Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Gold/SPX Ratio and the Gold Stock Case - 18th Jan 21
More Stock Market Speculative Signs, Energy Rebound, Commodities Breakout - 18th Jan 21
Higher Yields Hit Gold Price, But for How Long? - 18th Jan 21
Some Basic Facts About Forex Trading - 18th Jan 21
Custom Build PC 2021 - Ryzen 5950x, RTX 3080, 64gb DDR4 Specs - Scan Computers 3SX Order Day 11 - 17th Jan 21
UK Car MOT Covid-19 Lockdown Extension 2021 - 17th Jan 21
Why Nvidia Is My “Slam Dunk” Stock Investment for the Decade - 16th Jan 21
Three Financial Markets Price Drivers in a Globalized World - 16th Jan 21
Sheffield Turns Coronavirus Tide, Covid-19 Infections Half Rest of England, implies Fast Pandemic Recovery - 16th Jan 21
Covid and Democrat Blue Wave Beats Gold - 15th Jan 21
On Regime Change, Reputations, the Markets, and Gold and Silver - 15th Jan 21
US Coronavirus Pandemic Final Catastrophe 2021 - 15th Jan 21
The World’s Next Great Onshore Oil Discovery Could Be Here - 15th Jan 21
UK Coronavirus Final Pandemic Catastrophe 2021 - 14th Jan 21
Here's Why Blind Contrarianism Investing Failed in 2020 - 14th Jan 21
US Yield Curve Relentlessly Steepens, Whilst Gold Price Builds a Handle - 14th Jan 21
NEW UK MOT Extensions or has my Car Plate Been Cloned? - 14th Jan 21
How to Save Money While Decorating Your First House - 14th Jan 21
Car Number Plate Cloned Detective Work - PY16 JXV - 14th Jan 21
Big Oil Missed This, Now It Could Be Worth Billions - 14th Jan 21
Are you a Forex trader who needs a bank account? We have the solution! - 14th Jan 21
Finetero Review – Accurate and Efficient Stock Trading Services? - 14th Jan 21
Gold Price Big Picture Trend Forecast 2021 - 13th Jan 21
Are Covid Lockdowns Bullish or Bearish for Stocks? FTSE 100 in Focus - 13th Jan 21
CONgress "Insurrection" Is Just the Latest False Flag Event from the Globalists - 13th Jan 21
Reflation Trade Heating Up - 13th Jan 21
The Most Important Oil Find Of The Next Decade Could Be Here - 13th Jan 21
Work From Home £10,000 Office Tour – Workspace + Desk Setup 2021 Top Tips - 12th Jan 21
Collect a Bitcoin Dividend Without Owning the King of Cryptos - 12th Jan 21
The BAN Hotlist trade setups show incredible success at the start of 2021, learn how you can too! - 12th Jan 21
Stocks, Bitcoin, Gold – How Much Are They Worth? - 12th Jan 21
SPX Short-term Top Imminent - 12th Jan 21
Is This The Most Exciting Oil Play Of 2021? - 12th Jan 21
Why 2021 Will Be the Year Self-Driving Cars Go Mainstream - 11th Jan 21
Gold Began 2021 With a Bang, Only to Plunge - 11th Jan 21
How to Test Your GPU Temperatures - Running Too Hot - GTX 1650 - Overclockers UK - 11th Jan 21
Life Lesson - The Early Bird Catches the Worm - 11th Jan 21
Precious Metals rally early in 2021 - 11th Jan 21
The Most Exciting Oil Stock For 2021 - 11th Jan 21
Financial Market Forecasts 2021: Navigation in Uncharted Waters - 10th Jan 21
An Urgent Message to All Conservatives, Right-Wingers and Patriots - 10th Jan 21
Despite Signs to the Contrary, Gold Price at or Near Top - 10th Jan 21 -
Ultimate Guide On The 6 Basic Types Of Index Funds - 10th Jan 21
Getting Vaccinated at TESCO - Covid-19 Vaccinations at UK Supermarket Pharmacies and Chemists - 10th Jan 21
Cheers for the 2021 Stock Market and These "Great Expectations" - 9th Jan 21
How to Plan Your Child With Better Education - 9th Jan 21
How To Find The Best Casino - 9th Jan 21
Gold Is Still a Bargain Buy - 8th Jan 20
Gold Price Set to Soar as Hyperinflation Looms - 8th Jan 21
Have Big Dreams? Here's How to Pay for Them - 8th Jan 21
Will the Fed Support Gold Prices in 2021? - 8th Jan 21
Stocks trading strategies for beginners - 8th Jan 21
Who is Buying and Selling Stocks in 2021 - 8th Jan 21
Clap for NHS Heroes 2021 as Incompetent Government Loses Control of Virus Again! - 8th Jan 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Take Your Pick: Invest in Sinking U.S. or Soaring BRIC's

Stock-Markets / Emerging Markets Aug 21, 2010 - 05:51 AM GMT

By: John_Browne

Stock-Markets Since March 2009, the S&P 500 has surged by nearly 60% and US Treasuries have continued to surge, pushing yields close to all-time lows. This has elicited sighs of relief from professional investors, who see the strength as sure signs of recovery. Yet, these investors are ignoring - willfully or otherwise -- the very thin trading volume upon which this rally is built. Retail investors remain scarred by the '08 collapse and have steered clear of the stock market altogether. Instead, they have parked cash in the Treasury market (hence the low yields).


Still, financial gurus are flush with tales of deep value that await investors who have the fortitude to wade into the market. This past week, with significant fanfare, Warren Buffett reduced his position in Proctor & Gamble while increasing his holdings of Johnson & Johnson. Perhaps Buffett is growing increasingly distrustful of a consumer revival, but feels that government support will keep health care from feeling the pinch? While parsing the nuance of Buffet's stance, most American investors are missing the big picture.

For want of a better cliché, reallocating US stock positions is like rearranging deck chairs on the Titanic. It would be far wiser to seek passage on a sturdier ship that is sailing with the tide, rather than against it.

When compared with the US markets, the stock markets of Brazil, Russia, India, and China (collectively known as the BRIC economies) have shown far greater returns over the past decade. Over the past five years, the S&P 500 has declined more than 12%. Over the same period, the Shanghai Composite has more than doubled. Brazilian, Indian, and Russian markets have shown lesser, but significant gains. These returns were based on economies with faster growth rates than what we have come to expect in the US. What's more, the growth was primarily achieved not with government subsidies, but with organic market demand fueling legitimately productive enterprise.

The conventional wisdom is that investing in dollar-based equities is "safer" than parking capital abroad, but we have several reasons to believe this is no longer true. Massive government stimulus packages appear to have failed to restore confidence, but have widened the federal government's fiscal gap. States are edging toward bankruptcy, many remaining solvent only because of the market's assumed guarantee of federal backing. The nation's largest banks are entirely dependent on federal support. On top of all this, Congress is now discussing nationalizing the mortgage insurance market, officially transferring tremendous unrealized losses to the taxpayer.

America is effectively bankrupt, but refuses to acknowledge the losses. Instead, they are being assumed by Washington, which is itself hopelessly indebted to foreign governments. This risks an international run on the dollar, which early indications show has already begun.

Meanwhile, the American private sector is exhausted. Anxiety over future stimulus and debt is now combined with fears over tax increases, greater corporate regulation, renewed political strength of organized labor, and new employer health care burdens.

If America is headed for depression, then US equity, real estate and even bond investments may become increasingly risky relative to the BRICs (and resource economies like Australia and Canada).

Still, many may be reluctant to increase their overseas holdings out of lingering concerns about risk. The guarded approach has been to invest in US corporations that generate a high proportion of their earnings from abroad. We see this as a poor substitute for the real thing. While it is true that foreign markets plunged more steeply than the US in 2008, it is also true that their rebound was far more dramatic. For the most part, the BRICs were dragged down in the credit crunch due to their dependence on the dollar-centric monetary order. They learned from this, and are diversifying as rapidly as possible.

As the severity of our troubles becomes clear, US stock markets will experience another major correction (in real terms). Even good companies with overseas earnings will likely be dragged down by the chaos of inflation, protectionism, regulation, and taxation that tend to follow economic upheavals.

Now may be a time when those individual investors still holding US securities and bonds might wish to follow the example of the People's Bank of China and begin harvesting their dollar gains. With the proceeds, investors should allocate to economies showing growth based on genuine demand and solid fundamentals.

For in-depth analysis of this and other investment topics, subscribe to The Global Investor, Peter Schiff's free newsletter. Click here for more information.

By John Browne
Euro Pacific Capital
http://www.europac.net/

More importantly make sure to protect your wealth and preserve your purchasing power before it's too late. Discover the best way to buy gold at www.goldyoucanfold.com , download my free research report on the powerful case for investing in foreign equities available at www.researchreportone.com , and subscribe to my free, on-line investment newsletter at http://www.europac.net/newsletter/newsletter.asp

John Browne is the Senior Market Strategist for Euro Pacific Capital, Inc.  Mr. Brown is a distinguished former member of Britain's Parliament who served on the Treasury Select Committee, as Chairman of the Conservative Small Business Committee, and as a close associate of then-Prime Minister Margaret Thatcher. Among his many notable assignments, John served as a principal advisor to Mrs. Thatcher's government on issues related to the Soviet Union, and was the first to convince Thatcher of the growing stature of then Agriculture Minister Mikhail Gorbachev. As a partial result of Brown's advocacy, Thatcher famously pronounced that Gorbachev was a man the West "could do business with."  A graduate of the Royal Military Academy Sandhurst, Britain's version of West Point and retired British army major, John served as a pilot, parachutist, and communications specialist in the elite Grenadiers of the Royal Guard.

John_Browne Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules