Another Reason to Hate the French

By now you know that Standard & Poor's has downgraded the U.S. credit rating for the first time in our country's history from AAA to AA+ with a negative outlook (for shame). What you may not know is the list of countries who still maintain a AAA rating. Here is that list: Australia, Canada, Denmark, Germany, Holland, the U.K., Norway, Singapore, Sweden, Switzerland, Austria, Finland, and France. And while President Obama sounded like a sanctimonious doofus when he said "we've always been and will always be a triple-A country" (actually, in point of fact, we're not), our downgrade did not actually change the investing landscape very much.

Just take a look at that list again. With regards to stability, currency, safety, size, and liquidity, which country, from a common-sense standpoint, truly bests the U.S. when it comes to deciding where to stash your risk-averse capital? I'll say none of them -- and institutions seem to agree, with U.S. rates dropping even after the downgrade.

AAA Market

Latent Problems

Australia, Canada Relatively small economies with overvalued currencies tied to natural resources -- and Australia is on the verge of a banking crisis due to a housing collapse.
Denmark, Norway, Sweden, Finland Small economies with rising liabilities.
Germany, Holland, Austria, France Eurozone economies that will ultimately be on the hook to bail out their less-than-creditworthy brethren.
Singapore Small, tied to financial sector, and reliant on China.
The U.K. Recent nationwide riots underscore many fiscal and structural issues.

Source: Author's opinion.

I don't think it's going out on a limb to predict that this club of AAA markets will only keep shrinking in the coming months and years. In other words, those easy-to-hate and sanctimonious French (and you'll have to read to the end to see how many times I can work that word into this column) won't be able to be so sanctimonious for long (that's three).

What to do
Of course, many investors already know this, which is why we haven't seen a flight from U.S. Treasuries to French or Singaporean bonds even after the downgrade. It's why investors in both bonds and equities have been fleeing Europe. European obligations are looking increasingly more severe than those here in the U.S., and their system for dealing with them is even more dysfunctional.

This is why I recommend you stick to the AA+-rated U.S. for safety and start looking largely at AAA-rated Europe for opportunity amid the crisis.

The global view
Let me be clear: Europe is not better off than it looks. In fact, I think it is worse. But there are plenty of companies in Europe that are being treated like European companies when in fact they are not. This is where the opportunity is. Here is a list of companies being sold off recently that could probably boost their stock prices simply by moving their headquarters to a new country -- and a country more representative of where in the world they are actually doing business.

Company

Headquarters

Revenue Outside of Developed Europe

Telefonica (NYSE: TEF  ) Spain 56%
ArcelorMittal (NYSE: MT  ) Luxembourg 71%
ABB (NYSE: ABB  ) Switzerland 61%
CGG Veritas (NYSE: CGV  ) France 61%
Unilever (NYSE: UL  ) Netherlands 73%

Source: Capital IQ, a division of Standard & Poor's.

While these are all European companies in name, they are not so European in practice. But the market is still selling off these stocks either because they are based in Europe or because investors are selling off European indexes that hold these names.

Why should Fools take the opportunity today to build a basket of these truly global companies that will benefit over the long term from outsized growth in emerging markets? Because, at the risk of sounding sanctimonious, we are smarter than the average investor.

Get Tim Hanson's top global stock picks by joining Motley Fool Global Gains. Tim's "Global View" column appears every Thursday on Fool.com.

Tim Hanson is co-advisor of Motley Fool Global Gains. He owns shares of ABB. The Motley Fool owns shares of CGG Veritas and Telefonica. Motley Fool newsletter services have recommended buying shares of Unilever and ABB. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (12) | Recommend This Article (21)

Comments from our Foolish Readers

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 August 11, 2011, at 3:45 PM, David369 wrote:

    The French, always there when they need you.

  • Report this Comment On August 11, 2011, at 4:55 PM, NeedaClue7 wrote:

    As you note, ABB's HQ is in Switzerland. When did Switzerland join the EU? I must have missed it...

  • Report this Comment On August 11, 2011, at 4:58 PM, TMFMmbop wrote:

    ABB does a lot of business with European utilities and governments.

    Tim

  • Report this Comment On August 12, 2011, at 12:17 PM, TMFCheesehead wrote:

    A Rec simply for the awesome title!

    Brian

  • Report this Comment On August 12, 2011, at 12:34 PM, toddy80 wrote:

    You had me at French

  • Report this Comment On August 14, 2011, at 8:23 AM, ryanalexanderson wrote:

    @NeedsClue:

    Switzerland is in Europe. That's all the article said. It didn't say it was in the EU, unless it was edited.

  • Report this Comment On August 14, 2011, at 10:14 AM, buddhalove88 wrote:

    What a horrible title representing America. Let's change the title to "Another reason to hate Israel"

    or

    "Another reason to hate America"

    Doesn't ring so well does it? You would have so many complaint with these titles.

    Grow up.

  • Report this Comment On August 14, 2011, at 11:25 AM, boogaloog wrote:

    Tim, I love reading your columns, but I have to agree with buddhalove88 on this one. When did America become the country of hate? We hate everyone in the Middle East. We hate China. We hate Mexico. For some reason we hate Canada. And we hate France, even though it's probably one of the first places people think of if you ask them where they'd like to take a vacation.

    I went to France once for two weeks. I don't speak French. Contrary to what everyone "knows" to be true, no-one was rude to me. In fact, they all went out of their way to make me feel welcome.

    So let's stop with the mindless hatred based on stereotypes. Maybe then the rest of the world will stop hating us (they must, right -- it's a stereotype so it must be true!).

  • Report this Comment On August 15, 2011, at 8:01 AM, GenevaChris wrote:

    Tim

    Really enjoy the columns...but please....don't alienate your European readers!

    CGG bought out Veritas a number of years ago to create CGG Veritas. An example of the US losing a company to those pesky French?

    Living in Switzerland, interesting to see how individuals are hiding behind the Swiss Franc. Next to Gold this has sent the value of the Swiss Franc through the roof. The ones really laughing are the ones who live in France but work in Switzerland (and there are thousands)....salary in Swissies and groceries in Euros......nice for some!

  • Report this Comment On August 15, 2011, at 3:34 PM, TMFMmbop wrote:

    Hey, Fools. Thanks for the comments. The title here was supposed to be on the humorous side -- and not on the alienating one -- so my apologies if it missed the mark on tone.

    Tim

  • Report this Comment On August 15, 2011, at 9:11 PM, Garys92 wrote:

    With all due respect but if you look at unemployment, national debt, growth, tax revenues etc, it's hardly strange that the Scandinavian/Nordic countries are rated higher.

    Just because a country is big, doesn't mean they automatically get Triple A.

    The argument "small economies with rising liability" is just not enough. What liabilities do you mean? The national debt is certainly not increasing in Sweden/Norway.

    Cheers

  • Report this Comment On August 16, 2011, at 5:02 PM, JSMBAPhD wrote:

    Don't any Americans know that there would be no America if it weren't for the French?

    "From the outbreak of armed rebellion in 1775, many in France sympathized with the colonists. Young, idealistic French officers like the Marquis de Lafayette volunteered their services and in many cases their personal wealth to help equip, train and lead the fledgling Continental army. The French government hoped to redress the balance of power that resulted from the French humiliation in the Seven Years Wars, which gave considerable economic and military advantages to Britain. While maintaining formal neutrality, France assisted in supplying arms, uniforms and other military supplies to the American colonists.

    This clandestine assistance became open after the defeat of General Burgoyne at Saratoga in 1777, which demonstrated the possibility of British defeat in the conflict and led to French recognition of the colonies in February 1778. As a result of the victory of the Continental forces at Saratoga, Benjamin Franklin, who had gone to Paris as ambassador in 1776, was able to negotiate a Treaty of Amity and Commerce and a Treaty of Alliance with France. From this point, French support became increasingly significant. The French extended considerable financial support to the Congressional forces. France also supplied vital military arms and supplies, and loaned money to pay for their purchase.

    French military aid was also a decisive factor in the American victory.

    ...

    In the end, these French soldiers became the hard anvil upon which the new American nation was forged and the chains of British imperial domination were finally broken."

    http://people.csail.mit.edu/sfelshin/saintonge/frhist.html

    Historical illiteracy on the part of posters ... well, I'll leave it there.

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