WSJ: Foreign Stock Look Cheaper Than U.S. Stocks

Posted by David Hunkar on 2 May 2015, 11:13 am

The S&P 500 is up by 2.40% year-to-date on price return basis. Many developed European markets are ahead of the U.S. as listed below:

UK’s FTSE 100: 6.4%
France’s CAC 40: 18.1%
Germany’s DAX Index: 16.8%
Spain’s IBEX35 Index: 10.8%

Among the emerging markets, China’s Shanghai Composite is up by an astonishing 37.3% so far.Brazil’s Bovespa has increased by over 12% while India’s Sensex have is down by about 2%.

Despite the out-performance, foreign stocks are cheaper than U.S. stocks according to an article in The Wall Street Journal. From the article:

It can be wise to diversify your stock portfolio internationally. Foreign stocks generally look cheap by comparison to U.S. stocks now. Interest rates also may stay low longer outside the U.S., which could give markets overseas a boost. Many experts say typical U.S. investors should consider putting at least 20% to 30% of their stock portfolio in foreign shares.

“There are good arguments why you would want to invest outside the U.S.,” says Joachim Klement, chief investment officer at Wellershoff & Partners, an investment consultancy based in Zurich.

But there will almost certainly be bumps along the way. When the Federal Reserve raises interest rates in the U.S., for example, stocks in Europe and Asia could take a deeper initial hit, in part due to the importance of the American economy, Mr. Klement says.

The sharp drop in some European markets on Wednesday showed how that could play out. The U.S. government said that morning that the economy had slowed in the first quarter, and the S&P 500 fell 0.4% that day. The benchmark index in Germany, home to many major exporters, dropped 3.2%.

Source: A Road Map for Investing Overseas by Liam Pleve, WSJ

The article also discusses that based on CAPE ratio, foreign markets such as France, Italy, Japan, Malaysia, Peru, Poland, Singapore and Spain are cheaper than the U.S. market. However the CAPE ratio is not a good measure for foreign stocks since historical data is limited and composition of indices change often.

Edinburgh, Scotland

MSCI Single Country Index Review: Developed Markets 2005 To 2014

Posted by David Hunkar on 1 May 2015, 11:35 am

The following chart shows the returns for the various MSCI single country indices:

Click to enlarge

Source: Blackrock

It is surprising that Singapore yielded the highest annualized return in 10 years during the period shown.
Ireland has been the worst performers in five years during the same period.
While the MSCI German index fell by nearly 46% in 2008, since then it has yielded a positive return return every year except in 2014 and 2011.
No country has consistently been the best performing. This shows the importance of diversification.

Related ETFs:

iShares MSCI Germany Index Fund (EWG)
iShares MSCI Canada Index Fund (EWC)
iShares MSCI Australia Index Fund (EWA)
iShares MSCI United Kingdom Index (EWU)
iShares MSCI Singapore Index (EWS)

Disclosure: No Positions

Knowledge is Power: Gluttony, China Stock Market Bubble, Greece Edition

Posted by David Hunkar on 30 April 2015, 8:55 pm

Executive Pay Gluttony (Barry) (Gluttony is a sin. So.. 🙂 )
Bubble risk grows as China’s stock boom defies gravity (Business Line)
Vietnam War 40 Years Later: Capitalism Trumps Ideology (Common Dreams) See also 30 April 1975: North Vietnamese forces capture Saigon (MoneyWeek)
The Day Wall Street Changed (Jason Zweig, WSJ)
Stick with the Winners (The Financilist)
Opinion: Five reasons why Greece won’t exit the euro (DW)
Why Mother India heads emerging market pack (Money Observer)
Is long-term earnings inequality growing? Evidence from German baby-boomers and their parents (OECD Observer)
Seven years on, RBS has yet to escape the grim shadows of the past (The Telegraph)… Still they call it “Royal” Bank of Scotland..

Healthcare Systems: U.S. vs Other Developed Countries

Posted by David Hunkar on 29 April 2015, 9:39 am

It has been many months since I wrote an article on the U.S. healthcare system. In this post lets take a look at how the U.S. system compared to 11 other developed countries.

According to a report published in June last year by The Commonwealth Fund, the U.S. ranks last overall. This won’t be shock to anyone if the U.S. had the cheapest healthcare system and spent the lowest in the world. However the exact opposite is true. The country spends the most on healthcare as a percentage of GDP. In addition, the average spendingon health per capita is also the highest as the chart below shows:

Click to enlarge

However despite this high spending the outcomes are not the best. In fact, they are very low based on many measures.

According to the authors of the report, the claim that the U.S. has “the best health care system in the world” is clearly not true.

The following graphic shows where the U.S. stands compared to other countries in terms of overall ranking:

The chart below shows the ranking based on various individual measures:

From the report:

The most notable way the U.S. differs from other industrialized countries is the absence of universal health insurance coverage.5 Other nations ensure the accessibility of care through universal health systems and through better ties between patients and the physician practices that serve as their medical homes. The Affordable Care Act is increasing the number of Americans with coverage and improving access to care, though the data in this report are from years prior to the full implementation of the law. Thus, it is not surprising that the U.S. underperforms on measures of access and equity between populations with above- average and below-average incomes.

The U.S. also ranks behind most countries on many measures of health outcomes, quality, and efficiency. U.S. physicians face particular difficulties receiving timely information, coordinating care, and dealing with administrative hassles. Other countries have led in the adoption of modern health information systems, but U.S. physicians and hospitals are catching up as they respond to significant financial incentives to adopt and make meaningful use of health information technology systems. Additional provisions in the Affordable Care Act will further encourage the efficient organization and delivery of health care, as well as investment in important preventive and population health measures.

Source: Mirror, Mirror on the Wall, 2014 Update: How the U.S. Health Care System Compares Internationally, The Commonwealth Fund