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Going Global

Going Global

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Published by: richardck61 on Aug 07, 2011
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TheCaseforGoingGlobalIsStrongerThanEverTheUSMarketsAreStillInTroubleUndercapitalizationMakesEmergingEconomiesMoreEfficient&DevelopedEconomiesLessEfficientEmergingMarketsStillUndervaluedGlobalCapitalShiftIsAcceleratingTheBiggestGrowthWillBeintheMostObviousPlaces(andSectors)ConventionalDiversificationWon’tCutItAnyLongerRisks(andthereareplenty)MaineandQE3,OperationTwist,etc.?ByJohnMauldin
August5,2011Aswillbeclearbelow,Ihadfinishedanearlierversionofthisweek’se-letter,buttheeventsofthelastfewminutesrequireafewparagraphs.AsIwriteattheendoftheletter,BloombergkepttheirsatellitetruckhereinMaine,astheyhadgotadvancewarningofthedowngradebyS&PofUSdebtandwantedtointerviewanumberoftheeconomistshere,includingyourhumbleanalyst.Ican’trewritetheletteratthislatehour,butwillsendyouadditionalcommentsonMonday.Andyoucangotowww.bloomberg.comandseeeveryone’sremarks,includingmine.Itwillbetheresomewhere,theypromiseme.Andnow,afewquestionsandobservationsareinorder.First,asIwalkedtotheareawheretheBloombergwasshootingtogoon,JimBiancoandJohnSilviatoldmethatS&PhaddowngradedtheFed.Ilaughedandsaid,“IfyouguyswanttomakemelooklikeafoolonTV,youhavetoatleastmakeupacrediblelie.”Theykeptinsistingitwastrue.IfinallyaskedMikeMcKeeofBloombergandBarryRitholtz,whowason-air,ifitwastrue.Theyclaimeditwas,too.Iwasstillwonderingiftheyweresettingmeup,butevenRoubini(whowouldn’tdothattome)saiditwastrue.So,iftheFed,whichdoesn’tissuecreditandcanprintmoney,canbedowngradedbecauseitholdsAA+debt,thenwhyandhowinhellcantheECB,whichholdshundredsofbillionsofeurosofthejunkdebtofGreeceandIrelandandinsolventbanksnotbedowngradedonMonday?AndtheBankofJapan?REALLY?Whataretheseguyssmoking?DowenowdowngradeGNMA?Ofcourse.AndtheFDIC?Whatthehellwillreposdoonmarketopen?TheNYFedsaysitwon’taffectanything.Don’taskme,Ijustworkhere.AndhowcanyourateFranceAAA?AndstillgiveAAormoretoItalywhenthemarketissayingtheyaregettingclosetojunk?SidebetforMonday.Thiscouldmakemelooklikeanidiot,butIthinktreasuryyieldsfallastherisk-offtradeincreases.Canthiscomeataworsetimeforanervousmarket?Bytheway,maybeyouwanttogolongKimberlyClark,astheymakeDepends(theadultdiapershereintheUS,formynon-USreaders),becausesalesaregoingtoskyrocketallacrossthefinancial
 
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markets.CanwesayEndgame,gentlereader?Madness.Andnowontotheregularletter.MoretofollowMonday. __________ThisweekIwritefromMaine,where,whenwelandedinthefloatplaneatLeen’sLodgeinGrandLakeStreamonThursday,welearnedthatthemarkethadcloseddown512points.IwasintheplanewithNourielRoubiniandJimBianco(plusaFedofficialtobenamedlater),whereforwhateverreasonwecouldgetreceptiononandoff(nophoneworksatthelodge).Wewerejustwatchingthemarketfall.ItisfuntositnexttoRoubiniasamarketcrashes.HeknowsALLthemarketcrashjokes.So,asismynormalroutineforthisfishingtriptoMaine,Itaketheweekoffandinviteaguestcolumnistin.ThisyearitisKeithFitz-Gerald,whomIhaveheardspeaktwiceandhavestartedreading.HehaslivedallovertheworldandspendsalotoftheyearinJapan,andisatrueexpertonemergingmarkets.Iamafanofinvestinginemergingmarkets(asIagreetheyarethefuture)butdonotconsidermyselfanywhereclosetoKeith’slevelofexpertise.Sothisweekwetakealookatthecaseforemergingmarkets.IfyouareinterestedinsubscribingtoKeith’sletterandlearningmoreaboutemergingmarkets,youcangoto
https://purchases.moneymappress.com/MMRKFGSHORT4950to79/LMMRM800/
.It’sfairlyinexpensiveandmyreadersgethalfoff.Now,let’sjumpin,andIwillendwithsomeclosingcomments.
TheCaseforGoingGlobalIsStrongerThanEver
ByKeithFitz-GeraldChiefInvestmentStrategist,MoneyMapPress
Ifwehavelearnedanythingfromthecurrentfinancialmess,it’sthatbuildingwealthisdependentonrationalanalysis,carefuldecisionmaking,andriskmanagement.That’swhystickingclosetohomeatatimewhenourmarketsaremoreuncertainthaneverisarecipefordisasterandabsolutelythewrongthingtodo.Notonlywillyoumissoutontheworld’sfastest-growingmarkets,buttheoddsareexceptionallyhighthatyouwillmissasmuchas50%ormoreinpotentialreturnsoverthenextdecade.
Don’tgetmewrong.
 
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Ifyouchooseto“stayhome”orgowithwhatyouknow,whichiswhatalotofinvestorsaredoingrightnow,chancesareyouwillprobablydookay.Afterall,therewilleventuallybeaU.S.economicrecoveryandamarketrebound.Butknowthis.Youwillhavetowatchothersoutperformyouby50%,75%,even100%ormore–foryearstocome.Addinginsulttoinjury,you’llhavetodealwiththeever-presentknowledgethat
youcouldhavebeenoneofthem
.Ifyoucanlivewiththis,fine…butmostinvestorsIknowwon’tbeableto.
TheU.S.MarketsAreStillInTrouble
DespitewidespreadbeliefinsidetheBeltwaythattheU.S.economyisonthemend,realityisthatit’sgoingtobealongtimebeforeU.S.marketsreturntonormal–ifthereissuchathinganymore.Ourrealestatemarketsarelikelytobehobbledforadecadeorlonger,ourconsumersarebadlyscarred,chronicunemploymentislikelytobeapermanentfixtureintheeconomiclandscapeforatleastthenextfewyears,andthepersonaldeleveragingwe’reseeingasmostAmericanspullintheirhornsisreallystillinitsinfancy.Factorintheeviscerationofournationalwealth,thedebtdebacleonbothsidesoftheAtlantic,fecklessleadership,andregulatorswhoaretryingtomakeuplostgroundforhavingmissedthecrisisinformation,andwehavearealwitch’sbrew,theresultsofwhichcannotbeunderstated,especiallywhenitcomestocapitalmarkets.Governmentbondmarkets,asIhavenotedmanytimesinpresentationsaroundtheworld,arepricinginslow-growthtono-growthexpectations,asevidencedbythe10-yearnotes,whichhavehistoricallyreflectedgrowth-rateexpectationsfortheso-calleddevelopedworld.ThisisespeciallyproblematicgiventhedebtcarriedbytheUnitedStatesandmostofitscolleagues.

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