re: Emerging Markets Mutual Fund in 401k portfolio

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Would this be a good time to invest in EMs due to the depreciated currencies therefore this company will be able to expand its infrastructure cheaper since they can borrow from their home country or any other stable economy?

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This depends on numerous factors. If they sell in the U.S. and are investing abroad simply for manufacturing purposes, further EM currency depreciation would reduce the cost side of the equation when translated into dollars while the revenue side would be unchanged (since sales are in dollars anyway).

If they are investing abroad and selling abroad, both costs and revenue would be reduced when translated into dollars.

If they invest abroad and get costs at 0.30 on the dollar and then down the road sell abroad and get revenue at 0.20 on the dollar, margins would be squeezed since revenue would be translated at a lower rate than costs.

If they invest abroad and get costs and sales at 0.30 on the dollar, margins would be maintained but revenue would be lower in absolute dollars.

But assuming they should invest abroad because costs are lower due to depreciating currencies fails to take into account that sales would also be lower, unless they aren't also producing sales in that region.

A general answer would be, "the company should invest abroad if its return on investment less depreciation in the EM currency nets out to a greater return on investment than what would be available in the U.S." If expected return is 4% in U.S. and EM currency depreciation is expected to be 4%, you've got to return more than 8% in the EM before translation in order for it to be worth it.

If you really want to rock his socks off, you could run a sensitivity analysis detailing how the net return on investment would be impacted by various exchange rate assumptions.

You could also introduce the concept of hedging. Assume hedging your currency exposure costs you 1%. You'd need to return more than 5% in the EM for it to be worth it.

That context really changes everything. The company's profits will be very dependent on growth in the country they build in. In this case it would absolutely be very important to not invest until the country has stabilized. Is there a specific country in general they are talking about? Because the answer would be very, very different for Mexico or Turkey.

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HBS cases

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You have no idea how much of a stigma I have for a lot of Ivy League people (not all, some are great). They come into this business with an entitled opinion and no intellectual curiosity. Not to mention the fact that Ivy League schools teach economic theory, not applicable finance. Every year the new MBAs come in with ideas on how we can improve the company from the top down, but have no idea how to use Bloomberg. YOU LIVE IN AN AGE OF GOOGLE, IF YOU DON'T KNOW SOMETHING IT'S YOUR FAULT. I'M NOT ASKING YOU FOR A SEMESTER PROJECT, I NEED THIS INFORMATION YESTERDAY.

I wish I could do more :banghead: emoticons just thinking about it.

I was reading an article about how they made some of the HBS mbas read over 200 cases in a semester and how engraining this sense of relativistic thinking makes it hard for them to transition in to the real world. So I think it is funny that you bring that up/

If you don't mind me asking what do you do?

IBD, PE, HF, PWM?

Haha no worries, I appreciate your input.