Roger Nusbaum (wish list) submits: A reader over at Trader Mike's posted the following question on Mike's blog: "I was wondering how do you judge how well iShares are doing? I was watching EWL, Swiss Ishares and it broke out today. However, since it does not belong to any sector/industry and it is from a different country, how do we go about looking at it?" Mike, in his answer, invited me to chime in. This was my answer:
Two of EWL's largest components are Novartis and Roche. In the last month they are up 8% and 5% respectively. Additionally the Swiss franc has rallied against the Australian dollar. The pair is a fear meter of sorts. This may account for the move in EWL.
Certain countries play different roles in the world market and some like the US, Japan or Germany are big benchmark markets. I would classify Switzerland has a role player due to its bomb shelter attributes.
I thought I would expand a little here. As a matter of investment philosophy I try to build in types of holdings that will benefit from different types of demand than the US and are at different points at the economic cycle. This insulates client accounts from bad times in the US market.
For example Norway and Canada offer two developed countries that benefit from strong oil demand and high oil prices. Ireland has a very pro-business government and offer visibility for real growth (which is rare for western Europe). Each country I have exposure to has some sort of role like this.
With that in mind it doesn't help me to compare different countries in the context of the way the question is asked. Switzerland doesn't really come to the forefront when you think about oil or other commodities. Deciding between Switzerland and say Norway doesn't seem to be ideal because both economies rely on very different things.
Deciding that now is a good time for a bomb shelter holding or not would be more of a driver to own Switzerland, from the top down. From the bottom up you might decide you like Nestle as a company so you buy it regardless of whether you think you should have bomb shelter exposure or not.
Novartis is a client and personal holding.
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