Shifting Growth Dynamics

Previously, I blogged about the rationale behind surging global stock prices, when in fact the main engine of global growth, the U.S. economy, appears to be faltering. The question is: Why has the DJIA surged to record highs above 13,000 for the first time - with U.S. GDP slowing in Q1 to the lowest levels in four years?

Do you know that most other global markets & economies are performing much better than the U.S. In fact, so far this year the DJIA is only up a bit over 5%. But the Dow Jones World Index (excluding U.S. stocks) has gained nearly10%, & Chinese mainland shares (still one of the hottest markets going) are up about 40%!

But there's another key factor behind the strength in U.S. stocks. Among the best performers in the DJIA recently have been big, multi-national firms. All of these giants generate a significant amount of revenue & profits from overseas markets. The sliding U.S. dollar helps boost the international sales & profits of these firms. In addition, these companies also benefit from stronger organic growth in foreign markets as well. This is one very good reason why I expect large-cap U.S. growth stocks to perform well this year. But for global investors, much better returns can perhaps be earned by venturing into other markets.

International stocks are again leading the pack this year because both economic & earnings growth rates are much stronger overseas. In other words, international markets appear to be successfully decoupling from the United States. It would seem that the global economy depends less on U.S. consumer spending than many people think. According to data from Morgan Stanley, exports to the U.S. "account for only about 2.9% of Japan's GDP, compared with 4% in previous decades."

For the European Union, which seems to be in the midst of a sustained uptrend in growth, exports to the U.S. amount to just 2.4% of GDP. Emerging nations too, are increasingly selling commodities & other goods to China & India, lessening their historical dependence on the U.S. export market. Many nations throughout Asia & Latin America, even in Europe, are seeing an increase in demand for raw materials from China. Countries like Brazil, Chile, Russia, Singapore, Taiwan, Malaysia, Indonesia, even Japan are benefiting from both growing trade with China, & increased wealth creation internally.

Nations with relatively open & efficient financial markets, with stable currencies, low or falling debt, stable (or better yet declining) interest rates & trade surpluses (unlike the U.S.), are among those that look particularly attractive going forward. So once you decide to invest elsewhere, it's a matter of choosing the countries with the most attractive stock market valuations on a relative basis. This list includes several of those countries mentioned above.

Bottom line: these shifting growth dynamics should help protect many international economies from a sharp slowdown in U.S. demand, as global trade marches on. Of course, you must be prepared for bumps in the road along the way. Global stocks - especially the emerging markets - have been on a tear in recent years, so a meaningful correction sometime soon would not be all that surprising. IMHO, you should view such a pullback in share prices as a great buying opportunity - to get even further invested overseas - as opposed to increasing exposure to U.S. markets.

And don't say I never say hor, for I said here already.

An Engineer in Hell

An engineer dies & reports to the pearly gates. St. Peter checks his dossier & says, "Ah, you're an engineer. You're in the wrong place."

So the engineer reports to the gates of hell & is let in. Pretty soon, the engineer gets dissatisfied with the level of comfort in hell, & starts designing & building improvements. After a while, they've got air conditioning & flush toilets & escalators, & the engineer is a pretty popular guy.

One day God calls Satan up on the telephone & says with a sneer, "So, how's it going down there in hell?"

Satan replies, "Hey, things are going great. We've got air conditioning, flush toilets, & escalators, & there's no telling what this engineer is going to come up with next."

God replies, "What??? You've got an engineer? That's a mistake. He should never have gotten down there; send him up here."

Satan says, "No way. I like having an engineer on the staff & I'm keeping him."

God says, "Send him back up here or I'll sue."

Satan laughs uproariously & answers, "Yeah, right. And just where are YOU going to get a lawyer?"

Military Super Computer

The U.S. succeeded in building a computer able to solve any strategic or tactical problem. Military leaders are assembled in front of the new machine & instructed to feed a difficult tactical problem into it. They describe a hypothetical situation to the computer & then ask the pivotal question: "Attack or Retreat?"

The computer hums away for an hour & then comes up with the answer: "Yes."

The generals look at each other, bewildered. Finally one of them submits a second request to the computer: "Yes what?"

Instantly the computer responded: "Yes sir."

Warning to all PC Users!

A new device has been introduced to the marketplace that is a huge danger to anyone who uses a PC that is not theirs. It is known as a key tracker & it sits between the keyboard & the PC. As can be seen in the pictures it is very discreet but is probably one of the most dangerous items of equipment to personal information that is readily available. These devices record every key that is pressed on the keyboard. Due to it’s position (it sits between the keyboard & the PC) the information is logged by the tracker before the PC knows about it & as such is very difficult for the PC to detect. They are available in both USB & PS2 formats so pretty much any PC can be logged. The user puts the tracker in line, leaves it there for a set amount of time & then retrieves it. They can then download the data onto their own PC.

If you intend to use a PC that is not yours (ie hotel business centre, internet café, airport etc) I would advise looking at the back of the PC to see if one of these trackers has been placed in line (scrambling under a desk is the better alternative to losing your email details). If you cannot get to see the back of the PC, I would suggest you don’t use it for anything personal. If a tracker is there & you do not notice it, whoever placed it there (could be any user of that PC before you) will be able to recall all of your keystrokes – logins, passwords etc.

These trackers cost less than £30 & they are definitely out there already.

Being a Winner

"Being a winner is an attitude, a way of life, a self-concept. It’s a heads-up, full-speed ahead way of living & being. It’s wanting the ball at crunch time because you believe in yourself. It’s an expectation of success that you can master with dicipline & determination."

- Denis Waitley.

The Alarm Clock Perspective

"When I was in college, I heard someone say something that has been with me ever since. It was something that demonstrated to me a positive attitude & the choice to take something that most people dread, & change it into a motivating factor.

He called the alarm clock the "opportunity clock."

When does an alarm go off? When something bad is happening! Well, waking up isn't bad. Waking up is good! In fact, waking up is an opportunity. Each new day brings with it the opportunity to enjoy our families & other people. It enables us the opportunity to work hard, & earn a living that will enable us in turn to provide for others & ourselves. Each day brings us the opportunity to help others & serve them in such a way to make our communities better places.

We get the opportunity again to dream & achieve those dreams. We have the opportunity to bask in the glory at the top of the mountain or learn valuable lessons as we walk through the valley. What opportunities! It's all in the perspective & attitude folks. I bet you can't wait to go to bed tonight & set your opportunity clock for tomorrow morning!"

- Chris Widener

What is Truely Important in Life

Below are 10 reminders I picked up from a book by Dr Denis Waitley, Safari to the Soul.

1. Simplify our lives. Stop collecting. Start celebrating for no apparent reason.
2. Gather memories instead of Memorabilia.
3. Do some genealogy about our family ancestors. What were their lives like? What legacy did they pass on to us? What did we learn & love most about our parents?
4. What will we gladly give up to improve the quality of our lives?
5. What will we never give up, no matter what?
6. Dream as if we had forever. Live as if this was the only day.
7. Don't just treat everyone the way we want to be treated. Treat everyone the way they should be treated to believe they can reach their full potential, based upon their own beliefs & heritage.
8. Never judge a person by her cow-dung house. She may be healthier, happier and wiser than us, & probably is.
9. It's not nice to fool with Mother Nature.
10. Love what you have, even if you don't have all that you'd love.

I recognized we are all different, but at the same time, we are all on a safari heading in the same direction. Let's make the journey meaningful & valuable.