Roger Nusbaum

Success in 2010 Requires Investing in Other Countries

thank you


On Dec 29 05:08 PM GoneFishing_73 wrote:

> Roger
> Thank you for staying the course in the face of all the negative
> commentary.
> You have always provided reasoned arguments for investments.
> Thank you

Success in 2010 Requires Investing in Other Countries

What stocks are you talking about? UK is the largest country in the EAFE index at 21% we have one stock at a 3% weight. Japan is second at 20% of the index, we have a zero weight. Next is France, zero weight. Next is Australia which we do like with a 3% equity weight and expecting to increase to about 5%. Next is Germany and we have a zero weight there. Next is Switzerland at 7.8% we have a 3% exposure, we may add more we may not. Moving further down the list Spain, Italy, Netherlands we have zero, zero and zero. Last country in the top ten is Sweden and have a 2-3% weight and we will not be increasing it.

The big problem EAFE has is that it provides relatively in effective diversification against the US because so many of the countries that dominate the index are in similar trouble as the US and the healthier countries are not big enough to move the needle in the index.


On Dec 28 07:20 PM EAFE Pro wrote:

> And I see you are not disagreeing given the stocks you own for your
> clients.
>
> The one problem that the EAFE market faces - which is discussed on
> EAFE Pro's blog - is China. While it is growing to a large extent,
> there is some unusual activity in China that should cause some concern.
>

Success in 2010 Requires Investing in Other Countries

I do not suggest ETFs. I would suggest the combo of tools that is best for you. I use way more stocks than ETFs. Candidly I am not too focused on one year. I have been investing this way for clients (and writing about it) for a while now and over a period of years the difference has been meaningful. As for the importance of one year do you remember how you did in 2005 versus the market? I am trying to add value for clients over the entire stock market cycle while at the same time trying to smooth out the ride as much as possible and that is what I write about.


On Dec 27 07:41 PM User 27605 wrote:

> A good post as usual but I have a question. I assume you recommend
> investing in the general ETF for the countries you like. I like the
> idea in theory. BUT...Aren't all the economies linked? All I have
> noticed in this economic debacle is that these countries fell farther
> and then came back bigger. They also seem closer to there historic
> highs right now. Am I just not giving credit to a difference (between
> the US market and the countries you like) of a few percent for 2010?
> Maybe for 2010 that will be worth the effort. Would you care to speculate
> on the reward you might predict for your strategy in 2010? That might
> help put this in perspective. Thanks

Success in 2010 Requires Investing in Other Countries

A website called EAFE Pro thinks EAFE is the way to go eh? Imagine the odds of that.


On Dec 27 04:44 PM EAFE Pro wrote:

> EAFE Pro believes that EAFE (Europe, Australasia, Far East) is the
> place to be for 2010. There are various safe, reliable but lucrative
> investments in Europe, viz. UK, France and Switzerland.
>
> In Australasia, you have options of Australia, Thailand, Indonesia,
> Malaysia and Taiwan.
>
> China is a growth story that is amazing. However once should be careful
> about their growth for 2010 - they are buying unaccountable and unprecedented
> amounts of aluminum and copper. What type of unprecedented amounts?
> View the graphs found at www.eafepro.com for a more thorough
> analysis on the Chinese growth story and why we are a bit cautious
> on Chinese growth for the next year.
>
> eafepro.com/content/sk...
>
> In short, we believe the best gains for 2010 are going to be in Australasia,
> Europe and some far east investments. Also Brazil must not be overlooked.

Success in 2010 Requires Investing in Other Countries

No. Used to own BP, swapped it for DKA several years ago (disclosed in a TSCM article written at the time).


On Dec 27 12:41 PM djj420 wrote:

> To the author: Would the 1 UK stock happen to be BP?

Success in 2010 Requires Investing in Other Countries

this is a thread that started over five years ago and does not end with this post so there is no way to thoroughly respond here. The short answer is that my idea of diversified is owning countries will all sorts of different attributes. in my experience this results in owning countries that are at different points in their economic cycles and so at different points in their stock market cycles. check when some of these markets started to roll over versus when the US did, how much they went down and then when they started to turn up. Incorporating this into a portfolio helps to reduce volatility. Several of these markets went up for another six months after the US peaked in Oct 2007. This is a good question, i will try to write a blog post that addresses the idea in alittle more detail. Seeking Alpha may or may not run it, no idea.


On Dec 26 04:29 PM DrBenway wrote:

> Roger,
>
> I have a bit of an issue with your country selection from the asset
> correlation perspective.
>
> Australia = Agriculture + Copper (export)
> China = Copper + Oil (import)
> Chile = Copper (export)
> Norway, Canada = Oil (export)
> Brazil = Agriculture + Oil (export)
>
> So all above countries are highly correlated with Oil, Copper, and
> Agriculture. Why not just invest directly into these assets if one
> accepts your macro point of view?
>
> Only these three countries provide some sort of diversification:
>
>
> Israel (high-tech, bio-tech) , Sweden (not sure?), Switzerland (banking,
> luxury goods).
>
> Going further down the list:
>
> Denmark, Egypt, Peru, Singapore and Vietnam
>
> Denmark = not sure but they are in one nasty recession now (-9.9%
> GDP last quarter) and will grow only 1% next year according to Economist
>
>
> Egypt = hmm...an interesting call, worth considering (4.7% GDP growth).
> Not sure what Egypt is good at (cotton?)
>
> Peru = don't know much about it
>
> Singapore = China + Asian Banking (not a good idea considering China
> real estate bubble)
>
> Vietnam = looks very overvalued due to a lot of hot money and difficulty
> to invest
>
>

Success in 2010 Requires Investing in Other Countries

as the savings rate has gone up (but still way below where it was in decades past) I have not seem much to address the distinction between savings accounts and stock market ivnesting. the talk is usually with rates at zero they are forcing us to invest; i hate that argument but i agree with you about the distinction being very important as a source of demand (or not) for US equities.


On Dec 26 09:03 AM Windwood Trader wrote:

> Thanks, Roger for a rather insightful article. I have pretty much
> formed my investment opinions and allocations based upon the same
> rationale that you have illustrated. The paragraph that brings it
> home is your comment here:
>
> "As John Mauldin has pointed out in his writings, the US economy
> will need to create 250,000 jobs every month for several years in
> a row to have a chance of getting the unemployment rate back down
> to 5%. Mauldin's thinking is that we need to replace the jobs lost
> plus keep up with the growth in the population. With the current
> path of debt issuance the US is holding, Ben Bernanke said that in
> a few years all of the US budget will go to paying interest. The
> US needs to issue more than $1 trillion in debt per year over the
> next few years, with the hope that with interest rates at all time
> lows, there will still be foreign buyers for this debt. Housing may
> or may not be showing signs of stabilizing, there is another wave
> of mortgage resets in the offing, and that is only a partial list
> of the problems that have to be dealt with."
>
> I believe that infrastructure repair and replacement, not growth
> in the US will be key to putting all those jobs back on the productivity
> list. The fact that infrastructure depends on government spending
> brings the realization that the US will be hard pressed to rebuild
> highways and bridges while another trillion in debt must be issued
> and serviced. Bernanke hit it on the head that the US will spend
> much of its resources just on debt management. Not much room for
> resource allocation to infrastructure improvement in that scenario.
> The growth that everyone is looking for will occur, as you pointed
> out in countries like China, Brazil (to a lesser extent in my opinion
> due to their dependence on the US economy,) Australia, and Vietnam
> to echo a few of yours.
>
> In sum major opportunities are in emerging countries that have their
> populace benefiting from an improved living standard and have less
> dependence on established mature economies like the US and Euro countries.
> Maylasia, Chile, India, Thailand and Turkey perhaps.
>
> The glut of housing in the US that sits like a dark cloud over the
> nation along with the unemployment that will persist for a decade
> or more doesn't suggest robust growth of any kind here. The drop
> in housing values automatically reduces the tax base for municipalities
> that need tax revenues for provision of services and infrastructure
> repair and replacement. Deflation will continue for quite a while
> with exceptions for energy and food costs that will increase.
>
> The trick is to find a place for the cash that's still in the mattress.
> The US is finally saving, like they never have before but whose coffers
> should they select? In addition if the US is saving they are probably
> not investing. Interesting dilemma.

Success in 2010 Requires Investing in Other Countries

as you recall? read the third paragraph, i recap it as being wrong about how low it would go and wrong about the magnitude. furthermore anyone who is really buy and hold was already holding.


On Dec 25 09:33 PM Paulo wrote:

> As I recall, Roger was predicting a massive rally a year ago, but
> the rally that occurred was from a massive low reached months later.
> If you were in buy and hold mode on that prediction, I doubt that
> you would be ahead unless you had hedges on or bought significantly
> at the bottom (or both).

Success in 2010 Requires Investing in Other Countries

as I think i mentioned I've been writing about avoiding Japan for many years and have chronicled reducing exposure to the big western European countries for the last three years so plenty of forward looking analysis. I am a top down manager. it is much easier for me to pick a country and then go along for the ride as opposed to finding one of a few stocks that might swim against the tide and that is what I write about.

Your example of Teva or RUK and NSRGY or UN is bizarre, did you look at a chart before you posted your comment? Go to Bespoke's blog and look for the decade to date country data they have compiled. You may disagree with the approach but pretty clear it isn't silliness.


On Dec 25 08:40 PM Deepv wrote:

> the S&P 500 is down 24%, the UK down 23%, Japan down 49% and
> Germany down 16%\--
>
>
> So Roger, your idea of good investment judgment for your clients
> is to shun countries that have done poorly last decade (cheap) and
> buy those that have worked (expensive)? And you are picking individual
> stocks, right? Do you have any evidence the macro issuesyou were
> about in Japan, US and W.Europe actually influence stock price returns
> of specific companies? They are not priced in one year after crisis?
> I mean by your logic I should not like Reed Elsevier because it
> is in the UK? And I should like Teva 'cause it's based in Israle?
> I should hate Uniliver (UK) but love Nestle (switzerland) Total utter
> silliness dude. Do bottom up work and stop worrying about country.

Success in 2010 Requires Investing in Other Countries

FWIW WRT to portfolio weightings of countries, during the last few years I have targeted 2-3% for each. Moving forward I expect to up that to 5-6% maybe 7%. Canada is now about 5% with one bank stock and one oil stock.

China is a great story but with clear and obvious issues. They will have a demographic problem in a few years similar but not as bad, I say not as bad, as Japan. One thing I read said this will start in 2015, I disagree about it being that soon but it is pretty clear it will happen. Additionally I would not touch any of the financials. I own CHL and have more exposure through a thematic ETF. The places I want to be in China are industrials and certain things that contribute to the ascending middle class.

Success in 2010 Requires Investing in Other Countries

you might want to check the correlations there. YTD XOM is down 14% (eyeballing a chart). DKA (foreign energy ETF I own for clients) is up 29%, YTD Statoil (Norwegian oil company I own for clients and personally) is up 50%, the benchmark OBX index from Norway is up 70% YTD. XOM is not an effective way to make your point, it captures nothing in the way of foreign markets. It might benefit from doing business overseas but does not correlate to over seas. For five years XOM up a little less than 40%, STO up 60%. From STO's NYSE debut in October 2001 to now it is up about 300% while XOM is up about 80%

I'm sure you can come up with an argument why you are right but I hope you open up to a different way of looking at things.


On Dec 24 08:10 PM E Nuff Sed wrote:

> Investing in big multinationals gives me all the exposure I need
> for global markets. Companies like P&G, JNJ, BA, XOM etc. allocate
> capital all over the world and most of these companies are deriving
> well over 50% of their revenues from foreign markets.

The Advantage of Investing in Chile and Brazil

certainly a beneficiary of copper.


On Sep 22 11:00 AM Financial Samurai wrote:

> Would you equate a play on Chile with a play on copper? From what
> I understand, both its equities market and its currency are highly
> correlated with the spot price of copper.

The Latest from Harvard Yard

I doubt they are any smarter or dumber than they were three years ago (despite management changes). Like any other manager they get some right and get some wrong. Their structure did not work as well in 2008, clearly, but it is possible that it will work again, probably likely to work again.


On May 17 08:28 PM Jasper M wrote:

> And did they not themselves lose their shirts in the recent decline?
>
> These are hardly the guys I'd want to follow into battle. I predict
> more grief for them.

Chile Leads the Way for South American ETFs

There is a 15% weight in Codelco? I'm pretty sure it is not a publicly traded stock and I do not see it in the listed holdings on the iShares site. Am I missing something?

us.ishares.com/product...

On Country Selection

fran, exactly right.