Risk: Flight to safety?

It is still a White Man’s World. And risk perception is decided by the White man. So if he says risk is in emerging countries, well it is time we told the White Man that risk is to be priced that is all. Frankly the Western World is in denial about the Greece problem. There is still a feeling that the other countries have no choice but to bail out Greece, so the risk of Greece defaulting need not be priced. This is not correct.

Today the countries like China, Brazil, India, even Russia have a reasonably stable government and booming economies (by western standards). Also these countries have a population that is far more willing to accept that some changes in their lifestyles will be necessary. However the Western World is in a state of denial – there are likely to be riots in Greece, Spain, Portugal if the local population is asked to make sacrifices. Neither does the politician want to run the risk of  asking people to ‘live frugally’.

Now am I saying that the developed markets are more risky than the emerging markets? No. I have no such comment to make. Instead I am saying that the risk in the emerging markets is already in the price. The ‘risk’ of the developed markets is still not there in the price. That is the risk – of not wanting to price the risk!

Oops I seriously try to keep my posts simple. If you are a retail investor in the developed markets it is time you shed the ‘feeling’ that emerging markets are risky – after all it is a prejudice. Like the upper caste male who cannot accept that somebody from the lower caste is as good as he himself. Prejudice? Bias?

Well- if flight to safety means flight to safer regions you should be removing your money from Europe and investing it in Asia. Of course you could hope that Greece will get bailed out….there is always the American banks who can structure any deal…and charge fees from both ends :).

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