Let's go global

Let's go global

Executive Summary

• 2012-2013 should provide investors with good opportunities to buy cheap non-U.S. stocks.

• Diversification is important. It is not the time to sell international/emerging markets stocks.

•The MSCI EAFE index (index representing international stocks) P/E* ratio decreased 50% from 2000 to 2012 (after doubling from 1991 to 1999).

• Less than 20% of the World GDP (Gross Domestic Product) is in the U.S.

• In the next 10 years, international/emerging markets stocks should continue to outperform. * P/E = Price /Earnings ratio, which is a measure of the price paid for a share relative to the annual Earnings per Share (EPS).

Introduction

The European crisis created lots of volatility, uncertainty, fear... but also opportunities. Furthermore, the Merkozy alliance is over and Europe may focus more on growth.

Great companies were founded during or shortly after a recession or a market decline (Texas Instruments in 1930, Samsung in 1938, McDonald’s in 1948, Walmart in 1962, Microsoft in 1975…).

Government Debt to GDP is much lower in emerging/developing economies, and the age distribution is better.

While the Net Present Value of health care and pension costs grew to more than 200% of GDP for the U.S. (Vs. around 50% for France or Germany), U.S. Stocks have more than doubled since March 2009. In the meantime, middle-class spending continues to grow and is expected to increase six-fold in the Asia-Pacific Region by 2030.

Adding international stocks to a U.S. stock portfolio will decrease the portfolio volatility.

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This newsletter was first published in July of 2012

http://bourbon-fm.com/file/BFM_Newsletter_07_2012_LetsGoGlobal.pdf