This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

ETF Hit to Emerging Markets May Swell

The ETF theory keeps coming back to haunt me. Brazil, Switzerland, South Korea and India all got hammered more than most emerging markets . You can't blame the various events in those countries for their incredibly sharp market declines.

Although each country had a particular political or legal event (respectively: riots, currency problems with the euro, an arrest of an executive and a government that may not be as capitalist as previously) and each can be lumped into the "higher rates could be a problem" camp, what I think happened is that the ETFs of these countries had attracted a giant amount of hot money and it turned, just turned, all at once, and there was nothing underneath, not a real market to buy the stocks that got spit out by the selloff.

It's almost like the days when there were gigantic withdrawals from high-tech funds that then repeatedly pummeled perfectly good stocks that could not bounce back because of the fund redemptions.

I think that this kind of action is going to make these markets much more difficult to invest in because they are so much easier to get into than to get out of. These markets had long been protected by hit money from a variety of restrictions and a lack of ease of doing business. But all four countries have done their level best to become worldwide markets, and they are now suffering the consequences of our hair-trigger mentality.

If you don't believe me, take a look at the parabolic run in gold. That was, alas, almost purely because people who would not otherwise plunk down $500 an ounce -- let alone know how to do it -- got together and bought ETFs that did just that.

Any time you say what I am about to say you get in trouble: Sometimes the individual investor doesn't understand the risks and rewards of his investments. In these ETFs, that is most certainly the case; we have too much power in the very wrong and inexperienced hands, I believe.

Which means that there could be more downside to come every time anything goes wrong, and the downside will be wildly exaggerated and longer-lasting than we expect.

Just like the redemption days in tech in the '90s.

Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for Action Alerts PLUS. Listen to Cramer's RealMoney Radio show on your computer; just click here. Watch Cramer on "Mad Money" at 6 p.m. ET weeknights on CNBC. Click here to order Cramer's latest book, "Real Money: Sane Investing in an Insane World," click here to get his second book, "You Got Screwed!" and click here to order Cramer's autobiography, "Confessions of a Street Addict." While he cannot provide personalized investment advice or recommendations, he invites you to send comments on his column by clicking here.

TheStreet.com has a revenue-sharing relationship with Traders' Library under which it receives a portion of the revenue from Traders' Library purchases by customers directed there from TheStreet.com.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Submit an article to us!
SYM TRADE IT LAST %CHG
AAPL $128.95 0.00%
FB $78.99 0.00%
GOOG $537.90 0.00%
TSLA $226.03 0.00%
YHOO $42.51 0.00%

Markets

DOW 18,024.06 +183.54 1.03%
S&P 500 2,108.29 +22.78 1.09%
NASDAQ 5,005.3910 +63.9670 1.29%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs