By David Sterman

In recent days, investors might not have noticed a very unusual trend playing out in global markets. A number of once-robust currencies are in free fall against the U.S. dollar -- and counterintuitively, that spells opportunity for U.S. investors.

Looking For A Bottom
From the South African rand and the Brazilian real to the Australian dollar, a worldwide slump is emerging. It's very unusual for currencies to gain or lose value in a rapid fashion, but the recent charts are quite humbling, as this chart of the Australian dollar shows.

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For U.S. investors with exposure to these markets, the currency shift eats away at a stock or fund's value, which comes on top of existing weakness in many foreign markets when denominated in their own currencies. For example, the iShares MSCI Australia Index Fund ETF (NYSE: EWA) has underperformed the S&P 500 by

One of the traits common to most investors worldwide is the concept of "home bias" with respect to investments. Home bias simply means investors prefer to invest in their home countries than in foreign countries since they may be more familiar with the companies located in their countries than abroad.

However, following this strategy may not be the best option for investors. For example, thousands of companies exist in other countries whose stocks may offer the potential for higher returns than the ones in home countries. According to the latest World Federation of Exchange data, the total number of listed globally is over 45,000. But in the NASDAQ and NYSE, just over 4,000 domestic companies are listed. Investors who confine themselves to the U.S. are more likely to miss out on the investment opportunities on the remaining 40,000+ companies.

The problem of home bias has been reducing in Australia,

It's not true -- the Toronto Star did not hire an extra 35,000 employees to follow their beleaguered mayor. Canada posted an eye-popping, decade-best 95,000 new jobs in May. To understand somewhat the significance of the print -- by superimposing it on its largest trading partner's economy, the U.S. -- that's the equivalent of nearly 1 million new jobs being created down South. In contrast, the U.S. managed to edge market expectations by a whisker, printing 175,000 new jobs in May.

Both countries' unemployment rates are heading in opposite directions. Canada has managed to shave 2/10ths off theirs, to report a +7.1% unemployment rate, while the U.S. adds 1/0th to up theirs to a +7.6%

"With iron ore currently accounting for around one-fifth of Australia's exports, the greater use of shorter-term pricing has implications for the terms of trade. In general, the spot price for iron ore has tended to move in line with developments in Chinese industrial production and steel production, although disruptions to supply can also be important. Hence, changes in the outlook for Chinese growth and steel demand are likely to be reflected more quickly in the prices received by Australian iron ore producers than in the past." - Reserve Bank of Australia (RBA) in its Statements on Monetary Policy - August 2012 regarding iron ore pricing.

This assessment accurately portrays what has happened to iron ore prices in its latest swoon. Iron prices have plunged almost as severely as they did last August as steel rebar prices have fallen. From Reuters on May 31st:

"The price of iron ore

Another worrisome divergence has emerged for the U.S. stock market over the last several months. And if the relationship happens to reunite in the coming months, it does not bode well for stocks going forward.

The U.S. stock market (SPY) and the Australian Dollar (FXA) have been engaged in a highly correlated relationship for some time. In short, when the Australian Dollar has been rising, so too has the stock market and vice versa. This relationship has been particularly tight since the depths of the financial crisis in early 2009.

The high correlation between U.S. stocks and the Australian Dollar has undergone a sudden and widely divergent change since the beginning of 2013, however. While the U.S. stock market has exploded higher almost without interruption thus far in 2013, the Australian Dollar at first languished during the first quarter and has subsequently plunged to the downside since April. This has

Is the developed world in the midst of a "Great Stagnation?" That question has several parts:

1. Is growth in living standards slowing?

2. Is growth in RGDP/person slowing?

3. If the answer to #2 is yes, is it merely because of the recession?

I'd like to examine questions 2 and 3 by looking at Australia. As far as I can tell, between August 2006 and August 2013, Australia's population will grow from 19.855 million to about 23.1 million, up 16.35%. Real GDP will grow from $1.112 trillion in 2006 to $1.376 trillion in 2013. Thus, per capita GDP will grow by about 6.3% over 9 seven years, or roughly 0.9% per year.

Here's why I find the Australian growth rate interesting:

1. Australia avoided the recession, so it should give some sense of the sort of long term growth rate one can now expect

As I've noted before, I'm bearish on Australia (see here, and here). The central problem is that it is very dependent on China as an export market for Australian raw materials. So as China slows, Australia's economy will follow suit.

Here is a summary of the Australian economy from the latest central bank's minutes:

Prices of tradable items fell substantially in the March quarter, with price declines widespread across items despite the relative stability of the exchange rate over the past couple of years. Members discussed the downward pressures on domestic costs and margins and the resulting declines in tradables prices, and whether these pressures would continue. In contrast to tradables inflation, non-tradables inflation appeared to have increased a little over the past year (abstracting from the direct effect of government policy changes). In the March quarter, inflation in new dwelling costs had risen, although inflation in

Below we have run the 30 largest country ETFs through our trading range screen, which measures where a stock or ETF is trading within its "normal" trading range. The black vertical line represents the 50-day moving average, while the red and green areas represent overbought and oversold territory. For a more detailed description of how to read the chart, please go to the bottom of this post.

Last week at this time (the tail end for each ETF), 16 of the 30 ETFs shown were in overbought territory. As of today (the dot for each ETF), only 7 of the 30 are overbought. One of these 7 overbought countries is the US, which is now the

By Guy Bruten

The changing dynamics of the commodity boom imply leaner times ahead for producer countries. Investors, however, should be wary of tarring them all with the same brush, as we believe such countries will offer different risks and opportunities as the cycle unwinds.

China is moving to a slower structural growth rate, commodity suppliers are bringing more capacity on stream and prices for some commodities are in decline.

As we discuss in The Commodity Supercycle and the Risks of “Dutch Disease,” these trends suggest that the 15-year-old commodity boom is entering a phase in which price growth tends to fall short of its long-run trend, and the risks of sharp price declines are likely growing.

Given the different ways in which they responded to the supercycle’s upswing, we think it likely that producer countries will respond differently to the downswing, too. This is an important point for

The Australian housing bubble is looking to be a bigger problem for that country than the U.S.' was in 2008-09. Australia differs from the U.S. both in terms of relative economic conditions and the health of its property markets. The mountain of debt is Australia is mostly private - housing - and dwarfs public-sector debt.

Australians have gone heavily into debt to buy houses that cost more than ever, especially the land component; and there's no sign this trend will end anytime soon. Mortgage debt has more than quadrupled from 19% of GDP in 1990 to 84% in 2012-- as high as that of the U.S. at its peak where mortgage debt as a percentage of GDP has fallen from 86% in 2009 to 68% in 2012. Negative gearing and easy lending combined to push house prices higher. Looking at affordability as a function of disposable income, both the ratio

(This article continues my Seeking Alpha series on high-dividend paying stocks. For those interested, some past articles in this series can be found here, here, and here. My blog details more on my investing philosophy here. All data used in this article are taken from EuroStat, the World Bank, OECD, and the stock exchanges.)

With U.S. stock markets surging over the last few months, investors still looking to put more cash into the market, but wary of the possibility of froth in the U.S. markets, may need to look outside this country for attractive opportunities. Fortunately in today's modern investing world, individual investors can put money to work in many different countries around the world without having to set up international brokerage accounts or worry about language barriers. In fact, for most retail investors today, international investing is probably best done through one of two choices:

The China syndrome is a hypothetical sequence of events following a U.S. nuclear reactor meltdown in which the core melts through its container and deep into the earth toward China. As we all know, a nuclear accident has fallout effects that can potentially spread around the world depending on its magnitude and severity. And when it comes to investment markets, one has to wonder about the potential for a reverse China syndrome increasingly taking hold. For while all is apparently well in U.S. markets, the same cannot be said for China, as the fallout effects from its weakening economy are already being felt in many parts of the globe.

It was not long ago during the post crisis period that the U.S. and China markets were moving as one. Both had sustained the earth shattering shock from the initial market meltdown in late 2008 and early 2009. And both were

The S&P 500 is up 17% year to date to new all-time highs. But U.S. investors who focus only on domestic stocks are missing out on enhanced performance and diversification over the long term.

"We do see investors have a home country bias," Jim Ross, senior managing director and global head of ETFs for State Street Global Adivsor's SPDR ETFs, said on a recent Charles Schwab conference call.

Investors have been too focused on U.S. stocks because they have been doing so well, at least for now - U.S. markets are up 17% year-to-date, compared to the 7% of other developed markets and the relatively flat performance in the emerging markets.

• SPDR S&P 500 ETF (SPY): up 16.6% year-to-date
• Vanguard MSCI EAFE ETF (VEA): up 10.3% year-to-date
• iShares MSCI Emerging Markets Index Fund (EEM): down 2.5% year-to-date.

Nevertheless, Ross suggests investors should "diversify away from your home"

The relationship between currency weakness and equity strength is generally a function of ultra-low interest rates, which are geared toward enticing investors into stocks with the hope of increasing consumer demand. The FOMC's chairman Bernanke and the BOJ's Kuroda have certainly earned kudos amongst equity investors for their attempt at forcing investors out the risk spectrum, which calls into question whether other countries will follow suit given the current macro backdrop.

Tailwinds

Last week, the Reserve Bank of Australia reduced their benchmark interest rates by 25 basis points to 2.75% from 3%. The move was not widely expected as short term interest rate contracts had placed the chance of a cut at approximately 40% prior to the RBA decision. In the days to follow, investors punished the Australian Dollar (FXA) dropping it 3% to parity with the US Dollar (UUP), as expectations of future interest rate cuts were baked into

Note from dshort: Chris Kimble's technical look at the Australian Dollar posted earlier today (here) reminded me that several months have passed since my last look at the benchmark All Ordinaries Index. The All Ords is currently 13.8% below its interim high, set on April 11th of last year, and 36.3% below its all-time high in 2007. Here is an update of my All Ords S&P 500 overlay.

What would the S&P 500 look like without the Tech Bubble? Perhaps something resembling Australia's All Ordinaries Index. I've included the S&P 500 in the background to support the idea.

I'm not a technical analyst, but the twin peaks in the S&P 500 over the last dozen years looks like a double top. On a smaller scale the shape of the All

The Australian Dollar experienced a steep decline over this past week, blowing past the "long zone" as outlined in the chart below due to the Reserve Bank of Australia (RBA) cutting rates 25 basis points to 2.75%.

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Of course, this chart featuring the "long zone" and "short zone" is largely a joke between a few traders and I, as clearly if it were that easy, I'd be out of a job.

This chart demonstrates my bias, as each S is a sell trade and each B is a buy, and there are a lot more Ss than Bs. In fact, since my fund's inception in January 2011, I've traded the AUDUSD 77 times, 66 times short, 11 times long, making money on 45 trades and losing money on 32 trades.

(click to enlarge)

That being said, my wins have been larger than my losses, making the AUDUSD

On Wednesday, May 8, 2013, U.S. stocks recorded gains for a fifth consecutive session. In fact, the S&P 500 logged its 12th gain in 14 trading days, rising 6% since a mid-April hiccup, and reaching yet another all-time peak. Equally intriguing, the last week has witnessed a renewed interest in foreign equities. Despite a deepening recession in Europe, questions about China's growth, declining worldwide demand for commodities, and little evidence of a self-sustaining global economy, some investors are filling their suitcases with overseas shares.

Valuation "wonks" might describe the phenomenon in simplistic terms; that is, investors obviously recognize that the earnings yields are compelling. The problem with this assertion is the fact that price-to-earnings bargains relative to U.S. stocks have existed for at least two years. More likely, investors love activist central banks and they expect foreign central banks to lower rates and/or devalue currencies.

In December, before many folks

Hey all -- this is Bonddad. I'm back after vacation. First, many thanks to NDD for the fine work he did while I and the Bondspouse vacated in San Francisco for a week.

During my time off, there was plenty of economic news which I'll be catching up on. Let's start with some of the big news from yesterday -- Australia's dropping its rates 25 basis points. First, remember that I'm bearish on the Australian economy as I've noted several times (see this link). The big reason is they're dependent on Chinese growth for most of their growth. So as China rebalances their economy, Australia should see a decrease in growth.

Here are the important points from the bank's interest rate decision:

Growth in Australia was close to trend in 2012 overall, but was a bit below trend in the second half of the year, and this

The Australian stock market has performed well so far this year. The benchmark S&P/ASX All Ordinaries Index is up 5.77% on a price basis and 9.67% on a total return basis YTD. Due to the fall in commodity prices, the index has not regained the level reached before the global financial crisis. However, the long-term return of the index since is pretty impressive as shown in the chart below:

Click to enlarge

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Source: Yahoo Finance

The Australian economy is a resource-based economy similar to Canadian and South African economies. The country is called the "The Lucky Country" for the weather, lifestyle and history, it can also be said that the country is lucky due to the vast amount of natural resources available that can be exploited. For example, some of the major commodity exports of Australia are: coal, iron ore, gold, meat, wool, alumina and wheat.