Don’t Get Too Misty With Multi Currency MISTs


MIST is a new term in multi currency investing.

Recently (June 9, 2012) I took a look at the seven top interest rates available from US banks for 1 year $25,000 or more CDs.

MIST equity markets

1.1% is the best one can earn. 1.1 lousy percent in a era where inflation is statistically rising at  2.3%!  And we have many reasons to suspect that real inflation is probably worse.

Yet right now anyone who is holding US dollars has a great chance to diversify into other currencies while the greenback is strong.

A strong dollar and really low returns will encourage investors to take greater risks.  We saw this with Facebook.  Investors thinking that IPOS are magical automatic money makers learn the truth… that they are often the sharp end of the knife used to stick it to the man on the street.

We need to take care with promises of high returns including MISTs.

Jim O’Neill of Goldman Sachs, who coined the acronym BRIC to denote the big emerging economies of Brazil, Russia, India and China, has coined a new phrase MIST, a second tier of biggish rising stars, alongside Mexico, Indonesia, South Korea and Turkey.

You may read or see some financial advisers touting the MISTs.

Be cautious.  Only one of the MIST equity markets is a good value market by Keppler Assets Management’s analysis.

If you are a new subscriber learn about Keppler Asset Management here.

MIST equity markets

This is Keppler’s most recent quarterly ranking of emerging markets which shows that three of the MIST equity markets; Mexico, Indonesia and South Korea by Keppler’s analysis are overvalued and should be “sell” rather than “buy” candidates.   This is a huge negative fundamental factor relating to this MIST idea.

We can see how the managers of State Street Global Advantage Emerging Markets Fund are following Keppler. This is a value fund that has consistently overperformed its bellwether MSCI emerging market Index.  They have a small holding in Korea but none in Mexico nor Indonesia.

MIST equity markets  

Where should one invest?

BRIC investing currently makes more sense from a value point of view.

The easiest way to capture this trend is to invest in a BRIC ETF like the MSCI BRIC Index Fund (traded as BKF on the New York Stock Exchange).    The chart below from fincne.yahoo shows that this ETF has performed pretty well since the 2009 meltdown rising from about $25 a share to $35 but…

BKF Bric ETF

the portfolio allocation breakdown shows that…

BKF Bric ETF

14.56% of the portfolio is in India, considered a poor value market.

Three of the BRIC markets (Brazil, Russia and China) are good value (buy) equity markets so these three BRICS blended with the one good value MIST (Turkey) makes more fundamental sense.  A more fundamentally sound way to invest in value is to choose four ETFS… one each for Turkey, China, Brazil and Russia.

Multi Currency subscribers can see a four ETF portfolio at there password protected site here.

Learn how to get a Multi Currency password here

You can learn more about ETFS from Morgan Hatfield at mhatfield@ruggiewealth.com

Investors are finding that this is one of the worst times to get decent returns without great risk. This leads to the temptation to throw caution to the wind… or to jump into the MIST.  Don’t.  Invest in value instead.   Seeking and investing in good value is the long term strategy that has the greatest potential for success.

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Gary

See government debt and trade balances at the Economist


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