Buy the EEM versus a short in the SPY for 2014

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There are times when one gets ahead of the other but it hasn't stayed that way forever. As the year-end is upon us, perhaps there is more potential in the next 12 months to be long the EEM             (Emerging Markets) instead of the S&P500             .

Risk 10%, Goal 10%. Probability 75% (my impression) of profit.

Would anyone like to comment on the valuation disparity between these ETF's and make a fundamental analysis? Or, feel free to wait for my analysis.

Monday, December 16, 2013 10:28AM EST
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Hello tim
i enjoy your work and thanks for sharing

i wanna ask you what do you think about the taper and its correlation to the EEM.
i think EEM can go lower from here if rates go higher, simply because cheap money in now invested in those markets and when rates go higher with the taper plan the cheap money will go out of EEM.

Hello TamirHa, Sorry I didn't see your question. I don't know the answer because I don't know what people have actually done with their money or what they will do with their money once interest rates change. What I can do is just watch the relative action of the markets and try to decipher when it is safe to jump in the trend and try to catch a meaningful move in the market. With individual stocks it is much easier to read the news and determine which side of the trade has more buying power based on how it moves around major news releases. But with "emerging markets" there are so many factors. Oil prices, for example, are a major driver of EEM (from what I've seen). Thanks for the comments and questions. I hope you private message me if I don't reply after a day to help remind me of your question. Thanks. Tim
TamirHa timwest
thanks for the comment :)
Short spy and short eem
The drop to the low in relative performance was 8% - which is quite close to the 10% expected as the worst case scenario. That's how relative trades set up sometimes. It has turned the corner in dramatic fashion and has almost come back to breakeven here as of March 28, 2014.
2use timwest
But its not out of the woods yet, although i already hear the news here and there about emerging markets.
2use 2use
6 months later on this chart and the result is astounding - the gap widens...although EEM rans up and we feel a chance of SPY taking a considerable break from the run.