market folly

We're posting up notes from the Invest For Kids Chicago Conference 2017.  Next up is Rick Reider of Blackrock who pitched a long of emerging markets debt.


Rick Reider's Invest For Kids Chicago Presentation: Long Emerging Markets Debt

“Getting income the new-fashioned way”.  Huge, extraordinary demand for income; buy emerging markets debt – hard to find it elsewhere.  Aging populations, lower growth will drive more demand for income.  Tens of trillions of supply-demand imbalance for income.  Would growth will follow the demographics.  Rates may stay low for a long time, especially ECB and BoJ (China, India, USA are a little better).  China is the world’s demand growth driver – up to 40% of world growth is China.  26 of the world’s 27 largest economies are growing right now – rare and extraordinary.

A good capital spending cycle is underway and that bodes well for 2018.  There has been no deleveraging – private debt now on public balance sheets.  A rate increase is daunting – central banks can’t let rates rise in the next five years or else the debts become overwhelming.  Technology is deflationary, although wage pressure is slowly building in developed economies (not in EM).

Emerging market valuations are still attractive: real rates + inflation + credit (CDS) framework shows value.  Equilibrium in energy markets has led to very low volatility in inflation – that stability in emerging markets is a new paradigm.


For more from this event, check out the rest of the presentations from Invest For Kids Chicago 2017.