What was the American mindset like a decade ago?
In the earlier part of the decade I can remember people were very nervous after 9/11 and the bursting of the Tech bubble. The stock market deflated and a lot of people came to the realization that it was in fact a bubble and we weren't getting back to where we were anytime soon. It was like yeah, that was a Tech bubble but now what, are stocks undervalued or was there more pain to come? People were nervous to get on an airplane and people wondered if they were going to get attacked while going to work or a crowded baseball game. There was just a lot of fear around 2002-2003. I took a look at the globe and thankfully bought into International equities for a lot of the reasons people are buying today. Today though, you want to invest in America.
What is the American mindset like today?
Today people are still fearful ( there is always something to fear huh?). Today people fear not having enough money for retirement, impending tax increases, drying up pension plans, Obamacare, too much debt, unemployment and China. Our media bombards us with tales of fantastic returns from emerging markets and International funds on the other side of the world. China is growing and the emerging markets gain is America's loss or so they tell you.
Emerging markets explored.
Have you talked to many Brazilians, Russians, Indians or Chinese citizens? Ask them how life is back home and they will all tell you that it sucks! American poverty isn't even on the same scale as emerging markets. In the streets of Brazil people get robbed at gunpoint by thugs with AK-47s. Even in decent 4 star international hotels in the rich part of China people do #2 in a hole in the ground at restrooms. Russians will tell you that the cost of living back home is similar to America but their salaries are a fraction of what they are here so they are collectively poor. Oh and don't complain about the government because you might be beaten in public. Indian poverty has been documented. In America the fattest people are the poorest people, in India if you are poor you don't eat. "Poor" Americans live better than middle class citizens of the emerging markets and most of the emerging market residents I talk to have a resounding message, " My country is FUBAR, don't invest in it".
Don't chase returns.
You can ignore me and invest in emerging markets and international equities anyway. Maybe you want to buy some BRIC stocks or funds in companies you've never heard of because you've been lured by the sirens seductive tales of fantastic growth rates and returns. The bottom line is that no matter what anyone says about growth rates, you can't make real money investing in emerging markets unless that nation has a good rule of law and Bric countries sadly do not.
Oh what a difference a decade makes.
A decade ago BRIC countries were called "Third world economies" and today they are given a much more marketable name of "Emerging Markets". Isn't that a contrary indicator in itself? If your broker told you he wanted to invest your hard earned money in "junk bonds", what is your first reaction? If your broker told you he wanted to invest your hard earned money in "high yield bonds" do you have the same reaction? Do you want to invest in "Third world economies", "Undeveloped markets", or "Emerging Markets"? One name sells because it sounds good, the other two don't. I'm here to tell you that emerging markets are still third world markets.
Where to invest?
If you really want to invest in an emerging market, invest in the greatest emerging market in the history of mankind America. The United States of America was once England's emerging market.
Globalization is Americanization. You could invest in BRIC stocks you've never heard of and can't pronounce or you can invest in strong US Multinationals that have a history of success and are good at business. If India grows will ICICI Bank benefit? Sure but won't Coca-Cola, Johnson & Johnson, Proctor and Gamble and Microsoft as well? As people come out of poverty and eventually join the global middle class will they drink Coke, put band aids on scraped knees, wash with Tide and use Microsoft Office?
Yound people around the world want to live like Americans. They see our movies, TV shows and music and think America is cool. Americans had more immigrants in the last century than the rest of the world combined. Europeans always seem to cynically have that blank stare in their photographs as they are told to live in the collective for somebody else. Americans have smiling bleached white teeth, are enouraged to pursue their dreams and accumulate lots of stuff that makes them happy. Young people around the world would rather drink coke, listen to their ipod, check facebook, and pile into a booth at McDonalds with their closest friends on a Friday night than the alternative. Different places will always have different customs but Globalization is Americanization and not the reverse.
America is on sale. I've never seen people so negative on this country. The grass is always greener somewhere else. We have problems and there are things to be fearful about, yes but there always are. People have been betting against America since the very inception of this country. The S&P 500 is the same price it was 12 years ago. In ten years a portfolio comprised of US Large Cap Multi Nationals with reinvested dividends will outperform a portfolio comprised of BRIC securities. America's best days are most certainly ahead.
Disclosure: Author is long KO, MSFT, AAPL at the time of this writing.
Disclosure: Long KO, MSFT, AAPL
What was the American mindset like a decade ago?