Beyond the lazy US man’s/women way to global investment exposure.
As long as the United States fails to address its saving problem, its large balance of payments deficit will persist and the dollar will keep dropping.....Consumption expenditures currently account for a record 72 percent of the gross domestic product — a number unmatched in the annals of modern history for any nation. This (US consumer) buying binge has been increasingly supported by housing and lending bubbles. Yet home prices are now headed lower — probably for years — and the fallout from the subprime crisis has seriously crimped home mortgage refinancing... Yet history is clear: no nation has ever devalued its way into prosperity. So far, the dollar’s weakness has not been a big deal. That may now be about to change. Relative to the rest of the world, the United States looks painfully subprime. So does its currency."
" By Steve Roach, for the excellent full article on this in the New York times today, see this link:
http://www.nytimes.com/2007/09/25/opinion/25roach.html?_r=1&th&emc=th&oref=slogin
Lots of investors in the US believe that getting global investment exposure just means buying some US exchange listed CocaCola shares or some other such international company which derives a substantial part of its revenues outside the US. But this is mostly the US lazy man's/women way to get global exposure. Investing globally for the most part does not mean just buying US companies with revenues from around the world, it means (pardon the cliche), owning the real thing, and its not Coke. It means getting real exposure to non-US exchange listed companies in select foreign countries! Select US listed companies with high non-US Dollar revenues have the same baggage/handicap other US companies have, among them: alarmist high executive salaries, excessive litigation risk, possible unfunded US pension liabilities, over complicated balance sheets and a few the executive options perk back dating nonsense. All suffer from high p/e ratios' and their over so minuscule dividends. Most of all US stocks are priced in US currency, likely a weak currency for some time to come (see below).
Yes, foreign shares are priced daily in dollars to US based investors but the key is the underlying stock is in a foreign currency. So if Tom, Harry or Dick's stock price does not move at all, but the US Dollar continues to weakens, his stock price in US dollars will move-up nevertheless. Voila la difference.
US investors especially should consider owning value shares in Thailand for high cash dividends, growth, low p/e's and US currency corrosion protection. Post the Dec 23 Thai election we are likely to see a bull market in non US consumption related shares here.
Best Regards,
Paul A. Renaud.
