The Illusion of a Global Investment Risk

Generally, I rarely watch business news TV shows in America. They report risk and opportunities around the world from very limited and deceptive perspectives. They create an impression that because Ghana, South Africa, Brazil are developing or emerging economies, their risk profiles are more that what you have in US and Europe.

Simply, business journalists fail to decouple the same mindset that the general media used to portray the developing world. It is unsafe, poor, risky to travel, terribly bad governance and nothing good about those nations. The business journalists based on those assumptions declare that if those nations are that bad, there is no hope of opportunities therein. They are classified as risk-prone and investors are advised to avoid them.

Unfortunately, that is not the reality. The developing world of today is unique. The institutions may be weak, but the opportunities are enormous. Forget the Argentine hyperinflation; forget the SAP program in Nigeria; forget the Mexican peso bailout; forget the contagion of currency devaluation of late 1990s in Asia; just forget those images of developing world.

They have since evolved. There is a new world and those business TV news, which are usually not thoroughly researched are missing lots of points. The truth is that a typical business anchor will not call some bad bets in the developed world because it seems abnormal. And many fund managers lack the boldness to tell their customers that the developed world is not that bad.

When they seek new funds, they still concentrate in Europe and US; rarely putting lots of capital in the emerging markets and developing world. Why not? That is the normal and any change means the fund manager is not thinking straight.

For me, while the developing world is risky, their risk-influence  invest in brics currency  cannot affect the world that much. If Ghana gets into sovereign debt problem or have series of corporate debts, it will be like a cup of water in an ocean. They have risks, but its influence is still limited internationally.

But think of the so called developed nations. In the last five years, all the global economic problems have come from these ultra advanced countries. The Great Recession did not start from Argentina, it started from the US. And the new one that is holding the recovery is not from those developing nations. Right there at Europe, the PIIGS are the issues. From Greece to Spain, the world has to face difficult hurdles in the recovery.