Systematic Relative Strength

Brandes has a nice report in which they make the case for International Investing.

U.S. investors who focus only on U.S. companies are overlooking opportunities in a large portion of the universe of stocks, as can be seen in the image below which shows that 55% of the total market capitalization in the MSCI All Country World Index is in Non-U.S. companies.

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It may also be surprising for U.S. investors to realize that over the past 20 years, in which the S&P 500 posted an annualized return of 7.1%, there were seven other countries that performed better than the United States.

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If you are interested in learning more about Dorsey Wright’s Global Macro and International Equity strategies , please send an e-mail to [email protected] and I will e-mail you the fact sheets.

200 (!) Chinese officials descended on Washington, D.C. to remind the administration that financial monkey business in the U.S. has to stop. China owns about $800 billion in U.S. Treasury bonds and has overall investments in the U.S. of about $1.5 trillion. China is suddenly concerned about the value of the dollar and we are suddenly less concerned about their human rights violations.

This is a new situation for the U.S.—dependence on another major power for funding. It’s got to be as uncomfortable in Washington as it is on Main Street. It shouldn’t, however, come as a complete surprise. The late John Templeton said a long time ago that nations who spend too much will eventually be owned by nations who are thrifty.

These are huge changes in the global financial landscape. It will be difficult, or maybe even impossible, to forecast how these new global relationships will evolve. I suspect it will be extremely worthwhile to watch relative strength relationships between asset classes for clues. Call me a cynic, but it might be easier to get the truth from the markets than from either government.