Just One Man' Opinion - 07 July 2005
by JMac
International Stocks -
The "Global Marketplace" has become a hackneyed expression. However, every investor should have 10-15% of his/her investment dollars in companies in that market.
There are three ways to play the world. You can buy stocks in foriegn countries through something know as ADR's ( American Depository Receipts), buy mutual funds or indices, or buy American companies that get a major portion of their profits from overseas
I personally do not like the first option for a variety of reasons: first, the lack of transparency and the unknown accounting rules. The US has a reasonably aggressive accounting and regulatory sysytem and yet Enron, Adelphia, WorldCom and a host of others were not discovered until it was too late for the common shareholders. Just think what it must be like in, say, Jeezsakistan, or where ever ( I made that up so as not to insult anyone reading this ). And, if Arthur Andersen and thier colleagues can not be trusted to add 2 plus 2, what about the accountants in Jeezakistan City? or worse Lagos, Nigeria.
My preference today is a broadly diversified international index fund (diversified by country, not necessarily by stocks). There are a multitude of good, well run funds out there with expense ratios below 1% and with no loads. I would look at China and India, obviously. Within two decades China's total GDP will exceed our's, and India will be even bigger ( three billion consumers!!!). Europe is down and parts of it will stay down for some time. Until Germany and France discover capitalism they will drag down the EU's economy. However, some very interesting things are happening in Central and Eastern Europe. The former Soviet Union's satillites are embracing the free enterprise system with gusto. Look at funds with exposure in the Czech Republic, Slovenia, Poland and Hungary. There is a reason why they are not clamoring to get into the EU and it is because they do not want to be dragged down by its overly bureaucratic, overly regulated sysytem, its high labor costs, low productivity, and the currency. The one country in the EU that I like is Great Britain, but if it ever converts to the Euro (and I do not think they will) then I would be careful there also.
The real safe bet is right here in the USA. Companies like Coke, Altria, Caterpillar, Avon, Boeing (Airbus has made this a better company), P&G, J&J, eBay, Starbucks, GE, Citigroup, Pepsi, Honeywell and, believe it or not, GM (those Chinese love those Cadillacs) all are growing their revenue overseas. As a result, when you buy their stock, you are buying into the "Global Marketplace".
Side note: If you think voice over the internet is the next great leap, look at Cisco (see this week's Business Week).
International Stocks -
The "Global Marketplace" has become a hackneyed expression. However, every investor should have 10-15% of his/her investment dollars in companies in that market.
There are three ways to play the world. You can buy stocks in foriegn countries through something know as ADR's ( American Depository Receipts), buy mutual funds or indices, or buy American companies that get a major portion of their profits from overseas
I personally do not like the first option for a variety of reasons: first, the lack of transparency and the unknown accounting rules. The US has a reasonably aggressive accounting and regulatory sysytem and yet Enron, Adelphia, WorldCom and a host of others were not discovered until it was too late for the common shareholders. Just think what it must be like in, say, Jeezsakistan, or where ever ( I made that up so as not to insult anyone reading this ). And, if Arthur Andersen and thier colleagues can not be trusted to add 2 plus 2, what about the accountants in Jeezakistan City? or worse Lagos, Nigeria.
My preference today is a broadly diversified international index fund (diversified by country, not necessarily by stocks). There are a multitude of good, well run funds out there with expense ratios below 1% and with no loads. I would look at China and India, obviously. Within two decades China's total GDP will exceed our's, and India will be even bigger ( three billion consumers!!!). Europe is down and parts of it will stay down for some time. Until Germany and France discover capitalism they will drag down the EU's economy. However, some very interesting things are happening in Central and Eastern Europe. The former Soviet Union's satillites are embracing the free enterprise system with gusto. Look at funds with exposure in the Czech Republic, Slovenia, Poland and Hungary. There is a reason why they are not clamoring to get into the EU and it is because they do not want to be dragged down by its overly bureaucratic, overly regulated sysytem, its high labor costs, low productivity, and the currency. The one country in the EU that I like is Great Britain, but if it ever converts to the Euro (and I do not think they will) then I would be careful there also.
The real safe bet is right here in the USA. Companies like Coke, Altria, Caterpillar, Avon, Boeing (Airbus has made this a better company), P&G, J&J, eBay, Starbucks, GE, Citigroup, Pepsi, Honeywell and, believe it or not, GM (those Chinese love those Cadillacs) all are growing their revenue overseas. As a result, when you buy their stock, you are buying into the "Global Marketplace".
Side note: If you think voice over the internet is the next great leap, look at Cisco (see this week's Business Week).
posted by TandaPundit at 12.7.05
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