With the Fed having moved 75bps between meetings, targeting slowing growth(with less focus on inflation) we are going to here more and more remonstration directed at the ECB on their reluctance to cut rates, and the root of this stance. Real rates are now probably 100bps higher in Europe than they are in the US and inflation is more contained than the US. Europe will be unable to escape slowing, not because the US sneezes but because their consumers will also be choked off. The fallout from subprime and excess liquidity in global markets for years is that a bubble was created in real estate( as a hard asset play, and with cheaper money to buy more home) all over the world. Spain, Italy, and UK housing markets are struggling. European banks have more bad debt on their balance sheets than they have reported. Risk is being unwound massively around the world. This is not going to abate.
The ECB seems to be too concerned in trying to establish an anti inflation vigilance( a la the Fed) and seems to be missing the point. The Fed has historically been the leader of the independent global central banks. This more due to the impact of the US economy on the global economy than anything, but also that the Fed has been a more dominant institution with longer legacy. The ECB seems too concerned with trying to establish its own legacy. This is not about having to follow the American lead, this is about the doing whats best for the regional economy in Europe. As more bodies rise to the surface(especially in Europe) over the next couple weeks this point will be even more in focus. ECB needs to cut rates.
This morning GEM looks cheap on a historical basis and even relative to the recent levels we saw in the fall. Trading at about 13.5X trailing earnings with prospect of 16% earnings growth ( Morgan Stanley estimate) buying EM here is not difficult on a longer term view that will outlast the current vol and global growth uncertainty. Another 10% down and Russia is a screamer.
About Tim Seymour
Timothy Seymour is Co-Founder and Managing Partner of Red Star Asset Management and is also Chief Operating Officer of the $116 million Red Star Double Alpha Fund. Prior to coming on board with Red Star, Seymour was the Head of Fixed Income in Moscow at Troika Dialog Group, and was later appointed Global Head of Sales for all products. In January 2000, Seymour moved to New York to found Troika Dialog USA, a full-service NASD/SEC regulated brokerage firm and subsidiary of Troika Dialog Group. He also oversaw the development of Troika's US corporate finance business, working with multinationals seeking strategic partnerships and green-field projects in Russia, as well as Russian companies making acquisitions in the US. Seymour holds an MBA from Fordham Graduate School of Business with a concentration in International Finance and a BSBA in Marketing from Georgetown School of Business Administration. He comments regularly on developments in Russia's capital markets on CNBC, Bloomberg and CNN.
Ethnocentric, Ecocentric or Just Right?
With the Fed having moved 75bps between meetings, targeting slowing growth(with less focus on inflation) we are going to here more and more remonstration directed at the ECB on their reluctance to cut rates, and the root of this stance. Real rates are now probably 100bps higher in Europe than they are in the US and inflation is more contained than the US. Europe will be unable to escape slowing, not because the US sneezes but because their consumers will also be choked off. The fallout from subprime and excess liquidity in global markets for years is that a bubble was created in real estate( as a hard asset play, and with cheaper money to buy more home) all over the world. Spain, Italy, and UK housing markets are struggling. European banks have more bad debt on their balance sheets than they have reported. Risk is being unwound massively around the world. This is not going to abate.
The ECB seems to be too concerned in trying to establish an anti inflation vigilance( a la the Fed) and seems to be missing the point. The Fed has historically been the leader of the independent global central banks. This more due to the impact of the US economy on the global economy than anything, but also that the Fed has been a more dominant institution with longer legacy. The ECB seems too concerned with trying to establish its own legacy. This is not about having to follow the American lead, this is about the doing whats best for the regional economy in Europe. As more bodies rise to the surface(especially in Europe) over the next couple weeks this point will be even more in focus. ECB needs to cut rates.
This morning GEM looks cheap on a historical basis and even relative to the recent levels we saw in the fall. Trading at about 13.5X trailing earnings with prospect of 16% earnings growth ( Morgan Stanley estimate) buying EM here is not difficult on a longer term view that will outlast the current vol and global growth uncertainty. Another 10% down and Russia is a screamer.
About Tim Seymour
Timothy Seymour is Co-Founder and Managing Partner of Red Star Asset Management and is also Chief Operating Officer of the $116 million Red Star Double Alpha Fund. Prior to coming on board with Red Star, Seymour was the Head of Fixed Income in Moscow at Troika Dialog Group, and was later appointed Global Head of Sales for all products. In January 2000, Seymour moved to New York to found Troika Dialog USA, a full-service NASD/SEC regulated brokerage firm and subsidiary of Troika Dialog Group. He also oversaw the development of Troika's US corporate finance business, working with multinationals seeking strategic partnerships and green-field projects in Russia, as well as Russian companies making acquisitions in the US. Seymour holds an MBA from Fordham Graduate School of Business with a concentration in International Finance and a BSBA in Marketing from Georgetown School of Business Administration. He comments regularly on developments in Russia's capital markets on CNBC, Bloomberg and CNN.