huangjin

Bye-Bye Dividends

Couple this argument with those that predict higher interest rates are on the way. Getting to 450 on the S&P 500 is quite easy under this scenario.

10-Year Compounded Return of Key Asset Classes

Are the international returns adjusted for changes in exchange rates? For instance, as of 2006/11/24 the EAFE is up 9.2% YTD in local currency and 18.5% YTD in U.S. dollars. (And what about after-tax returns?)

Historically the U.S. has outperformed because the Federal Reserve and U.S. Treasury have managed U.S. currency better than most foreign nations. For foreign stock markets to continually outperform, one must believe their governments are equally or more stable and responsible and their economies equally or more efficient than the U.S. economy. While many investors focus on how bad the U.S. situation is today, they neglect to see how bad foreign governments and economies continue to be. The Fed is still better managed, the population less protectionist, the demographic situation more suitable to growth, and the size of government smaller.

Right now, the trend seems to be continuing- the dollar is moving lower, so international markets, oil, and commodities look like good bets. But, have you taken a look at Chinese money supply growth over the past 5 years? There are plenty of mines in these foreign waters. Remember how fast the Asian Crisis annihilated years of gains.