The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.
By Ivan Martchev of InvestorPlace.com
NEW YORK (TheStreet) -- I'm guessing you've heard some of the same comments I've been hearing recently regarding the weak start that many emerging markets have made this year: "It's time to buy developed markets again," "Emerging markets are done," "The emerging market rally is over," etc.
Nothing could be further from the truth. The secular bull market in BRIC markets and other smaller, organically growing emerging markets is far from over.Markets that are developing their domestic economies based on sustainable "savings-and-investment" economic growth cycles, rather than on unsustainable, ever-rising levels of borrowing such as we've seen in many developed markets (Germany being a notable exception), have plenty of upside ahead. In the United States, we saw corporate profits hit an all-time high at the end of 2010, with financial firms showing some of the biggest gains. However, this is hardly surprising when you borrow at zero percent and lend at a positive rate. Corporations reported an annualized $1.68 trillion in profits in the fourth quarter. This is almost exactly the size of the projected deficit for fiscal year 2011 of $1.65 trillion. So, in effect, the federal government has borrowed the total profits of the U.S. economy! Before the financial crisis, we had a smaller federal deficit, but then it was consumers and corporations that were doing the borrowing. In short, if the government borrowing goes away, so does the recovery. It is very difficult to advocate holding an S&P 500 index fund in the next 10 years, as the last 10 years has produced an annual return of just 3.2%. As you can see in the chart below, there is only one market in the MSCI Emerging Market Index with a lower return in that time frame (Taiwan), while the rest have been spectacular performers without running huge and unsustainable fiscal deficits.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV