Commentary: BRIC is broke, and emerging markets are discouraging

NEW YORK (MarketWatch) -- Many investors turned to emerging markets last year because those economies kept sizzling even as developed economies began cooling. Some pundits opined that emerging markets were the new global growth engine and that their momentum could save developed economies from sliding into recession. Indeed, that view held up for a while. In 2007, the Dow Jones Wilshire Emerging Markets Index rocketed up 45.4% on a total-return basis, while the DJ Wilshire Developed Markets Index gained 9.5%. From Oct. 31, when the global equities market peaked, through the end of the year, the developed markets index sank 5.9% but the emerging markets index eased only 2.6%. (The U.S. market peaked earlier, on Oct. 9.)

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Then the roof fell in. From Jan. 14 of this year through Jan. 22, the DJ Wilshire Emerging Markets Index plunged 16.3% (versus a 9% decline for the DJ Wilshire Developed Markets Index). Emerging markets recovered almost completely by May 21, but from then through Sept. 16, they were pounded down by 35% (versus a 19.7% drop for developed markets). The bigger fell harder. The acronym-anointed BRIC darlings -- Brazil, Russia, India and China - stole the emerging market show last year and are leading the retreat this year. All four markets are in the tank with double-digit declines, though China and Russia are being battered roughly twice as hard as the other two.

Decoupling is a mirage.

The recent growth of emerging economyies are built on same overleveraged and shaky financial foundations.

The may grow fast, but are also vulnerable to any adverse development. Money can go in and out fast and furiously of those economies.

In the age of interconnected global finance, their economies cannot be decoupled safely. That is a purely wishful thinking.

I know what not to read or post from Market Watch. However, this thing about emerging economy has been my opinion for some time.

I am not a mindless cheerleader for Chinese economy decoupled from ills of world economy, whose domestic demands growing leaps and bounds, making happy all kinds of fat cat donors to Dems and RINO.

I had it with buying on the dips.

I’m so disillusioned with the “brilliant” minds in finance and the economy. Trying to fathom economic truths is extremely difficult. But I simply have no faith in or respect for these so called “experts” and geniuses when time and again I seem to know more than they do, and with absolutely no training as an economist.

I knew intuitively that decoupling was patently false even while all the pundits were talking about how well the world held up despite a slow down in the USA and how they predicted that growth from China and India would sustain the world when the USA scaled back.

All you had to see is our GDP and the volume of our imports and then you look at these huge net importers like China, and you just had to know that our inability to buy goods was going to impact them and all other nations that provide us with goods.

I’m no financial genius, but when these Harvard graduates are telling me the world economies have decoupled from the USA, is it any wonder I am now so skeptical of every word they spew, even if they say the sky is blue.

I just can’t believe anybody would be idiotic enough to believe, at this time, that the developing countries with their relatively small economies, were just going to go on a tear when the USA scaled back. I mean, it was intuitive. And now, I have no respect for these guessers. My guess is as good as theirs. No, my guess has been consistently better than theirs.

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