Wealthy Americans Finally Catch a Break

Good news, wealthy Americans! Something finally went your way!

Last year, I wrote an article entitled "The Death of the American Billionaire," in which I noted that after years of American domination, the composition of Forbes' annual billionaires list had adopted a decidedly international flair -- as you can see from the table below:

Metric

2003

2004

2005

2006

2007

2008

Number of Americans in Top 10

8

8

5

3

3

2

Number of Americans in Top 25

18

13

12

12

8

4

The good news
It's been a rough year for America's billionaires. Warren Buffett lost $25 billion. Microsoft (Nasdaq: MSFT  ) founder Bill Gates lost $18 billion. Poor Las Vegas Sands (NYSE: LVS  ) chairman Sheldon Adelson fell from the 12th richest person in the world in 2008, all the way to 178th on the list this year.

I thought you said this was GOOD news ...
Oh, it is. While the past 12 months were tough on America's billionaires, they were absolutely brutal on their international counterparts. Carlos Slim and Arcelor Mittal (NYSE: MT  ) chairman Lakshmi Mittal each lost about $25 billion. And the biggest loser of all was India's Anil Ambani, whose net worth declined by a whopping $32 billion.

As a result, America can now claim three of the world's top four billionaires (Gates, Buffett, and Oracle (Nasdaq: ORCL  ) founder Larry Ellison), as well as 11 of the top 25. Congrats, wealthy Americans. The world is your oyster once again ... for now.

Enjoy it while you can
As I indicated in last year's article, I don't think the increasing number of international billionaires in recent years was a fluke -- and I only expect that trend to continue over time. Even though most international stocks have suffered through a terrible 12-month stretch, they were still the best-performing markets over the past three- and five-year periods.

Not convinced? Check out the tables below:

Market (Country)

1-Year Performance

3-Year Annualized Performance

5-Year Annualized Performance

IPC (Mexico)

(33%)

0%

14%

Ibovespa (Brazil)

(38%)

0%

12%

BSE Sensex (India)

(43%)

(6%)

10%

SSE Composite (China)

(46%)

19%

4%

Dax (Germany)

(37%)

(12%)

1%

Hang Seng (Hong Kong)

(42%)

(6%)

0%

S&P 500 (U.S.)

(41%)

(17%)

(7%)

*Data from Yahoo! Finance as of March 16, 2009.

Fueled by America Movil (NYSE: AMX  ) , Mexico's IPC index easily outperformed the S&P over the past five years. And thanks to the torrid performance of companies like Petrobras (NYSE: PBR  ) and CVRD (NYSE: RIO  ) , Brazil's Bovespa index isn't far behind.

The point is clear: If you had invested $10,000 in the S&P 500 exactly five years ago, you would have $6,518 today. If you had invested in any of the international indices listed above, you would have anywhere from $10,034 to $19,679.

That's why it's such a shame that most Americans are significantly underexposed to these international economies. There is no consensus on the average American's exposure to foreign equities, but I've seen estimates ranging between 2% and 20%. As Motley Fool Global Gains advisor Tim Hanson pointed out in a recent article, that low level of exposure leaves domestic investors tied to a vulnerable U.S. economy, and it all but ensures that they will miss out on the greatest economic growth of the next 10 to 15 years.

In fact, Tim cites PIMCO co-CEO Mohamed El-Erian, who believes that American investors should devote two-thirds of their portfolios to foreign stocks!

Past is not prologue
As you know, past performance doesn't necessarily indicate future results. But I believe the best-performing markets over the next three to five years (and beyond) will still be based abroad. Face facts: Foreign economies stand to benefit from blistering economic growth the likes of which the U.S. will never see again.

Take China, for example. UBS recently cut the country's 2009 GDP forecast ... to 6.5%. If that holds, it would be the lowest growth rate that China has posted since 1990.

Contrast that with the United States, where 2009 GDP is expected to contract by 3.1%. Since 1990, U.S. GDP has never grown by 6.5%.

That kind of powerhouse economic growth makes me believe that we'll continue to see more outperformance by foreign markets, and more of the world's billionaires cropping up abroad.

The best way to play it
If you're interested in increasing your exposure to China, India, and the rest of the world's fastest-growing economies, consider taking a free 30-day trial of our Global Gains investing service. Every month, we recommend two new international stocks, as well as our best bets for new money now. Just click here for more information.

Rich Greifner is still waiting for Forbes to release its list of the world's thousandaires. He does not own shares of any company mentioned in this article. America Movil is a Global Gains recommendation. Microsoft is an Inside Value selection. Petrobras is an Income Investor pick. The Fool has a disclosure policy.


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 18, 2009, at 12:24 AM, WPaulS wrote:

    Advise to invest in many International Markets can be as Unwise as it is Unfoolish. Markets like those referenced in Hong Kong and China are unregulated - there is absolutely no comparable oversight over the markets. Does anyone recall Peregrine Investments a Hong Kong firm which sparked the Asian Financial Crisis in 1997? Please recall that the Peoples Republic of China is still ruled by the Chinese Communist Party - Chinese companies do not prosper according to their worth, but rather according to what the Chinese Government desires. Hong Kong is a Special Administrative Zone to be sure - but likewise subject to the whim of the CCP. Anyone claiming to have any special insight into the real worth of a Chinese Company is overstating their case - CEOs do tend to be occasionally hauled off and shot - Anyone care for the job running SanLu? For the moment, it appears to function as a Western Market would, but that is subject to change at any time. India has been a heartbeat away from becoming involved in a Nuclear exchange with Pakistan, Mexico is overrun with druglords. The entire point of Foolish Investing is to make sound investments based upon economic evaluation and judgement - something which would rarely be available in most of South or East Asia.

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