• support@madhedgefundtrader.com
  • Member Login
Mad Hedge Fund Trader
  • Home
  • About
  • Store
  • Luncheons
  • Testimonials
  • Contact Us
  • Click to open the search input field Click to open the search input field Search
  • Menu Menu

October 8, 2010 - My Reconciliation With Emerging Market Debt

Diary

Featured Trades:? (EMERGING MARKET DEBT), (PCY), (ELD)
PowerShares Emerging Markets Sovereign Debt Portfolio ETF
Wisdom Tree Emerging Markets Local Debt Fund ETF


2) My Reconciliation With Emerging Market Debt. Last month, I advised readers to take profits on the emerging market debt ETF (PCY) after clocking a generous 30% total return over the previous year (click here for 'Sovereign Debt Was a Great Place to Hide'). As much as I liked the credit, the tremendous gains achieved by all fixed income instruments were starting to give me a definitely queasy feeling.

Well, Doctor Ben Bernanke rode to the rescue with a Costco sized bottle of Dramamine, and I am now feeling a million times better. Given the global surge that is going on in all asset classes, the (PCY), with its generous 5.82% yield, has to be on the menu in a yield hungry world.

One of the great ironies in the international capital markets is that emerging nation balance sheets are so healthy because the West refused to lend to them for so long. Several debt crisis during the seventies and eighties caused entire continents to be rated as junk. That forced these countries to pull themselves up with their own bootstraps, financing growth from savings instead of expensive foreign borrowing.

Now that I'm back in the game, I'll see you one ETF, and raise you another. While the (PCY) invests only in the dollar denominated debt of emerging markets, Wisdom Tree has just launched its (ELD), which gives you the local currency exposure as well, and still offers a healthy 4.8% yield. The fund invests in the bonds of Brazil, Chile, Columbia, Indonesia, Poland, Russia, South Korea, South Africa, and others, all countries you should know and love well after reading this letter. With large capital inflows expected to continue into these high growth countries for years to come, giving a steroid shot to their currencies, this is a bet that I am more than happy to make.

You get the a double play here: a continuous cycle of credit upgrades lead to lower interest rates, higher bond prices, in appreciating currencies. International capital flows are providing a tremendous wind at your back. Don't expect the de facto better quality credit to continue paying higher interest rates forever. This screaming contradiction can only be resolved through higher prices for both the (PCY) and the (ELD).

PCY08.png


ELD08.png


Mirandacarmen.jpg

We're Getting Back Together

Share this entry
  • Share on Facebook
  • Share on X
  • Share on WhatsApp
  • Share on Pinterest
  • Share on LinkedIn
  • Share by Mail
https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2010-10-08 01:50:292010-10-08 01:50:29October 8, 2010 - My Reconciliation With Emerging Market Debt

tastytrade, Inc. (“tastytrade”) has entered into a Marketing Agreement with Mad Hedge Fund Trader (“Marketing Agent”) whereby tastytrade pays compensation to Marketing Agent to recommend tastytrade’s brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastytrade and/or any of its affiliated companies. Neither tastytrade nor any of its affiliated companies is responsible for the privacy practices of Marketing Agent or this website. tastytrade does not warrant the accuracy or content of the products or services offered by Marketing Agent or this website. Marketing Agent is independent and is not an affiliate of tastytrade. 

Legal Disclaimer

There is a very high degree of risk involved in trading. Past results are not indicative of future returns. MadHedgeFundTrader.com and all individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles and all other features are for educational purposes only and should not be construed as investment advice. Information for futures trading observations are obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the trading observations is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein. Affiliates of MadHedgeFundTrader.com may have a position or effect transactions in the securities described herein (or options thereon) and/or otherwise employ trading strategies that may be consistent or inconsistent with the provided strategies.

Copyright © 2025. Mad Hedge Fund Trader. All Rights Reserved. support@madhedgefundtrader.com
  • Privacy Policy
  • Disclaimer
  • FAQ
Link to: October 8, 2010 - Guess Who's On Top of the ETF Rankings? Link to: October 8, 2010 - Guess Who's On Top of the ETF Rankings? October 8, 2010 - Guess Who's On Top of the ETF Rankings? Link to: October 11, 2010 - Where to Buy the Next Dip in Gold Link to: October 11, 2010 - Where to Buy the Next Dip in Gold October 11, 2010 - Where to Buy the Next Dip in Gold
Scroll to top