Time to Change Country Mix in World Market-Cap

This article has 13 comments:

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  DrBagel

  Jun 22 08:44 AM
  some interesting question. I wonder what the usual country weight would be for someone in the UK. Do they Massively overweight domestic stocks? I'm sure Dutch investors (or other smaller countries) dont invest 85% in domestic companies.
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  Richard Shaw

  Jun 22 09:11 AM

  My Website
  my understanding is that the the Holland and Scotland were early global investors in the 1700's. due to the small size of their country, the Dutch have had a necessity to invest globally. due the size of the US markets, the typical US investor has been home market oriented. perhaps a reader with a good economic history background could shed some light on that
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  Learning
  Curve

  Jun 22 11:13 AM
  About the 1700's, previous centuries & subsequent centuries: all the imperial powers have effected a global investment strategy. Globalization is not new. Now, in this country, we have multi-nationals whose principal revenue is derived off shore. It has been ever thus.
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  enzo

  Jun 22 11:23 AM
  Do you think that US investors maybe overweighted because there is a lack of information on international companies headquartered overseas? Are the international ETFs focusing on marketing their products appropriately in the US? If that is true, what's the best approach to providing that information?
•  
  DrBagel

  Jun 22 12:17 PM
  I think some of the domestic overweight is driven by risk avoidance inherent in the investment industry. While trying to find a 529 plan, I discovered that almost all were 80-100% domestic in their stock allocations. I think these companies chose overly conservative portfolios for their ready made investment options. Why? It seems there is an assumption that consumers who use such products are not smart enough to assume investment risk. I'm not sure.
•  
  Richard Shaw

  Jun 22 04:58 PM

  My Website
  Enzo,
  
  The ADRs of foreign companies provide a great deal of information and are the only practical way for most US investors to buy individual securities outside of the US.
  
  The international and global mutual funds and ETFs are marketing well and have been attracting more capital than domestic funds for several years. See my article on money flows to US versus international and global mutual funds
  
  www.qvmgroup.com/inves...
•  
  Topforeignst
  ocks

  Jun 23 05:41 PM

  My Website
  I think most investors are heavily weighted in US stocks because they are forced to own them - either thru 52 plans as DrBagel points out, thru 401k or other plans. Or it is just "Financial Advisors" pushing the notion that they must own "US" company stocks because it is patriotic to do so and foreign stocks involve too many risks such as political,currency risk. There are plenty of opportunities outside of US. But most US investors are not aware of them. Somewhere I read an article all of us should go for 50% US and 50% non-US stocks in portfolio allocation.
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  fran

  Jun 24 02:46 PM
  like the habitual debtor[ the brother-in-law in the joke], a person with funds avoids encounters with same.
  
  will national FICO scores be the next financial guidepost?? would the USA maintain/sustain a credible score?? will "debtors rehab" be in our future??
  
  will we find the "ENERGY" and "FISCAL" policies necessary?? how often canwe continue to fall off the wagon?
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  Acercher

  Jun 25 01:40 PM
  Your articles are consistently among the most interesting on Seeking Alpha. I appreciate the way you marry hard data with a point of view--too many other commentaries have one or the other but not both.
  
  My personal portfolio for equities has been divided about 50/50 for the last couple of years, which I think is nowhere as risky as conventional wisdom would have it, particularly given the secular trend of a declining dollar.
  
  However, I have consistently been troubled by the role of Japan in foreign allocations. Even in your schedule above, Japan has been hovering around 10% for years, yet has truly sucked eggs as an investment. How do you deal with this yourself?
•  
  Richard Shaw

  Jun 25 02:05 PM

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  Acercher -- Japan is a perennial question. I have not overweighted in years, although I continual think it ought to somehow become a success story after decades of squeezing out the excesses of its past bubble.
  
  According to S&P/Cit Global Indices, the PE is on the high side:
  
  globalindices.standard...
  
  This recent article at CNN Money reports a negative economic view by the Japanese government:
  
  Japan's economic outlook dims
  
  Government points to exports, output and corporate profits all slowing down; says economic recovery on 'pause.'
  
  June 16, 2008: 9:37 AM EDT
  TOKYO (AP) -- Japan cut its overall economic assessment for the first time in three months on Monday, saying that exports, output and corporate profits are all weakening.
  
  "The economic recovery appears to be pausing (and) weak movements are seen recently," the Cabinet Office said in its monthly economic report for June. The government mentioned only the pause in the economic recovery a month earlier.
  
  The government's increasing pessimism toward corporate performance is a gloomy sign for Japan's economy, which has recovered in recent years mainly due to the robust business sector. A slowdown in the U.S. economy is leading to a decrease in Japanese and Asian exports to the American market, weighing on companies' sales.
  
  The recent surge in energy and raw material prices is also eroding business profits by crimping margins.
  
  Japan's government cut its evaluation of exports and industrial production, saying that both have had "a weak tone recently," as well as downgrading its view on corporate profits.
  
  The Ministry of Finance last week said that Japanese companies' business investment, profits and sales all declined on year during the January-March quarter.
  
  A government official briefing reporters Monday said that corporate capital expenditure trends need to be watched closely.
  
  "Once the U.S economy picks up, which we expect to happen later this year, Japan's economic growth will gain steam as exports should start rising again," he said.
  
•  
  buyitcheap

  Jun 26 06:48 AM
  Is free float really viable in countries i.e. China and Russia, where the governments could flood the markets with additional shares of state/public owned firms? It seems "float risk" aka dilution, might require some degree of discount on the market accordingly.
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  Richard Shaw

  Jun 26 10:36 AM

  My Website
  buyitcheap -- interesting point. the risk may go both ways, as we saw in Venezuela, and as we have seen Russia squeeze Shell and BP to sell to government controlled oil companies -- the key is that all of the indexes from MSCI, DJ, S&P and FTSE (the key indexers) use free-float. My point in making that otherwise redundant references is to explain why, for example, China has a smaller country weight globally than Switzerland. Not only are Swiss companies large, but they are very high free-float, while Chinese companies on average are low free-float.
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  tg-2009

  Jun 30 09:06 PM
  We need to keep an eye on the acounting system used in third world. What is the valuation of stock in Brazil, for example ? I also suspect how India and China can sustain their econmy when oil price is so high and US in recession ?