Don't you wish you had a one-year time machine these days?

Oh, the ways we could profit from a gadget like that:

  • Go back to January and bet against the 12-point favorite New England Patriots in Super Bowl XLII.
  • Jump back 365 days, take out the fattest second mortgage available, and ride tiny James River Coal (NASDAQ:JRCC) to a 160% return -- or leave a note to sell on June 23 for a whopping nine-bagger.
  • Give a copy of the World Economic Forum's just-released Global Competitiveness Rankings to Mssrs. Bernanke, Paulson, and Bush. Or just push the Forum to release this thing a few weeks early.

Quit dreaming!
OK, so maybe a recent issue of The Economist or The Wall Street Journal would fit that third bill just as well, but the GCR report shows plenty of early warning signs of the current calamity -- and it comes from data collected last spring. I love bullet lists today:

  • The financial health of the U.S. banking system is ranked No. 40 out of 134 nations under the microscope, behind such financial powerhouses as Canada (No. 1), Malta (No. 10), Namibia (No. 17), and Botswana (No. 38).
  • Sweden (No. 1), Switzerland (No. 6), Chile (No. 14), and Ireland (No. 16) all boast more efficient and/or transparent securities exchanges than ours. The SEC clocks in at No. 20.
  • We're in (or dangerously close to) the bottom 25% or worse in important macroeconomic factors like the national savings rate, government debt, and national surplus/deficit. Guatemala and Kenya beat the Yankees at every turn. Vamos arriba, mosongo!

Some of these rankings are based on hard economic data and others on more than 12,000 interviews with high-ranking financial and business experts across these 134 countries. Again, the information was collected between January and May, 2008, so these problems should not have surprised anybody.

What have we learned here?
I've got a few key takeaways for you, Fool. First, here's how you can profit from this knowledge.

Most of the American megabanks may be knee-deep in financial bat guano, but there are still a few genuinely sound financial systems out there. I don't expect Canada, Sweden, and Luxembourg (the three most solvent banking centers) to bail us out of this mess, but investing in their banks strikes me as the closest thing to a safe bet these days. Your money can stay out of the American turbulence, in the hands of conservative and strictly regulated banking markets:


Nation of Origin

Total Assets (billions)

Dividend Yield

CAPS Rating

Allied Irish Banks (NYSE:AIB)

Ireland (No. 9)




Royal Bank of Canada (NYSE:RY)

Canada (No. 1)




The Bank of Nova Scotia (NYSE:BNS)

Canada (No. 1)




Banco Bilbao Vizcaya Argentaria (NYSE:BBV)

Spain (No. 20)




Westpac Banking (NYSE:WBK)

Australia (No. 4)




Financial data from Capital IQ, a division of Standard & Poor's.

If you're feeling semi-adventurous, you could even dip into the Bulletin Boards. Swedbank AB is one of the largest banks in Scandinavia with assets of $278 billion, represents the second-strongest banking system in the world, and is regulated by the strongest market regulation environment.

Second, it's clear that the United States is falling behind many other industrialized nations when it comes to managing our vast financial assets. Stricter regulations, more transparency, and less risk-taking are all mandatory from now on -- and all of these things sound like reasonable outcomes of the current lending logjam. The invisible hand of the market might fix what our leaders wouldn't or couldn't do of their own free will.

Thanks for the report, Forum dudes. I just wish you had unleashed it a little bit earlier. Now, where'd my flux capacitor go?

Further Foolishness:

Allied Irish Banks is a Motley Fool Global Gains recommendation. The Bank of Nova Scotia and Banco Bilbao Vizcaya Argentaria are Motley Fool Income Investor picks. The Fool owns shares of Allied Irish Banks. Try any of our Foolish newsletters today, free for 30 days.

Fool contributor Anders Bylund holds no position in any of the companies discussed here, though he probably should. You can check out Anders' holdings or a concise bio if you like, and The Motley Fool is investors writing for investors.