Emerging markets fail

U.S. Stocks Beat BRICs by Most Ever Amid Market Flight

Investors are favoring U.S. stocks over emerging markets by the most ever as fund flows and volatility measures show institutions are increasingly seeking the relative safety of American equities. Almost $95 billion was poured into exchange-traded funds of American shares this year, while developing-nation ETFs saw withdrawals of $8.4 billion, according to data compiled by Bloomberg. The Standard & Poor’s 500 Index (SPX) trades at 16 times profit, 70 percent more than the MSCI Emerging Markets Index. A measure of historical price swings indicates the U.S. market is the calmest in more than six years compared with shares from China, Brazil, India and Russia.

This is about money fleeing from the US bond market and the US bubble stock market, looking for real growth. They are coming back sadder but wiser. Emerging markets are not quite there, rife with corruption and poorly written laws. They so not have the liquidity structure to keep US fund managers happy. Now with tapering coming up, the load is put right on our legislatures in DC. To keep the money here, the DC politicians are going to have to live with a 2-3% ten year yield. Ant that depends on whether California can avoid major screw ups, and we all know the California legislature, one of the worst.