Time to panic?
"The British are coming! The British are coming!"
That's a familiar, if dated, note of alarm in the United States, but BusinessWeek recently rolled it out for a command performance in an article describing the way the Brits are outflanking Wall Street.
Times change
The cautionary tale was about IPO moola. It seems the numbers show that the London Stock Exchange and its Nasdaq doppelganger, the AIM, have wrapped off 58% of IPO bucks this year -- something that probably strikes fear into the hearts of many a New York plutocrat, not to mention U.S.-based exchanges NYSE Group
It's no wonder that Nasdaq keeps making passes at the London exchange and that the NYSE is trying to get hold of the pan-European Euronext.
As my colleague Bill Mann pointed out in the inaugural issue of Motley Fool Global Gains, 51% of public companies are now domiciled outside the United States, and only eight of the 20 biggest companies on Earth are American. The situation is far bigger than London vs. New York. Clearly, the rest of the world is catching up to the U.S.
No need to panic
I find that pretty exciting, which is why I'm amused by the reaction that this reality has received here in the U.S. That BusinessWeek article, for example, tried to downplay the importance of the skew in IPO bucks by scoffing at the quality of some of those recent London offerings, as if the crash of Party Gamingproves listing standards in London aren't as stringent as on our shores. (I've got a one-word rebuttal for that: Vonage.)
But while others may try to downplay the trend, many of us see that much of our investing down the road must take into account this reality: U.S. markets are not the only game in town. In fact, they're likely to continue dwindling in importance, relative to the world as a whole, as other economies increasingly decouple themselves from the U.S.
Quite honestly, I expect to see more and more foreign companies eating the U.S.' lunch. While GM
Grass is greener
But no matter what you think of American competitiveness, there's simply no arguing with numbers like these. They show just how significantly foreign market returns can outrun those at home. So far this year, the U.S. market's (admittedly decent) return has been outrun by markets in plenty of surprising places, and it has even underperformed the MSCI World index.
|
Market |
YTD % change |
|---|---|
|
Peru |
137.3 |
|
China |
76.8 |
|
India |
44.9 |
|
Poland |
41.6 |
|
Spain (Madrid) |
32.7 |
|
Singapore |
20.4 |
|
France (SBF 250) |
15.7 |
|
World (MSCI) |
15.3 |
|
United States (S&P 500) |
12.1 |
These major shifts are why no less an authority than Wharton professor Jeremy Siegel, author of Stocks for the Long Run and The Future for Investors, has recommended that we put a full 40% of our equity portfolios into foreign stocks.
Careful where you tread
But he also cautions that we don't just throw money at entire economies, hoping to capitalize on "growth." Price, as always, is key, and when prices are too high, investors can get burned no matter how great the growth.
That's something we understand at Global Gains, where we spend our time searching for the best international opportunities we can find. We don't buy into Wall Street's market-of-the-week mentality. We're not looking for the fastest-growing companies. We're not looking for the most popular companies. We pick the ones that offer the best potential rewards given the risk and the price. Period.
It's a new project and a new process, but it's headed by Bill Mann, an experienced international investor, and powered by a team of my colleagues who have made plenty of money on overseas investments themselves. If you'd like to join us in exploring this brave new world, a free guest membership in Global Gains is just a click away.
At the time of publication, Seth Jayson had plenty of money in foreign stocks but no positions in any company mentioned here. View his stock holdings and Fool profile here. NYSE Group is a Motley Fool Rule Breakers selection. Fool rules are here.
