It Was A Very Good Year

By Vadim Pokhlebkin

2006 was good for global stocks. India, China and Russia, the three emerging global powerhouses, did especially well: India's Sensex index gained 47% last year, Russian stocks were up 67%, and China's Shanghai Composite rocketed up 130%.
And let's not forget Venezuela's IBC General index, which was up 156% in 2006, making it the best-performing stock index on the planet.
By comparison, the Dow Jones Industrial Average, the world's benchmark stock index, ended 2006 with a 16% gain.
But here's a surprising fact: German blue chip stocks, represented by the DAX index, have outperformed the global stock market average since 2003, the year when the markets bottomed. That's what Tom Denham, editor of EWI's European Short Term Update, points out in the latest, Monday (Jan. 22) issue:

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It's encouraging to know that one can still make money (and average better returns!) the "old-fashioned" way: by investing in more familiar markets like Western Europe rather than in exotics. (Although, I admit, dropping a line like "I invest in exotics" at a party sounds a lot cooler than "I've decided to be a little more aggressive in my 401K this year.")
Just a few years ago, if you wanted to invest in Europe or Asia, you had to: a) open an overseas brokerage account, and b) know which market to invest in. These days, exchange-traded funds and mutual funds eliminate the need to travel overseas to meet your broker.
But the need to know what market to invest in – and when to do it – remains as pressing as ever.

Don't do it this year, says Marc Faber, a famous investor and money manager, "who predicted the U.S. stock market crash in 1987" and who "advised investors to buy gold in 2001, which has since more than doubled" (Bloomberg).


Mr. Faber believes that, "In the next few months, we could get a severe correction in all asset markets." That why, "in the buying mania that we have now the wisest course of action is to liquidate." And it's precisely the stocks of last year's biggest winners – China, India and Russia – that he recommends investors be especially careful with.

Mr. Faber is not alone in his opinion, but he is in a minority: Most analysts and money managers see nothing but blue skies ahead. So what's an investor to do? Well, as usual, you have to work your way through the maze of opinions and do your own research. Technology may change how we invest, but the decision-making process is still the same, isn't it?