The extent to which our financial functioning has relied on foreign purchases of our debt should not be new to you. Additionally the amount of borrowing it takes now to create a dollar of GDP growth versus how much debt it used to take is also something you should be familiar with. These are crucial dynamics.
These looming issues have not prevented the S&P 500 from going up 60% from its March low but are the essence of why I have been writing about increased foreign exposure from the start of this site. It seems logical that these, and the other issues, will matter at some point and have to be reckoned with. Obviously this line of thinking has existed for a while so it could be a long time before it matters.
As opposed to guessing when this will occur I'd rather just slowly increase foreign exposure slowly over several years.
On a somewhat humorous (to me) note Robertson said the Norwegian kroner was his favorite currency. Erin said he had a very big bet on Norway, who knows what big is but Robertson cited all the things that every Norway bull has been talking about for years.My exposure to Norway has been the same for several years now; Statoil (STO) and short term sovereign debt. Obviously anyone can buy a stock but the debt is a little trickier as minimum order size for foreign debt is $100,000 (I am able to buy all at once and allocate smaller positions into client accounts).
GlobalX has filed for a Norway ETF but who knows when that will come out. In the mean time there are some stocks besides STO to check out for anyone so inclined. In the materials sector there is Yara International (YARIY), in telecom there is Telenor (TELNY), a name I used to own for a few clients, in financials there is DNB Nor (DNBHY) and there is even an ADR for one of the fishery stocks Marine Harvest (MNHVY)--careful there though as neither Yahoo Finance or Pinksheet.com shows volume and Schwab did not have the ADR set up in its system for trading but ADRBNY has quote information so go figure. In tech there is Opera Software (OPESY) and there are others. To be clear I am just mentioning that these stocks exist not suggesting they be bought.
Each country can be looked at for stocks in this manner as a starting point for research. I have stuck with STO because it is by far the biggest company in that market, heavily involved it what the country is known for making it a good proxy. At some point though I will want to increase my exposure from the one name to include a second stock.
8 comments:
"I think the most important takeaway was his repeated insistence that if the Chinese and Japanese reduce their purchases of US debt, let alone outright sales, the US would be in a world of hurt."
True, but this is currently a silly fear. China and Japan are whining about dollar strength. China is manipulating their currency to keep the dollar strong. Neither of these countries is about to do something to destroy the dollar as they desperately want our export market.
We should continue to let the dollar weaken against asian currencies but it will be very difficult as countries like china will continue to buy treasuries to manipulate currency rates for the fore see able future.
FWIW, Jim Jubak recommended STO to his readers a day or two ago. He reasons that the recent elections indicate a willingness to open new drilling frontiers, which could benefit STO.
As far-fetched as it seems, I think a "debt war" with China is more likely than a shooting war and one that the US would be likely to lose.
Roger,
thanks for bringing on Julian Robertson. I rarely watch CNBC. Good interview.
Best,
Jeff from Milan, Italy
I disagree about the debt war between the us and china as it serves no purpose for either side.
But, one day when the Chinese are ready they will want china to replace the US for world trading currency. One day the Chinese will win that battle but it will not happen within a decade possibly 2 or maybe even 3 decades. But it will happen
Well, hmm. To extend that point, when and how would China transition from an export economy to a consumer economy?
Stephen, according to a Chinese expatriot I work with, that is happening now. The rural dwellers are being encouraged by credits, grants, and subsidies to purchase durable goods made in China. There is also a huge ongoing investment by China in solar in dwellings to increase self reliance and build an internally driven economy. I can not substantiate this information. It was per a conversation over lunch with a fellow employee.
I don't know how relevant this is today but China has been poised to play a central role in the world multiple times in its long history. Each time it has ended up turning inward for cultural and political reasons.
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