European Closing Bell was co-hosted by Andy Hartwill from Quasar. I've never heard of him or the firm but I thought his points were interesting, mainly because they jibe with mine (ahem).He seemed to stress two points; geographic diversification and that buy and hold "as we know it" won't work anymore.
His perspective is as a UK market participant so his home bias is, or was as the case may be, presumably the UK and he wants out of the region. Europe, including the UK, may turn out to be worse off than the US. Too many US based investors rely on products that are too heavy in Europe and the UK for their foreign exposure. This hurt in the current bear market and maybe a hindrance in the rebuilding of portfolios that hopefully will occur over the next few years.
This line of thinking is obviously consistent with what I have been writing about for a long time regarding investing at the country level. Better foreign diversification can be had by seeking out and buying countries that are fundamentally different than the US. Most of the EMU countries have a lot in common with the US in that they need to import a lot of stuff, are mature economies, "advanced" financial systems and heavily indebted. The opposite of this could include commodity based, exports a lot of stuff, a much simpler financial system and a little less debt.
While finding countries that meet all those criteria could be tough there are plenty of countries that are different enough. I guess my favorite countries are Chile, China, Brazil and Norway. I say I guess because I have been writing about them more than other countries (mostly at greenfaucet) but long time readers might remember what I have been doing with these countries over the last few years.
From the low point in November to now, Chile has had a very smooth ride to a 10% gain, China is up 25%, Brazil is up 45%, Norway is up 30% and the US has had a very volatile ride to a 10% gain. All four of those foreign markets dropped a lot at different points in this bear market but the timing has been a little different and owning them has helped smooth out the ride which as you know is a big priority here.
This is not a case of some great call I made. It doesn't take much to find out a country has a different fundamental make up than the US and if you believe in the concept (different fundamentals means different cycles) then you can figure which countries give the best shot at this effect.
The equity markets of these countries are becoming easier to access but the fixed income and currency markets no so much. WisdomTree filed for an ETF for just about every conceivable currency on the planet but have only actually listed a small handful of them. They filed so long ago that I have pretty much given up on them but in line with what Hartwill, I and others have been saying it will only get more important to seek these investments out.
17 comments:
YES
The US will not dry up and blow away, but it will not be a leader if you are looking for growth. This will likely be true the rest of our lives.
Yes. The U.S. is a bit of Wal-Mart to me. Huge, politically stable, relatively financially stable(?), not much more room for growth. So what does that leave us with? Asia and South America?
Roger,
Off topic, but I know your take on the current rally and you feel another test for the lows is in order. However, it seems like we're rising on bad news. MSFT has a not-so-hot quarter, F only loses a coupla bills, etc. It seems reminiscent of 2003 where the news was still bad, but the market rose.
This mean anything to your prediction?
Roger,
great post. I have heard that the US ratio debt/GDP has gone from 40% to 80% due to the recent infusion of additional money. That ratio is like Greece's. This will be a shock when the additional money will go from the banks to the rest of the economy. I saw the clip of Nicole Elliott and she is very bearish. I wonder what kind of political schenario is evolving in the US. There is a study of an exKGB prof. that says that the US will be split-up in 5 sections, and the US will not exist as we know it today. It is far fetch but we also thought that the demise of the USSR comunist block was far fetch. There is a book by Biggs "Hedgehogging" around p214 describes what a person could do to save his family from such destress situations. 401k and money in foreign investments will not help. I mention this because I know what it means to have gone through a personal distress situation that I had no control. You never know when things can escalate. I hope it will not come to that. But China today for the first time has shown their nuclear sub.
Best,
Jeff from Milan, Italy
BillB, your first question yes Asia and South America. I would add Israel, Oceania, I believe the swings of the pendulum will be a little less in the middle east at some point, there are parts of Europe and Canada.
Your other question, so obviously I may turn out to simply be wrong. It fell that 50% so fast that a big bounce, really big, like i was saying at the beginning of the year still makes plenty of sense. Once thing about feel good rallies is the make people feel good which may be happening, not sure. Regardless of what I think I will start back in if the SPX takes back its 200 DMA but I will do so slowly to try to avoid whipsaw.
Jeff, gulp.
when was the last time a non-communist country had that type of political turmoil (referring to the one guy's theory of splitting into five sections)?
i certainly do hope that is farfetched.
Well, Russia isn't communist anymore, so you could almost say "last week."
Your points on China and Brazil made me look at a chart. Looks like emerging markets are probably up about 10% since the November lows.
Helpful post on Seeking Alpha about South Africa as an emerging investment destination. Not without risk, but gaining momentum among international destinations.
I'd like to see more BIC investments, Russia has been a terrible place for investors and it's currency looks particularly weak with lower oil prices. Brazil, India and China, on the other hand, are not one-trick ponies.
Or maybe a BICC or BINC to include Chile or Norway?
my hunch is that when/if oil goes back up people will mostly forget about Russia's troubles
I refuse to invest in Russia no matter what the oil price is. Politically it is a mess.
The far-right and the far-left (what nebulous terms!) in this country would LOVE to see a divided America
All the negative points made about Russia seem like indications that now is a good time to invest. You don't want to invest there when the Ruble is at an all time high along with the price of oil - do you?
Anon, if you like Russia long term, then yes, now is probably a great time to get in. However, if you believe that long term Russia will end up right where it started, then why bother?
I agree Russia is not a good place to buy and hold forever. But it will have a lot of growth along with Eastern Europe
I prefer to leave Russia be, because of the political risk. I understand that's an issue with almost any EM, but the way Putin has run/controlled things don't inspire me with confidence, and he's young enough to be around for a fair while.
Jan
Have you looked at Korea and Taiwan, Roger? Both are technically in a bull market.
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