donzelion

Buy British or Buy American?

The way I see it, when the pound collapsed last fall versus the dollar, fairly decent British companies went on sale for an additional 25% off. Since I lack any confidence in the USD long-term, getting a portion of my portfolio out of the country makes very good sense to me.

British equities are almost always more deeply integrated in their global operations than American companies (American companies try to avoid global taxation rules by incorporating in Britain - and then incorporating subsidiaries from the British subsidiary). While in theory, these separations are merely paper barriers, anyone who has been awake for the last 16 months might have learned that paper occasionally matters.

If you're looking for globalization to save the day, look to tightly integrated outfits like HSBC (JP Morgan is a fine bank, but where HSBC has integrated management staffs posted in nearly every member of the G20, JP Morgan normally has a couple of country representatives and no deep presence). Same principle applies with double strength for AT&T v. Vodafone.

In terms of BP v. XOM, I'd go with the dividend payer (esp. if the dollar is likely to decline relative to sterling).

As for other matchups, it's hard to pick a clear winner. There really is no British analogue to Wal-Mart - but Carrefour is an excellent European contender (which, it turns out, is also far more global than Wal-Mart, which is barely moving across N. America, let alone high-growth emerging markets).

Preview from Europe: The Equity Rally Lives

I like the analysis, and concur with this line: "It was perhaps only a matter of time before we saw some sort of rebound in US banking stocks."

That rebound was nice and nasty (nice, because I could exit a losing position at a 50% loss instead of a 75% loss; nasty because it came a few days before my limit orders hit on a financials ETF, so I missed most of the bounce). Lots of people offer reasons for the market to turn - but all their reasoning smells like mumbo jumbo (e.g., the ratio of bearish projections increases, hence we must be near the bottom...).

For the banks/financial sector - folks are waiting for the government to dictate values of "toxic assets." Right now, the banks say these "assets" have a value of X, while the market says they have a value of Y. Everyone wants Uncle Sam to say who is right (or rather, for Uncle Sam to agree with their own side that they were right all along) - and the government just wants to avoid picking sides. Positing a bottom because that process of valuation adjudication is nearer to a conclusion makes about as much sense as positing a bottom because 'what goes down must come up.'

Dividend Investors Watch Out

I lost 30% on IP before pulling the plug last week. Timber did quite well during times of high deflation and inflation; it's a contrarian store of value (far more useful than gold). The industry is labor intensive, particularly when it is practiced with a modicum of good stewardship over the land - so it seemed like a politically apt choice. Finally, saving responsible companies like IP is prudent: in timber, most of the worst offenders are companies striving to pay off debts quickly by pillaging the land.

The gamble? Debt load. IP made the same blunder so many other companies have made. Now, if only I could find a good alternative timber REIT with low fees...

Barclays: Crushed

Here here!

Much of the problem in the "financial SERVICES sector" is that nobody in that sector wants to offer services, but rather, to "sell financial products." For products, the relationship ends for the most part after the transaction - no ongoing duties continue. For services, the relationship continues long past the initial transaction - instead of being judged by how much revenue one extracts, one also has duties to do it all honestly (or else the customers walk away for good).

The financial sector fixated upon selling "financial products" in the 80s and 90s - and in particular, upon rewarding people for sales. Banking dropped integrity and prudence in favor of sales volume - and the rest is...well, what we're just starting to work our way through.