[ by Howard Haykin ]

The perpetual exodus by institutional investors - soon followed by mom+pop investors - in search of higher yields and stock market returns is taking this hearty lot to emerging markets.  Some investors feel that now is the time.  WHY?  Because "risk aversion has come down, and that's definitely a positive for [this sector]," according to Prudential Int'l Investment Advisers chief strategist, John Praveen. 

Since 2008, emerging markets have been out of favor for this band of 21 countries, including Brazil, Russia, and Malaysia.  Some of these markets are 25% below their October 2007 peak. 

Frankly, this relatively conservative investor can't begin to fathom the idea of investing in emerging markets.  How would it be possible for emerging markets to rise with the current state of the world?  Can these emerging markets jump on the badly slumping shoulders of the developed markets?

And how can any country or region not be affected by the civil strife that currently plagues the Middle East, Africa, Europe, parts of the Far East, and points in between?  And since computer hackers are often indifferent to the identity of their victims, rich or poor, large or small targets are exposed like never before.

Advising Your Retail Client. Risk is a perpetual factor when it comes to investing in emerging markets.  And what's your firm's best guess as to how long the honeymoon with emerging markets will last.

So far this year, global investors have poured a net $23 billion in to emerging market stock funds, with $9 billion coming since the beginning of August.  Last year, investors yanked $34 billion from emerging markets funds. 

On the flip side, the WSJournal tells us that investors have pulled a net $7.1 billion out of the U.S. equity markets.

The bets bet is to provide a client with the various funds that provide access to emerging markets, then market the order ticket as "UNSOLICITED."  Even if your client may not be able to sleep at night, why should you suffer too?

Hey - Does anyone know the odds on next week's NY Jets game against Miami, and the chances of Tebow taking over as QB?  I got some loose change that's burning a hole in my pocket.

[WSJournal, 10/22/12]