Forbes.com ran an article written by me today, discussing the potential for a bubble in sovereign debt, particularly that of emerging market countries.

When I started trading emerging market sovereign debt in the early 1980s, the big risk was non-payment. The danger of default always loomed over a deal. It was like buying a Japanese car or a transistor radio made in Taiwan in the early 1970s: cheap, substandard goods that would likely fail early and often. However, some countries we still label “emerging markets” have become economic powerhouses: China, India, Brazil and Russia for example, holding foreign exchange reserves respectively of $2,300 billion, $284 billion, $235 billion and $433 billion.

Today, more than $5 billion of emerging market debt (EMD) is traded daily and prices are sky high in both debt and equities. Since Jan. 1, 2009 the MSCI Total Return Emerging Markets Index is up 65.1%, outperforming the S&P 500 Total Return Index, which is up 17%.

Read on…

MarketFolly.com also featured my overview of the EMD market.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aVD2G_.A8UEc

Saleh and Turan are mentioned here based on our involvement with Russian debt in the past:

“A lot of debtors in 1998 said they’d never touch Russia again, but memory in the bond market is short, so they are all lining up,” said Saleh Daher, the managing director of Boston- based Turan Corp., which owns Russian debt dating back to the Soviet era. “There is a wall of cash looking for investment, in particular in the emerging-market bond world.”

We learned an expensive and painful lesson in 1998 about “too big to fail.” It’s interesting to see how quickly the ocean of liquidity can make people forget.