Much has been made about how America is going down the toilet and is reliant on everybody else around the world. I think this is false. Certainly developing countries growing very fast helps us. No doubt about that. But, America is self-sustaining. These guys on television that bash America have seen their Chinese & Indian investments drop 50% in the past few months. Compare that with 15% on American stocks.
But, as an investor, we can’t ignore international growth. I think over the next 3-5 years, most of my money will be invested in international investments. In the fall of 2007, who would have thought we’d see some of these developing markets down 50%. They are on sale. I will begin adding very soon some more developing market holdings the portfolios. I hold very little right now. But, have owned this area for years.
The reason these stocks fell so much was due to the fact that America’s financial system is the grease that keeps global growth going. I believe if our finanicial system was left to seize up, global growth would have slowed dramatically. Now, everyone is on the same page and throwing money at the economy(ies). Given this, it wouldn’t surprise me to see international markets continue their upward trend they’ve been on for a few years.
I’m still concerned about American markets. Not because I don’t like the stocks and I think it’s cheap. I don’t like it because I don’t see the demand for stocks I’d like to see. I need to see increasing volume on up days and right now I’m not seeing that. Until that changes, I’m concerned.
But, I will be continuing to build positions in developing countries and cheap American companies while continuing to hedge them to protect my downside.
