It’s not the Great Crash of 2008, but it’s worrying: Year on year, world trade was down more than 10% between January 2014 and January 2015. That’s mostly price movements, to be sure, but the collapse of export prices in dollar terms reduces capacity to service dollar debt. Deficit = death in this kind of market. Stick with surplus-earning countries like China.

That’s why we keep seeing explosions in emerging market debt, including bonds widely held by mutual funds. Yield piggyness motivated by collapsing yields for safe instruments drove investors into the emerging market morass, which turns out to be loaded with land mines. Banco Mercantil do Brasil, one of Brazil’s largest lenders, saw its bond prices collapse to below half of face value after setting aside enormous amounts for loan losses.

Risk outweighs reward in the weak-currency emerging markets–which means all of Latin America as well as Turkey. Emerging markets overall are the laggard in 12-month returns, with China leading the pack among major markets.

And for all the China-bashers out there: We China bulls are laughing all the way to the bank.

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