At one point in 2008 I wasn’t sure that the world was going to make it to 2011. For those of us watching the financial collapse and resulting panic it certainly felt that way.
But guess what? The sun is still coming up every day. Wall street is still open for business. And those of us who didn’t chase returns through the use of leverage are still here fighting.
It now seems we are getting right back into panic mode. And there truly are lots of things to worry about. It seems strange that the richest countries in the world are generally the ones in the worst financial shape.
Earlier this year Jeremy Grantham laid out for us 10 reasons why he expects developed economies to struggle for at least the next seven years:
- Over-indebtedness of consumers in certain countries, including the U.S., the U.K., and several European countries
- Dangerously excessive financial system debt was moved across, with additions, to become dangerously excessive government debt
- We have lost a series of artificial stimuli that came out of the steady increases in debt levels and the related asset bubbles
- Very bad things may lie ahead in Europe, and banks in general are undercapitalized and reluctant to lend
- Runaway costs in the public sector, particularly at the state and city levels, have run into a brick wall of reduced taxes
- Unemployment is high and will also suffer from the loss of those kickers related to asset bubbles
- Trade imbalances and the explosion of domestic sovereign debt levels
- Incompetent management in Spain, Greece, Portugal, Ireland, and Italy allowed the local competitiveness of their manufactured goods to become 20% or more uncompetitive with those of Germany
- The general rising levels of sovereign debt and the particular problems facing the euro bloc and Japan are leading to the systematic loss of confidence in our faith-based currencies
- Widespread over-commitments to pensions and health benefits
The recent pullback in stock prices does have Grantham a little more bullish. In a recent article Grantham recommended that investors focus on three areas:
- Europe
- Australasia
- The Far East
Stock markets in these areas are down for the year and Grantham believes that from these prices a respectable long-term return is likely.
There are three simple ways to add this exposure to your portfolio:
iShares MSCI Europe Fund (IMEU)
The iShares MSCI Europe offers investors exposure to a broad benchmark of developed European equities. This fund provides access to leading, blue chip companies from approximately 16 major European markets, including the UK.
The top ten holdings currently are:
- Nestle SA (NSRGY.PK)
- HSBC Holdings (HBC)
- Novartis (NVS)
- Vodafone (VOD)
- Roche Holding (RHHBY.PK)
- Royal Dutch Shell (RDS.A)
- BP
- GlaxoSmithKline (GSK)
- Total SA (TOT)
- Royal Dutch Shell B Shares (RDS.B)
iShares MSCI EAFE Index Fund (EFA)
The iShares MSCI EAFE Index Fund seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded securities in the European, Australasian and Far Eastern markets, as measured by the MSCI EAFE Index.
The top ten holdings currently are:
- Nestle SA (NSRGY.PK)
- HSBC Holdings (HBC)
- Novartis (NVS)
- BHP Billiton (BHP)
- Vodafone (VOD)
- Roche Holding (RHHBY.PK)
- [[BP]]
- Royal Dutch Shell (RDS.A)
- GlaxoSmithKline (GSK)
- Total (TOT)
iShares MSCI All Country Asia (AAXJ)
The iShares MSCI All Country Asia ex Japan Index Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the MSCI All Country Asia ex Japan Index.
The top ten holdings currently are:
- Samsung Electronics (SSNLF.PK)
- China Mobile (CHL)
- Taiwan Semiconductor (TSM)
- Ind & Comm Bank of China (IDCBY.PK)
- CNOOC Ltd (CEO)
- China Construction Bank (CICHY.PK)
- Hyundai Motor (HYMTF.PK)
- Petrochina (PTR)
- AIA Group Ltd (AAGIY.PK)
- Bank of China (BACHY.PK)
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
