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 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.