Here is an article I read on Yahoo! about the S&P vs. investing abroad.

http://biz.yahoo.com/fo/030703/7b412a33f39ed42f554267859cea0105_2.html

Interestingly enough they start out by saying the rally for the last few months may not be the best place to park your money.

In light of the last COT report, I had to agree.

Also Larry discussed emerging and international markets in a SMR awhile back.

I hope at least one person enjoys this article !

Sincerely,
Matt Lewis

http://biz.yahoo.com/fo/030703/7b412a33f39ed42f554267859cea0105_2.html

p.s. check this extract from the article, pretty compelling in my opinion!

"Unlike aging America, the populations in many countries like China, India and Indonesia are younger and entering their prime working, consuming and investing years. And they're not mortgaging their futures to do it. Savings rates in the rest of the world are much higher than the U.S.' 3.5% of income. The Chinese save over 30% of their income, which gives them much more to reinvest in their country."

http://biz.yahoo.com/fo/030703/7b412a33f39ed42f554267859cea0105_2.html

Matt,

Thank you for the link. It is indeed a good article. In addition to the quote that you cite, I think this one is very relevant…

“Cheaper valuations. Johnstone points out that the S&P trades at a frothy 32 times trailing earnings and 3 times book value. Next to that, European stocks are a bargain at 21 times earnings and 2 times book value. And Asia (excluding Japan) goes for a dirt-cheap 13 times earnings and 1.3 times book.”

When you combine undervalued assets with better growth prospects and a younger, rapidly growing population, the case for investing in emerging markets is overwhelming. I'm not interested in Europe because I think Europe will go the way of the U.S. stock market. But I am very interested in Asia.

Having said that, I, like many Americans, am very under invested in those markets right now. I will be looking for opportunities to rectify that situation.

Larry

I too would like invest in other markets. I have two concerns:
1. what type of governing bodies are in place and
2. the validity of their financial accounting

I don't want to play in a market where the rules are not fair to the investor. Is this a valid concern in today's world or am I wrong?

David Parker

Hey Gang

I'm confused. I thought that the most of us here were trying to find a better system to time the market rather than looking at fundmentals like P/Es and Book values.

My response to Davids comment about validity of financial accounting methods overseas is, even in a country like America where we have the SEC and government regulations out the wazoo, coruption can still bite your ass (ie: Enron, WorldCom, Tyco, Martha Stewart...Who will it be next week...maybe Walmart...maybe AT&T...).

If your going to invest based on fundamentals and hold individual stocks for any length of time then obviously your not only placing your money but also your trust with PEOPLE, not just a company, that you probably don't know. My Grandpa used to say that locks on doors were to keep honest people honest, not to keep out the thieves. Accepted accounting principles serve the same purpose in business.

I personally have been very leary of giving away any control of my capital since all the fraud in corporate america has come out in the open.

On the other hand I really like the idea of a commando style of investing where my money isn't lying around in one place for very long.

Before I start investing overseas i'm looking for some consistant indicators to help me time the markets there just like we use the COT for this Market.

Donnie

David,

Your concern is valid. I recommend that when it comes to foreign securities - especially emerging markets - that you invest in an Exchange Traded Funds, closed-end funds, or maybe no-load mutual funds. Find professional managers that you trust, and let them worry about regulation, accounting issues, etc.

For example, when I wrote about investing in Russia earlier in the year, I didn’t focus on individual Russian securities. I suggested the Templeton Russia Fund (TRF). When I decide to invest in China (I should have already done so, but I haven’t), I’ll probably go with the China Fund (CHN), or some other professionally managed fund.

Larry

Donnie,

In the early issues of the SMR, I emphasized certain investment themes that I think will be important for the future – lower U.S. financial asset prices, higher gold prices, higher commodity prices, and higher prices for emerging market securities. Even though the S&P COT report is a cornerstone of what I do, it is not the only thing that I do when it comes to investing.

Unfortunately, the COT report is not going to help me time my investment in China, for example. But basic technical analysis like buying close to a rising 200 day moving average will help. So I think that reliable indicators can still be used to give us an edge in those markets where the COT reports do not necessarily apply.

Larry