side of the Moon. So Why Do You Know Nothing About It?

https://www.forbes.com/sites/jamiecartereurope/2018/12/05/china-will-attempt-risky-moon-landing-new-years-eve-why-is-nobody-in-the-west-talking-about-it/#46729d256a25

_______________________________
Mr. Forbes, Can you handle the truth?

You cant handle the truth! Mr Forbes, we live in world that has great vested interests, and those have to be guarded by men full of hatred, ignorance, and intolerance.

Mr Forbes, we use words like democracy, rule of law, fair play as the backbone to defend our way of life, our civilization, you naively use them as if they are real rules of conduct in the world.

You want the truth why we arrest Ms Meng? I give you the truth! We hate them when they get ahead of us! We just hate themmmmmmm!

#53 Chairman Mao on 12.16.18 at 8:44 am

#38 IHCTD9 on 12.15.18 at 10:00 pm
“Maybe the difference is how long they’ve been here in Canada.”

You hit the nail on the head. Canadian born Asian women want to marry non Asians. Chinese born women even those who have been exposed to western men, if my decade of observation is valid, still marry Chinese men. I am sure the Chinese men are breathing a sigh of relief!

#54 crowdedelevatorfartz on 12.16.18 at 8:54 am

@#44 Smokey
“Meet Arnold, the terminator. ”
++++
I saw Arnold during the opening ceremonies on the 2010 Owe-Limp_icks in Vancouver.
I noticed a massive traffic jam at the entrance to Stanley Park at 8am the morning of the “torch parade” and was curious as to what was happening.
Walked a block from work to check it out
As governor he ran less than a kilometer through Stanley Park carrying the “torch” towards the Stadium.
It was pouring rain, torrential. The security around him was unbelievable.
Quite amusing seeing everyone around him in yellow rain jackets and heavy boots running/clomping along. Arnie wasnt winning any races with his “smile and wave while holding a torch” jogging pace.
After handing the torch to some other poor PR athlete/political hack to carry( can you imagine the let down as Arnold hands you the torch and you’re completely ignored/pushed away by the media, the security, everyone as they listen to every gutteral germanic utterance…….to keep running….alone…. in a monsoon away from the “fame and glory”) .
He gave a brief speech to the ever fawning , lick spittle, complacent BC media.
Arnie smiled for the cameras and promised that there would be “Hydrogen Fueling stations from Cali-forn-yah to BC in the near few-cha” as a shout out to Ballard and their fuel cell tech…( remember Ballard?), “To fight global warming”

But now its Tesla and we’re still waiting for “green” fuel stations to make a “green” trip possible…….as the BC and Cali forest fires add to the smoke and mirrors……

#55 dharma bum on 12.16.18 at 9:32 am

When the MSCI launched its first comprehensive emerging markets index back in 1988 only 10 countries were worthy of representation and encompassed only 1% of the world’s market cap. Today this index includes 24 countries and 11% of the world’s market cap. Emerging market investing is here to stay. – Doug
——————————————————————–

“The stupid don’t even understand something that happened long ago; the wise understand it before it develops.”

~ Shang Yang

China and the Chinese had a developed society and a “market” eons before the Europeans or the Americans.

They will have an advanced market and powerful society long after American and European civilizations have crumbled.

The long term future of prosperity lies in emerging markets.

We will all eventually be their slaves.

#56 dharma bum on 12.16.18 at 9:41 am

#46 Smoking Man

Charged me 5 bucks for taking his photo.
——————————————————————–
Please post a link to that pic.
This I gotta see!

#57 Sideshow Rob on 12.16.18 at 9:46 am

“Who’s Maxine Waters? ”

There is this new search thingy out. It’s called “google”. It’s pretty good. It might even catch on.

#58 Herb on 12.16.18 at 10:05 am

SM,

not surprised that you wound up in CA. As I remember from the ’70s, it’s the low point of the continent, and all the loose nuts slide down there.

#59 Vampire studies on 12.16.18 at 11:17 am

43 IHCTD9 – very interesting article, thanks

#60 Doug Rowat on 12.16.18 at 12:40 pm

#56 Sideshow Rob on 12.16.18 at 9:46 am

“Who’s Maxine Waters? ”

There is this new search thingy out. It’s called “google”. It’s pretty good. It might even catch on.

I thought I even marked it “mouse trap”…

–Doug

#61 Never Say Never on 12.16.18 at 12:43 pm

https://www.youtube.com/watch?v=aJURNC0e6Ek #48 Bezengy – He was the greatest dictator that ever lived because all was for the citizens to prosper, and he also took his share too.

#62 Doug Rowat on 12.16.18 at 12:53 pm

#37 For those about to flop… on 12.15.18 at 9:51 pm

Doug, it was good to see you call yourself Robax.

Robax is not the worst nickname,nor is InfLewenza,

Badges of honour for both of us. Might even be Ryan’s Porsche vanity plate.

–Doug

#63 crowdedelevatorfartz on 12.16.18 at 1:01 pm

@# 51 Ham and CHEESE
“China Just Launched A Daring Mission To Land On The Far Side of the Moon.”

++++

A “daring mission”?
To send a robot where the Amricans sent real people 50 years ago…..
Yawn.

And you wonder why the media is ignoring it?!??!?

Further proof that China eventually steals and copies everything that is thought up or invented in the West.
Lets face it, aside from toilet paper and gunpowder there hasn’t been much in the way of Chinese earth shaking inventions for the last 1000 years or so.

P.S. Hammy.

As I posted a few days ago in response to your propaganda drivel…….

The Americans just landed another robot on Mars to join the other robots they have landed on the Red PLANET over the past 4 decades.

P.P.S.
Don’t gloat too much….. China hasn’t successfully landed that glorified Huawei washing machine yet.
Lets just hope they remembered to convert “miles” to “kilometers” when they stole those 50 year old plans from NASA

P.P.P.S.

Will Winnie the Poo be there to shake hands with the robot when it returns to Earth like the American Presidents did with the astronauts in 1969?

Or will he pose next to pictures of the “historic event” because they haven’t figured out how to drive it 250,000 miles back home without crashing?

#64 Good game on 12.16.18 at 1:31 pm

Emerging markets do have sexy appeal, but in a systemically integrated financial system burdened by unprecedented and growing credit with rising rates… meh

#65 PeterfromCalgary on 12.16.18 at 2:08 pm

Be careful about not putting too much of your portfolio in emerging markets. There is lots of upside but the risks are real and they don’t all have to do with trade.

The status of Taiwan, South China Sea, and Human rights issues could impact what happens to your investments.

Diversification is you best protection don’t put too much of your portfolio in emerging markets.

#66 Stan Brooks on 12.16.18 at 2:20 pm

https://www.huffingtonpost.ca/2018/10/12/canadians-debt-bdo_a_23559288/?utm_campaign=canada_dau

Nearly 1 In 4 Canadians Feel Crushed By Their Debts: BDO Canada Affordability Index

“This lack of affordability suggests that a significant group of Canadians take on debt to cover their spending and many find themselves feeling lost and overwhelmed by this debt,” Jones said in a release.

———————————–

https://ca.finance.yahoo.com/news/consumer-insolvency-filings-spike-canada-173600370.html

The drug/credit dealers are abandoning the drug/credit junkies to it’s fate.

One wonders how is that possible provided that the employments is great, economy booming and apparently there is no inflation.

#67 SoggyShorts on 12.16.18 at 2:53 pm

#38 IHCTD9 on 12.15.18 at 10:00 pm
#23 Chairman Mao on 12.15.18 at 7:27 pm
IHCTD9 on 12.15.18 at 12:50 pm
Of course, especially if these kids were actually born in China, #1 preference for mates for everyone alive is someone of their own race and culture, even nationality.
*************************
Really? That hasn’t been my experience at all.
When I lived in Taiwan the girls there went nuts for white guys. Dudes who were objectively a 5/10 back home turned into a “Taiwan 9” the moment they stepped off the plane. At first, I thought it might just be a gold-digger thing, but not so- even wealthy women gravitated towards foreigners. Plenty of those expat dudes were also over there at least in part because they found Asian women especially attractive.
On the other side of the pond, I know of loads of guys in Canada who are only interested in Asian girls, and a couple of black guys who have no interest in black women, and their blond girlfriends who will only date black guys. Plenty of middle-eastern women aren’t interested in men from their home countries either for some pretty obvious reasons.

“people prefer their own” is not even remotely close to what I have seen.

#68 Rifles on 12.16.18 at 3:00 pm

Did they abandon EM because of Trump tweets or because of Asian exposure to USD denominated debt that risks blowing the place up as USD stays strong? China, India, Indonesia, Malaysia, South Africa, Mexico, Chile, Brazil and some Eastern European countries have foreign-currency debt 20 – 50% of GDP. Growth slowing and responses to market weakness on part of giovernments in region not compelling. The spread may be at record wides but sometimes things are cheap for a reason – and may well stay that way for many years.