caseyresearch.com / Justin Spittler / September 25, 2015
Emerging markets are in trouble…
The iShares MSCI Emerging Markets ETF (EEM), which holds roughly 800 emerging-market stocks, is down 23% since last September.
And things have gotten even worse recently. EEM has now fallen for the past seven days straight.
John Burbank thinks the strong U.S. dollar is a big reason why…
Burbank founded Passport Capital, a hedge fund that manages $4.1 billion. He made a fortune betting against the U.S. housing market in 2007. Passport Capital’s main fund returned 219% that year.
This year, Burbank’s Passport Global fund has gained 15%, while the S&P 500 has lost 3%. One reason Burbank has crushed the market this year is because he’s made big bets against emerging markets…
Emerging markets are countries that are on their way to becoming developed like the U.S. and Germany. China, Brazil, and Russia are all major emerging markets.
Burbank is bearish on emerging markets because companies in these countries have borrowed record amounts of U.S. dollars, as we recently explained. According to The Wall Street Journal, the amount of loans made in U.S. dollars to emerging-market borrowers has almost doubled since 2009.
• The strong U.S. dollar is making these loans a lot harder to pay off…
Regular Casey readers know the U.S. dollar has soared 13% versus other major currencies over the past year. And the dollar has gained far more against key emerging-market currencies…
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