Where is the smart money going?
One of the biggest business news stories of 2012 the media completely missed was the start of the big stock market rally in Europe in the midst of the so-called "European Crisis".
As far as the media is concerned - bad news is good news. And Europe has been and still is providing plenty of bad news to fill in the white space between the advertisements.
Greece debt issues, Spanish bond yields, France's economic woes, Great Britain's austerity program, the breakup of the Euro currency - the list goes on and on.
All of these headline news articles were daily fodder in all of the mainstream business newspapers in North America. Yet despite the "sky is falling" media mentality - very few (if any) business journalists have noticed that Europe's equity markets have quietly ignored the news headlines and kept pace or even exceeded the torrid pace set by the U.S. stock markets.
Even today, Europe is still not on the radar or investment screens and investors would be astonished to know that Europe's major stock markets[1] have nicely zoomed up 25% -40% in just a 1 year timeframe.
[1] Source: based on FTSE 100 Index (London), CAC 40 (France) & DAX (Germany) trailing 52 week returns.
Ignore the media's bad advice
While the popular press was writing about apocalypse now, I made the following blog comments about why we should be avoiding the red hot Canadian stock market in 2011:
When will foreign mutual funds outperform?It is too early to call it a trend, but some foreign mutual funds (mutual funds containing foreign securities) appear to have perked up in recent weeks.I have been asked by some clients why we should be holding any foreign mutual funds at all in our portfolios as the lofty Canadian dollar, recent European weakness and other factors have caused these funds to underperform many Canadian equity mutual funds. Indeed, Canadian equity funds performance as a whole has outpaced the foreign sector by a wide margin for at least 10 years. "Shouldn't we be putting all of our eggs in the Canadian basket?" The answer is no. We should not be buying just one narrow part of the market including just our own. The idea of diversification is to be diversified at all times even if we may be tempted to buy into the latest “hot” investment fad...
One of the key roles of an adviser is to find value where value is often overlooked, ignored or even at times - ridiculed. When I mention Europe to some of my colleagues, I often get amused, disbelieving looks. Europe! You’ve got to be kidding!"
No. Not kidding. Look at the numbers.
