Thinking Globally as an American Investor
By: Brian C. Beasley, CPWA
Americans are notorious around the world for their self-centered thinking. The biggest example is ouruse of languages. Very few of us speak other languages—almost everyone else in the world speaks atleast two. And we almost expect people in other countries to speak English when we travel. Oh, thearrogance, right? Now before you put me on a soap box, please know that I’m just as guilty as the nextperson. I can barely order a meal in Spanish, and my in-laws would like me to learn Tagalog (Filipino).So it is with American investors. The average American invests less than 20% of their money outside theUnited States. Most of the global economy is outside our borders. Almost all of the economic growth inthe past five years has been from emerging countries like China, India, and Brazil. With interest ratesnear all-time lows in the U.S., many other countries offer higher yields on bonds. And yet, Americans arehesitant to invest outside our borders with any enthusiasm.Our primary problem is that we think this is still the Post-World War II United States. Immediatelyfollowing World War II, the United States
the global economy. Our infrastructure, food production,oil production, and other resources survived the war completely untouched. The rest of the world hadbeen bombed, overrun, burned, and basically was on life support. For a good period of time, the U.S. andthe “almighty” dollar dominated the entire world economy. During this period, the U.S. owned over 70%of the world gold supply, was a net creditor nation, and an oil exporter. We also owned most of themanufacturing base for the world. Virtually everything was made here!Clearly, the United States of today is not the same as it was in 1946. Maybe we all need to change ourthinking a little. So how can an American with all of those biases learn to embrace the reality of today’sglobal economy? How can we think as globally as investors in other countries? Here are three ideas thatmay help:
The Dollar is a Variable, not a Constant
We have to learn about other currencies. That Ford car that we buy with dollars is sold in Europe forBritish Pounds, Euros, or Swiss Francs. People pay for their iPhone in Japan with Yen. This is obviousfor anyone who has traveled, but have you ever thought about how this affects global trade? What aboutall the products made in China? The Chinese currently manage the exchange rate between their currency(Yuan) and the U.S. Dollar. It’s been relatively stable for a few years. But what if they allowed theircurrency to fluctuate more? These are questions that investors outside America understand. Generally,Americans aren’t keeping up. With your investments, you must think beyond dollars.
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