Thailand Takes a Baht to Emerging Markets

Don't like this Thailand situation. Not one bit. When governments get involved -- as with Thailand's new currency control that locks up 30% of foreign capital deposits, ostensibly to stem speculation in the baht -- you have to pull back in emerging markets. I have tried to justify, at various times, why I should stay in "good" emerging markets and just avoid "bad" emerging markets, and I have always failed.

When I look at the gains in Mexico, Brazil, Argentina and India, I just say shoot first, take it off the table -- I don't even care if I give up 5% on the get-out.

These markets are pathetically interrelated by mindset and leverage. Whatever would attract people to investing in Thailand attracts them to all other emerging markets. Worse, these people tend to all panic at once. Maybe they don't panic today; that just means they'll panic tomorrow.

Think back to what happened in Latin America in May: nothing! That's right, nothing at all. But those stocks went down huge, many being cut in half, simply because our central bank raised rates too high.

The worst that happens? You miss a big move up that is, alas, highly unlikely, given what just happened. Now everyone will scrutinize each government -- the new Thai government was pro-investing -- and conclude there is more risk than they thought.

Not worth weathering it. Never has been.

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