The following post is by a hedge fund manager friend of DB who shall remain nameless. He runs the emerging markets desk at his firm.
The man who first hired me to work in emerging markets investing used to claim that understanding the idiosyncrasies of these markets was entirely a matter of understanding corruption. Predicting policy choices, he argued, was a matter of figuring out which domestic interest would pay the highest bribes. Capital flight? Just a question of how corrupt actors were feeling about the security of their ill-gotten gains. At the time, my youthful enthusiasm resisted accepting wholeheartedly such a cynical conclusion. It wouldn’t be unfair to say that a good deal of my many years of practical education since then has consisted of coming to a full understanding of my old boss’s dictum. It turns out that countries run by crooks tend to blow up. Go figure.
