Over the years, I have been made the case that the U.S. economy is growing ever more slowly, while the rest of the world was accelerating; and that the U.S. markets are not an ideal place to be invested. I have been a Bear on the U.S. Economy for some time, and less than
enthralled of the U.S. equities for a while (recall my infamous Cult of the Bear column in TheStreet.com in January 2006).
I have discussed overseas (especially Asia) as a preferable place to be invested, and given the nod to Energy (5 years ago) Gold (4 years ago), Japan (3 years ago) and Agricultural commodities (2 years ago).
There are select places to put your money in the U.S., but they are few and far between. Over Summer 2006, we identified Big Cap US multi-nationals — those with heavy overseas exposure — as a valid place to be invested.
Apparently, many people think the only thing you can say about this investment posture is that I am Bear. I do not think that does justice to what some dismissively call nuance.
Is this perhaps too subtle? Can you be a fully invested Bear?
I have been thinking about this after three separate people this week asked me if I was getting killed shorting the markets. No, I said, we are mostly long the asset classes named above, with some U.S. exposure, some cash, and handily outperforming the SPX. Our short positions are very small, and either have reasonable stops attached to them, or are hedged with options.
Well, it turns out that this call hasn’t been so bad. According to Time’s Floyd Norris, there have been Strong Gains in U.S., Except by Comparison:
"FIVE years after the American stock market hit bottom after the bursting of the technology stock bubble and the 2001 recession, share prices as measured by the Standard & Poor’s 500 have doubled.
That growth amounts to a compound annual increase of 15 percent a year and is the fastest doubling off a market bottom since the 1980s. But in the current world environment, it does not look impressive. Nearly every other stock market in the world has done better.
Of the 83 countries for which records of a major stock index were available, the American share price increase in the five years after Oct. 9, 2002, was better than those of only four. All four are small countries, either in the Caribbean or Latin America.
But South America also produced three of the six best-performing markets during the period, in Peru, Brazil and Colombia. Peru’s annual gain of 87.5 percent was the best in the world.
That all 83 markets around the world had an increase is emblematic of the strength of the global economy and the willingness of international investors to pour money into markets that many had never heard of — or that did not exist — 20 years ago."
That’s correct: Out of 83 international bourses, the USA ranked 78th. (Where can I order one of those big foam hands with the index finger and the wording WE’RE # 78! on it?)
So while I get grief from people for being negative on the US economy and markets — versus overseas bourses — that has turned out to be the right investing position.
The graphs below are quite revealing:
graphic courtesy of NYT
Strong Gains in U.S., Except by Comparison
NYT, October 13, 2007