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Which cycle exactly?

D’oh, as the great man has been known to say – I have just fallen for the oldest trick in the online publisher’s iBook. Worse still, not only did I click on a webpage link as a result of a headline and teaser that, while literally accurate, certainly made me look one way when I should have been facing the other, it also had me fuming for a good five minutes before I made the click.

“Is now the time to move out of emerging markets?” I was taunted. “With the sector seeing its worst four weeks in the last three years, should investors return to developed markets?” From a number of immediate thoughts, the most printable was that investors with any brains should already be suitably diversified across both mature and emerging markets and not be trying to guess the right time to switch between the two.

Investors who do see the relationship between the developed and developing worlds as similar to that of the little chap with the umbrella and his happier friend in the shades, destined to be either inside or outside their weather predictor house but never in the sunshine or the rain together, have the simplistic world view of a Sunday personal finance section and probably deserve all they get. Individual markets and indeed investment as a whole may theoretically be zero-sum games but this specimen is not.

As it turned out, my blood pressure and I need not have grown so exercised. Of the six industry experts asked whether now was indeed the time to sell, three had the words emerging markets in their job title and a fourth works for Aberdeen, who one hears is quite big in the sector.

Emerging markets managers tend to be a pretty optimistic breed at the best – worst? – of times but you are as likely to find one who will merrily advocate selling as you are a banking executive who understands how much positive PR could be generated by foregoing or donating to charity even one round of bonuses.

This is the point where I am supposed to wheel out the “blood on the streets” quote/cliché and suggest buying emerging markets on bad news – a category for which Iran sending a warship or two, for whatever reason, up the Suez Canal certainly seems to qualify.

At the very least, I would think twice about selling emerging markets en bloc and, if you have already advised your clients to do so, with such a short-term and reactionary approach to what everybody knows is a hugely volatile asset class, have you ever considered a career advising institutional investors?

Too harsh? Perhaps. After all, one of the more splendid aspects of the wonderful world of investment – at least philosophically – is that nobody is ever entirely wrong. No, in the same way even a stopped clock is right twice a day, provided that you hold your stance long enough, you will almost certainly be proved right in the end.

Sure, you, your investors or your clients may have lost a packet but then you just have to focus on why you got into this business in the first place. As ever, I shall invoke my Swiss Army penknife of an all-purpose example, the tech boom, where some seriously high-profile managers argued for years that IT companies were overvalued while other investors made a fortune. Who was proved right in the end? Discuss.

This murky area gained an extra dimension for me recently when I heard the chief investment officer of a chunky industry player claim they were ahead of the cycle in being bullish on the prospects for emerging markets which, when you think about it, is a terrific piece of investment one-upmanship.

Thus, if you are in the camp that believes, perfectly reasonably, that the outlook for developed markets is perkier in 2011 than it has been for years, you are already behind the times.

As for me, who has been pro-emerging markets at least since I got offered a contract to write a book on the subject and maybe even a week or two before that, to this CIO’s mind, I may very well have been lapped. Who will be proved right in the end?

Julian Marr is editorial director of Marketing-hub.co.uk and Thoughtleadershiplive.com

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