Wednesday, May 09, 2007
Donald Coxe from BMO Financial Group was on CNBC with Maria yesterday talking about foreign investing; specifically why a strong currency is a good top down reason to pick a country to invest in which leads him now to Canada and Australia. He is partial to the mining stocks.
The idea of being in touch with the strength or weakness of the currency for any country you invest is something I have stressed for a long time on this site. For purposes of this post the assumption is that you don't get all your foreign exposure from one or two broad-based funds.
I would add a little more to Mr. Coxe's idea. Obviously it is impossible for anyone to cover all the bases in a short sound bite.
While there is nothing wrong with seeking investment destinations with a strong currency it might not ideal to limit yourself to such places. This is sort of an odd period because it seems like the dollar is weak against every currency so to pursue this you might need to look at different cross rates.
What I would add is to own countries with differing characteristics. I tend to think of countries with surpluses or deficits, commodity based or not, in their own world, big and obvious growth engines and so on.
It is easy right now to find Canada and Australia compelling (I have exposure to both for clients and personally) for all the reasons you already know. But the things that make them compelling are very similar. If something goes wrong with the commodity idea both countries would seem poised to be adversely effected. In this scenario if your only foreign exposure is here you will take a hit, a bigger hit than if you had several different countries with differing attributes.
I invest in and write about all sorts of countries in an effort to explore them for myself and encourage exploration beyond the UK and Japan.