Four Countries That Could Weather a U.S. Market Deterioration

Roger Nusbaum submits: As a follow up to yesterday's There's No Place Like Home, Right? post, in which Larry asked what regions were my "favorites" for the next 5-10 years...

I don't really think in terms of favorite per se. Ideally there would be no need to go heavy into foreign because the Kudlowite view will turn out to be right. While I believe in what is going on in the countries I write about, and expose client money to them, the other part of it is concern over things not going well in the U.S.

If the U.S. does poorly (not talking about some world-wide contagion that starts in the U.S. but simply a lag) there are many different foreign countries that could do well.

I tend to group some of these countries together into categories. The developed countries that I think could do best with a slow deterioration here are Australia, Ireland, Norway and Sweden. They don't rely too heavily on the U.S. They each have other attributes that I buy into and that I have written about before.

I also buy into emerging markets over a longer period of time. But here, as I mentioned yesterday, I want diversification within this part of the market. While I have no Chilean exposure now, it is a country that I believe in and will probably buy back into. They rely on exporting copper, similar to Brazil which I also own, but with less juice than Chile. I buy into China for the long term; China is obviously a buyer of copper as opposed to a seller. I have written several times about Vietnam, which I've described as being in its own world, as are a lot of frontier markets.

There are plenty of other countries that I own for clients, and at anytime one of them could offer a lot of return -- like Spain last year -- but the ones above seem to me to be intellectually the most promising. Each will have disappointments along the way that will seem like surprises, but I think of all of them as multi-year themes. I would be hard-pressed to guess what country will do the best this year, but the way I manage I don't have to.

Related ETFs: iShares MSCI Australia Index Fund (EWA), iShares MSCI Sweden Index ETF (EWD), Irish Investment Fund Inc. (IRL)

Comments

[David Banash]

Interesting take on downside protection. Could you include New Zealand in that list?

[RogerNusbaum]

with some caveats. NZ's economy, shorter term has some big obstacles. NZT is the only easy ADR I am aware of. Most of the ordinary shares have very low prices which makes trading them through a brokerage potentially wildly expensive.

I used to own NZT personally and for clients. I sold it a while back, not at the high, for bottom up concerns. The stock then went much lower, I blogged about whether it had bottomed,a t the time but never bought back in. right now I don't have a great feel for it as the stock is higher but only a couple of issues were resolved.