The well bred contradict other people. The wise contradict themselves. (Oscar Wilde)

Today's presentation by Arthur Budhaghyan, Chief Emerging Market Strategist at BCA Research, has been negative on Emerging Markets overall. He is contradicting other analysts or editors of BCA research:

• China suffers from over investment (in real estates and heavy industries), and hence, profitability has been falling for couple of years. Also, the Chinese government will be more market oriented in the future and letting bankrupt countries fail. Most likely the government will introduce fiscal and monetary stimulus, should the economy seriously tank, but it will be rather lagging. This could hurt exporters (of commodities, capital goods and luxury goods) to China. Capital good exporters are Japan, Korea and Germany. 
• Russia: The fall of Russian stocks was an exaggeration of discounting geopolitical risks. But a slow down of China could depress oil prices and hurting the Russian economy.
• Brazil: Could enter recession, because Brazilian banks have to many non performing loans in their books (Brazilians are over indebted and the economy is already slowing).
• India suffers from under investment, mainly because of the lack of the populations financial savings. The country has entered a phase of zero growth. Arthur is only positive on India's IT sector, which exports to the US.

Valuation: Although valuation (P/E, P/B etc.) of emerging markets stocks are low, it is only because of the heavy market weight of badly run state companies which deserve low multiples.

BCA Long China, Short Treasuries and Long Europe

BCA Research just finished its  webcast on China, the US Fed and Europe .

China
The market is for China too negative. Although the Chinese government is determined, to let fail some smaller institutions, it would never risk its growth target of 7.5% p.a. by having a Lehman-like situation.
Please keep in mind China's currency reserves of USD 3.8 trillion and the high central bank rates which are at the government's disposition should a hard landing scenario become more likely.

The Chinese central bank has a lot of room lower rates

Fed / US Treasuries
The market is too complacent concerning the 10-year treasuries and the Fed rates. BCA also assumes that the first rate hikes will take place in June 2015, but they think that money market rates will increase swiftly thereafter; much more than the markets expects.

The market expects a nominal rate  of 2.25% as of 2016. This implies a real rate of 0.0%, while it averaged 1.8% in the past

Thus, USD bonds exhibit a high potential for negative surprises, and duration should therefore kept short.

Europe
The strength of the Euro is based on big current account surplus and a shrinking ECB balance sheet:

The big current account surplus confirms that there is a big demand for Euros. The shrinking ECB  balance sheet proofs that the ECB policy is restrictive, while the US Fed is still pursuing a expansive policy.

The Sage of Omaha has spoken again

Warren Buffett's 2013 annual letter to Berkshire Hathaway shareholders is out.
Buffett bulleted five fundamentals of investing, which we paraphrase:

• "You don't need to be an expert in order to achieve satisfactory investment returns." But Buffett also warns that the investor should recognize her limitations and "keep things simple.
• "Focus on the future productivity of the asset you are considering." Buffett notes that no one can perfectly forecast the future profitability of an investment. "[O]mniscience isn't necessary; you only need to understand the actions you undertake."
• "If you instead focus on the prospective price change of a contemplated purchase, you are speculating." Buffett has nothing against price speculation. But he emphasizes that it's important to be able to know the difference between investing for the productivity of the asset versus investing on hopes that the price of the asset changes.
• "With my two small investments, I thought only of what the properties would produce and cared not at all about their daily valuations. Games are won by players who focus on the playing field -- not by those whose eyes are glued to the scoreboard. If you can enjoy Saturdays and Sundays without looking at stock prices, give it a try on weekdays." In other words, focus on the long-run.
• "Forming macro opinions or listening to the macro or market predictions of others is a waste of time. Indeed, it is dangerous because it may blur your vision of the facts that are truly important." So mute CNBC, Bloomberg TV, and Fox Business. Unless Warren Buffett comes on.

Ben Graham: "Investment is most intelligent when it is most businesslike."

Copied from businessinsider.com. Read more: http://www.businessinsider.com/warren-buffett-2013-shareholder-letter-2014-3#ixzz2uigWv5N8