Investing Tips Information

Mr Guild has written an interesting article about the current state of the US dollar. It certainly has been on the decline. When investing offshore, currency rates can have a huge impact on returns. Companies from other countries that have had a large percentage of their sales in the US are now feeling the pinch. MGW on the Australian stock market is an example of this. I personally have some investments in managed funds that are tied to the $US, however the importance comes when I intend to sell them. The decline in the US dollar has lowered the profits of some of these funds from my perspective. Anyway, I hope that you find the article below useful.

I don’t know if any of you know the old blues song from the 1930’s that goes “Once I lived the life of a millionaire…spending my money…I didn’t care. Taking my friends out for a mighty good time…buying bootleg liquor, champagne and wine. But then ooh…I fell so low…Had no friends and had no place to go…”

Today, it is as if the same song is being sung by the U.S. dollar. The U.S. dollar is being deserted one friend after another. One would expect the dollar to rally after its big decline, but it doesn’t. WHY?

More and more countries that have aligned their currencies to the U.S. dollar are re-examining the so called U.S. dollar peg.

China is being forced to do so by European and U.S. pressure. Hong Kong speculators are attacking the Hong Kong dollar peg to the U.S. dollar and forcing the Hong Kong government to defend it at great expense.

The six Middle East countries pegged to the U.S. dollar (Saudi Arabia, Kuwait, UAE, Bahrain, Oman and Qatar) that export a lot of oil and have historically tied their currencies to the U.S. dollar. This group has decided to institute a single currency by 2010.

Many other oil exporting nations have been interested in being paid Euros for their energy.

The new rich nations of the world that sell raw materials, or manufactured goods, are all wondering about the big buildup in dollars in their portfolios, and what they will do to diversify their risk. In addition to causing a decline in the value of their holdings, having too many dollars causes other problems.

When-non dollar nations accumulate large quantities of U.S. dollars, they must sterilize them to avert inflation (this is often done by buying U.S. dollar denominated debt). If the dollars are used to buy goods, it can end up importing inflation (especially if they buy goods from non dollar based countries that are rising in price).

Although the dollar can rally at any time, until the U.S. starts to face its fiscal and trade deficit problems, and the U.S. economy finds a bottom to the credit crisis…the currency will remain ‘Under Pressure’…(a popular 80’s pop song for those readers who may not be familiar with 1930’s blues tunes).

CHINA AND SOME OTHER SOVEREIGN WEALTH FUNDS ARE RAMPING UP THEIR STRATEGIC INVESTING IN METALS, ENERGY AND COMPANIES

Their focus is on acquiring mineral resources, energy resources and investments in private equity houses, where they can get big and cheap stakes in companies.

Today, it was announced that China is seeking to make major investments in a large number of private equity firms. This is logical, and it follows the pattern that they have set in the last few years. They have been accumulating MINERAL AND ENERGY assets in Africa and Latin America.

They do not mind investing in countries with corrupt governments or wars going on. They are more than happy to invest in stable African and Latin American countries like Tanzania, Kenya, Uganda, Brazil, Peru and others to secure raw materials. They are after nickel, coal, zinc, copper, iron ore, oil and precious metals.

Political risk is not their big concern. Their big concern is to get the raw materials to allow 300 million more Chinese (in the case of China), and countless more in other countries make the transition from countryside subsistence farming to urban dwelling and its blue and white collar jobs.

No wonder precious metals, base metals and energy continue to rise…the demand continues to grow. We estimate that there will be continued demand for years to come.

BETTER LATE THAN NEVER

The IEA (International Energy Agency) hints that its new crude oil forecast (to be announced soon) will be much higher than the previous price forecasts have been. Failing to buy the peak oil thesis for a long time, the IEA has been making low-ball estimates of global energy prices for the whole five years we have been shouting about higher oil prices. This was because they believed what the oil producing countries told them. Of course, the oil producing countries had a vested interest in trying to sell the world that they could increase production and keep oil prices down so consumption would stay high.

Now even the IEA has seen through this paper thin argument, and will announce that oil prices can go much higher because the amount of oil which can be produced in the world has PEAKED.

OUR THEMES

We remain gratified that our themes have worked out so well, and we continue to see most of them working in future months.

Energy-We are certain that energy which we predicted years ago could go to $100 by 2008 will get there soon. What then? At this juncture we believe that alternative energy and foreign energy companies may be more attractive than U.S. energy providers. We have investments in energy companies operating in Australia, Canada, India, Africa, the North Sea, Norway, South America and the Mid East. We continue to own oil, natural gas, uranium and renewable energy investments in the energy sector.

Base Metals-Although we remain bullish on base metals long term, for the short term we are concerned that a weak U.S. economy will cause base metals stocks to move sideways. We will not emphasize base metals stocks for the next few months for this reason.

Precious Metals and Currencies-The weakness in the U.S. dollar mentioned above is extremely salutary for gold and non U.S. currencies, and we remain very positive on them for the coming months. We own both gold royalty companies and the metal itself. We own several non-U.S. currencies, including the Canadian Dollar, British Pound, among others.

India-India has recently changed the investment regime for foreign investors. This may cause a short-term decline in Indian stocks, which we would be delighted to see. We believe that India holds huge promise over the long-term and we would like a lower price at which to add to our Indian positions.

China-China is best played through Hong Kong, and this has been a very successful area for us. We will use any market corrections (which usually appear at least once a year) to add to our Hong Kong based positions in Chinese companies.

Singapore and other fast growing countries-Here again we plan to wait and add on market corrections.

We look forward to your comments and we thank you for listening.

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These articles are for informational purposes only and are not intended to be a solicitation, offering or recommendation of any security. Guild Investment Management does not represent that the securities, products, or services discussed in this web site are suitable or appropriate for all investors. Any market analysis constitutes an opinion that may not be correct. Readers must make their own independent investment decisions.

The information in this article is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation, or which would subject Guild Investment Management to any registration requirement within such jurisdiction or country.

Any opinions expressed herein, are subject to change without notice. In addition, there are many market, currency, economic, political, business, technological and other risks that are beyond our control. We make reasonable efforts to provide accurate content in these articles; however, some content and some of the assumptions, formulas, algorithms and other data that impact the content may be inaccurate, outdated, or otherwise inappropriate. In addition, we may have conflicts of interest with respect to any investments mentioned. Our principals and our clients may hold positions in investments mentioned on the site or we may take positions contrary to investments mentioned.

Guild’s current and past market commentaries are protected by copyright. Apart from any use permitted under the Copyright Act, you must not copy, frame, modify, transmit or distribute the market commentaries, without seeking the prior consent of Guild.

About the author:

Mr. Guild founded Guild in 1971. Prior to founding the company he was an analyst at a bank and a hedge fund. Mr. Guild is a recognized expert in the areas of international investing and economics. He has been a writer and speaker on economic issues for 30 plus years and has been widely quoted in the world media. He holds a BA in economics and an MBA with highest honors. For more company information please visit http://www.guildinvestment.com

Article Source: http://EzineArticles.com/?expert=M._Guild

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As most of you are probably aware, I am a big fan of investing overseas and I have been doing so through Landau Securities for a number of years. This article written by Jeffery shares some of the same thoughts that I do, so I felt that I would share it with you. 

The returns on international mutual funds have far out-paced those earned by U.S. funds for the last several years. As a result, there has been a deluge of money flooding into these funds. Is this the 1999 Tech Bubble all over again? Read on to find out.

Investing in technology stocks was the big thing in the late 90’s. Internet startups that didn’t have a dollar in sales were raising billions of dollars in an IPO. The value placed on companies was outrageous. Anyone remember Priceline.com? In 1999 the stock hit a high of over $300. A few years later it was trading at $5 a share. Will the same thing happen with International stocks?

The short answer is no. Investments in foreign companies haven’t reached the frenzied pace seen in the Tech Bubble. Moreover, there is a reason overseas markets are performing so well. It’s essential you understand the underlying trend so you can properly allocate the place international investments have in your portfolio.

My wife and I recently returned from a short trip to Cambodia. My experience there has given me a greater appreciation for and an understanding of the development under way in Asia.

Cambodia is a very poor country. The average annual income per person is $2,000. And they’re still recovering from atrocities of the Khmer Rouge in the late 1970’s, when 2 million people died. Now, 40% of the population is under the age of 15.

The human spirit, though, is the same everywhere. Ambition and desire are not American attributes; they are basic to human nature. And that’s what I saw in Cambodia. Many are working to improve their own lives and those of their families. That means commerce.

Cambodian wages are very low so foreign money is flooding into the country. Garment factories are being built and employ thousands. That’s causing land prices to double and triple in value. Family rice patties are now sold for tens of thousands of dollars. Their sale completely changes the lives of that family.

Invariably, they buy a car and home. They buy furnishings. That money trickles through the economy, raising the standard of living each step of the way. Multiply that by thousands and thousands and you can see the impact it has.

The capital of Cambodia is Phnom Penh. Just 5 years ago many of the streets there weren’t even paved. Now they are. New roads are being built and hydro-electric dams are being planned.

Cambodia is just one example of what is happening in countries all across Asia. In China and India alone there are over 2 billion people. Most of them have lived in poverty all of their lives. But that is changing. Standards of living are increasing.

Will this rate of growth continue forever? No. But I believe it will last a decade or more. The rate of growth isn’t going to be constant. There will be cycles just like there are in any economy. There’s no denying the overall trend, though.

What does this mean for your portfolio? I believe that many investors should have a substantial part of their portfolio invested outside the United States. Our economy has been growing around 3% a year. China and India’s economies are growing around 10% a year.

Traditionally, experts have suggested that 10-15% of your portfolio be invested internationally. Now some suggest 25%. I believe it should be higher than that.

The problem, though, is that you can’t just throw money into an overseas mutual fund and forget about it. These markets can be very volatile. China’s market dropped almost 10% in a single day earlier this year. It’s vital that this money be invested wisely, that it be closely monitored and that strategies are in place to reduce the overall risk.

That’s what I’ve been doing in my clients’ accounts the last year or so. Some of the stocks that have performed very well are Bayer (BAY), Siemens (SI) and Bunge (BG). There are investments in Canada, Europe, Russia, Israel, Brazil, Australia and all across Asia.

Using targeted companies to profit from such trends is better than just buying an index. When balanced with other income-oriented investments and loss-limiting proprietary strategies, the result is a portfolio that is designed to have greater growth potential than one focused only in the United States.

It’s important that you have money invested outside the United States. The growth in emerging markets like China and India isn’t a fad, but a trend that could last for decades.

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