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Based on its strong natural resources, Argentina should, in theory, be a gold mine for investors. With arguably the third-largest shale gas reserves in the world, the Argentinean economy is only one close step behind Brazil for the top spot in South America.

So why did today an analyst quote in a NASDAQ article that on a one to 10 rating for investors, 10 being the riskiest, he would give Argentina a nine? This statement addresses one of the biggest problems with investing in an emerging market: its governance.

Argentinean president Cristina Fernandez has enacted policies that have made foreign investing in this country an uncomfortably volatile thing. Dissonance amongst varying economic growth predictions has raised suspicion of a government that could very well be laced with corruption and in potential need of reform.

In fact, it could also be possible that the Argentinean government is evading Western investment altogether, seen in their nationalization of YPF (Treasury Petroleum Fields). This move sent the only Argentina ETF down over 20 percent since mid-April (NASDAQ) and demonstrated government hostility to the free market principals.

MSCI, an investment tool and index firm, is considering the removal of Argentina from its Frontier Markets index due to the government’s aversions. What’s further unsettling is that due to their richness in mineral resources, the country hosts a few popular stocks, such as Pan American Silver and Yamana Gold. With their removal from this MSCI index, further pressure could be placed on these stocks, as well as their ETF.

Their tempting potential continues to make emerging markets alluring to investors. Its unfortunate that this potential is often overshadowed by less than stable governance, making increasing the chance of risk for investors over that of return. Do these factors make investing in emerging markets more speculation than investment?

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.

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Our Two Cents – Week of 12/27/11

As the world slipped into holiday celebrations and vacations, news about U.S. consumer spending and the euro zone continued to move faster than Santa Claus could shimmy down the chimney.

Days before Christmas, the Italian government focused on reviving economic growth after passing Prime Minister Mario Monti’s enormous austerity package. Monti said the package, which included hefty tax hikes and deep budget cuts, was essential to restoring international market confidence in the boot-shaped country.

Economic growth also took center stage thousands of miles across the Atlantic and below the equator in South America. Known for samba dancing and excellence in soccer, Brazil now has a new accolade to crow—the world’s sixth-largest economy. The country overtook Britain’s No. 6 spot after it downgraded to seventh place because of the 2008 banking crash and current recession. Brazil, which is the largest country in South America, has boomed on the backs of exports to China and the Far East.

Signs of growth, however, haven’t prevailed in some of Europe’s wealthiest nations. Economists say the Netherlands has now been hit by the euro zone crisis, falling into recession and making budget cuts similar to its neighbors. The Netherlands has been one of the most vibrant economies in the West because of its low unemployment, high savings rates and strong export bases. East of the Netherlands, Poland has been cast in the fiscal shadows, but boasting strengths such as $30 billion International Monetary Fund flexible credit line to weather the storm. As nations seek to squelch the euro zone crisis, and as readers maintain pace with headlines, misconceptions about the crisis can rise, including the notion that countries will go broke when yields rise about 7 percent and Italy is flat-out destitute.

In the U.S., green wasn’t used to just describe Christmas trees. Consumer confidence soared almost 10 points to 64.5 (up from 55.2 in November) and registered the highest level in eight months. Christmas Day online spending spiked 16.4 percent, while mobile sales increased 173 percent. There may be one final present this holiday season—numbers pointing toward record-breaking sales. While Americans shopped, housing figures rose, adding more optimism in the economy and hinting at reduced chances of a double-dipping recession. For hedge funds, December saw leveled redemption rates. According to the GlobeOp Forward Redemption Indicator, hedge fund investors sought to pull 4.58 percent of industry assets in December, compared to 4.59 percent last year. Experts say the month-on-month increase is within normal range of seasonal patterns.

• Consumer confidence index surges in December, USA Today, Dec. 27, 2011
• Christmas Day Online Spending Up 16.4 Percent; Mobile Sales Up 173 Percent, TechCrunch, Dec. 27, 2011
• Brazil overtakes UK as sixth-largest economy, The Guardian, Dec. 25, 2011
• Italy’s Monti says Italy gov’t will now turn to growth, Reuters, Dec. 22, 2011
• Poland Can Weather Euro-Zone Storm, Wall Street Journal, Dec. 21, 2011
• Tied To Trade, Dutch Economy Falls With The Tide, NPR, Dec. 21, 2011
• GlobeOp: December Redemptions At Normal Levels, FINalternatives, Dec. 21, 2011
• US Housing Figures Add to Positive Signs, General Optimism, Forex Crunch, Dec. 20, 2011
• Five Popular Misconceptions About The European Debt Crisis, Forbes, Dec. 19, 2011

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.