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Buffett Urges Investors to Look Overseas
as Dollar Declines
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Thursday, May 11, 2006
Vol. 8 No. 94 |
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In Today's Letter: Comment: If Buffet Says So...
Offshore: Avoid Offshore Blunders
Wealth: The First IPO Index Fund Goes Public
Privacy & Rights: Immigration Goes Biometric
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Buffett Urges Investors to Look Overseas as Dollar Declines
Today's comment is by Eric Roseman, The Sovereign Society's Investment Director and editor of Commodity Trend Alert.
Dear A-Letter Reader:
China: the world's worst-performing emerging market since 2001 is now one of the best performing bourses in the world. And the world's richest investor believes overseas markets provide an optimal hedge ahead of the next U.S. dollar bear market. And I agree.
Mainland Chinese stocks, dogs of the investment world since 2004, have surged 32% since January 1, 2006. This surge comes on the heels of a booming GDP growth ( 10.2%) in the first quarter, a series of market-friendly government-introduced stock market reforms, tax incentives and expectations that the world's largest initial public offering this year will be listed in China.
Foreign stocks continue to soar this year. On May 8, the widely followed MSCI World Index, a globally diversified market-capitalized benchmark since 1969, hit an all-time high in local currency. While the U.S. lagged behind other markets since the bear market low of October 2002, virtually every other constituent of the MSCI World Index has either hit all-time highs or fresh six-year highs this year. And when converted from local currency terms to U.S. dollars, the returns are even more dramatic. Over the last three years a host of countries have doubled in value measured in dollars, including Austria, Japan, Germany, Denmark, Sweden, Norway, Australia, Hong Kong and Canada.
At his highly anticipated annual address to Berkshire Hathaway shareholders in Omaha investor extraordinaire, Warren Buffett, recently advised investors to diversify overseas as a hedge against a declining U.S. dollar. For the last several years, the Sage of Omaha has warned that the United States cannot indefinitely sustain structural deficits. America's budget deficit is now 6% of GDP, and growing. Buffett had previously earned a $2 billion profit on Berkshire's foreign currency speculations against the dollar in 2005. Last week, the Berkshire Chairman also revealed a new investment in Israel, another in a growing list of foreign investments denominated outside of the dollar.
China, which now ranks along with India as the Asia-Pacific Basin's best performing market, will shortly launch the world's biggest initial public offering or IPO since 2000. The Bank of China, the country's second-largest bank, plans on raising $9.8 billion dollars ahead of its June listing. In addition to the planned offering in June, the China Securities Regulatory Commission announced new measures to raise the transparency and accountability of Mainland Chinese stock markets.
ERIC ROSEMAN, Investment Director
on behalf of The Sovereign Society
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Top 5 Ways to Avoid Offshore Slip-Ups
- Start by doing research in your home country with domestic advisors.
- Select appropriate offshore providers (easier said then done, which is why The Sovereign Society provides professional contacts for members).
- When you first meet your provider, have a list of questions ready to address any concerns you may have.
- Once you have a plan in place, regularly review your financial affairs (to see if any changes need to be made).
- Meet with your provider at least once a year to check on the outcome of your plans.
The above commentary originally appeared in a recent issue of The Sovereign Individual, The Sovereign Society's monthly newsletter for members. Not a member yet? Click here to learn how to become one.
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The First IPO Index Fund Goes Public
The latest in exchange-traded offerings come with a twist. Unlike most exchange-traded-funds (ETFs), which replicate a market index or sector, the new First Trust IPOX-100 Index Fund (AMEX-FPX) is designed to reflect the performance of the U.S. market for initial public offerings or IPOs. The index is based on the IPOX 100, managed by Chicago-based IPOX Shuster. The ETF, which sports an expense ratio of 0.60% per annum, debuted on the American Stock Exchange (AMEX) at $20 per share last month. In the late 1990s, IPOs were one of the hottest tickets on Wall Street as the technology boom fed new issues to the market virtually every week. Many of these new issues rose a few hundred percent or more on their first day of trading. But by late 2000, the IPO sector collapsed, following the onset of the bear market in March that same year. The most successful IPO-dedicated mutual fund, however, is the IPO Plus Aftermarket Fund, up 13% in 2006 and 32% over the last 12 months. With the Dow near all-time high, and small and mid-cap stocks hitting new records almost daily since January, I'd postpone making a bet in an IPO ETF until the froth cools.
ERIC ROSEMAN, Investment Director
on behalf of The Sovereign Society
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Canadians Plan to Biometrically Screen ImmigrantsInkless fingerprints, digitized photographs - immigration seems to be getting even more complicated these days. The Canadian government is preparing to launch a six month trial to biometrically screen any incoming immigrants according to The Vancouver Sun. "Biometrics" refers to scanning these potential immigrants' physical characteristics like their fingerprints, DNA and irises to confirm their identities. Of course, Canadian officials intend for this new and very controversial biometric screening to improve security, speed up travel time and cut down on document fraud. And, surprisingly, a recent poll shows that over 70% of Canadians support this new initiative. Most Canadians still think security demands outweigh the privacy concerns.
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58 Wealth-Saving, Money-Making And
Life-Changing Reasons To Become A Member Of The Sovereign Society
Reason #6: Make Profits Overseas - free from foreign taxes.
Reason #16: Greater real estate investment opportunities throughout the world
Reason #32: Hold as many as 15 different currencies
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LINK: http://www.isecureonline.com/reports/SVS/ESVSG506/
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