There is little doubt that the 21st century belongs to China and India. The European Union is just now coming into its own in the years following the introduction of the Euro currency model. One implication for an investor’s portfolio is that there is going to be a lot of wealth creation outside of the borders of the United States of America. As a country, we find ourselves in the same position as Great Britain during the 19th Century when J.P.
Morgan’s father was running his banking operations from London and shipping capital over to our nascent republic, investing our infrastructure and corporations with the hope of big profits and anything-goes capitalism.
Although this is certainly going to present some challenges as our society adjusts to the changes, there is money to be made and prosperity to be had by taking advantage of the new global economy. Several of my favorite mutual funds offered by companies such as Third Avenue and Tweedy Browne (full disclosure: my family and I have investments with these firms) already offer private accounts (separately managed accounts) for high net worth individuals and mutual funds for the masses that invest extensively throughout the world.
These are important components in a global portfolio because the old adage that “when the U.S. sneezes, the world catches a cold,” might not be true in the future. For a recession resistant portfolio, international assets can often be uncorrelated with the financial realities back home, providing a nice buffer.
The fundamental rule that Price is Paramount still applies, however. It isn’t enough to buy a good stock, in a good industry, operating from a growing country because if you pay too much, you’re going to lose money. It’s that simple.
Some companies may experience falling share prices while earnings-per-share go through the roof. Those opportunities don’t come along every day, but when they do, you can be certain that you have a much higher chance of being rewarded handsomely five or ten years down the road. During the least recession, I was picking up shares of stock in a rapidly expanding teen retailer that had fallen to fire sale prices. Today, with dividends reinvested, the value of each share has increased several times over despite the dot-com meltdown, the war on terror, higher national debt, and a declining dollar. Why? A few quarters of recession isn’t likely to make teenagers spend less in the long-run on fashion-forward denim jeans or polo shirts. I mean, if you are parent, when was the last time your son or daughter walked in the door and said, “I’m not going shopping at [insert company here] due to the recent contracting in Gross Domestic Product”?
Morgan’s father was running his banking operations from London and shipping capital over to our nascent republic, investing our infrastructure and corporations with the hope of big profits and anything-goes capitalism.
Although this is certainly going to present some challenges as our society adjusts to the changes, there is money to be made and prosperity to be had by taking advantage of the new global economy. Several of my favorite mutual funds offered by companies such as Third Avenue and Tweedy Browne (full disclosure: my family and I have investments with these firms) already offer private accounts (separately managed accounts) for high net worth individuals and mutual funds for the masses that invest extensively throughout the world.
These are important components in a global portfolio because the old adage that “when the U.S. sneezes, the world catches a cold,” might not be true in the future. For a recession resistant portfolio, international assets can often be uncorrelated with the financial realities back home, providing a nice buffer.
The fundamental rule that Price is Paramount still applies, however. It isn’t enough to buy a good stock, in a good industry, operating from a growing country because if you pay too much, you’re going to lose money. It’s that simple.
Look for Hidden Bull Markets During a Recession
Former hedge fund manager Jim Cramer is famous for saying “there’s always a bull market somewhere.” He’s absolutely right. No matter how bad the economy, no matter how terrible the job market, nor how high the cost of debt, there is always some pocket of the world where it’s incredibly easy to make money because of circumstances that have converged. If you don’t feel as if you possess the necessary skills, experience, temperament, and expertise to find them in the financial markets, you might be better suited to creating them yourself. A recession, after all, just means the overall economy is shrinking – it doesn’t mean you can’t increase your income!Some companies may experience falling share prices while earnings-per-share go through the roof. Those opportunities don’t come along every day, but when they do, you can be certain that you have a much higher chance of being rewarded handsomely five or ten years down the road. During the least recession, I was picking up shares of stock in a rapidly expanding teen retailer that had fallen to fire sale prices. Today, with dividends reinvested, the value of each share has increased several times over despite the dot-com meltdown, the war on terror, higher national debt, and a declining dollar. Why? A few quarters of recession isn’t likely to make teenagers spend less in the long-run on fashion-forward denim jeans or polo shirts. I mean, if you are parent, when was the last time your son or daughter walked in the door and said, “I’m not going shopping at [insert company here] due to the recent contracting in Gross Domestic Product”?
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