The Most Profitable Global ETFs

If you’ve been missing some of Ron Rowland’s columns on exchange traded funds — ETFs — that we publish here each Thursday, then I think you may be making a serious tactical error.

I say that for three reasons:

First, because he’s been so right for so many years about the tremendous growth he predicted for global ETFs and how easy they would be for average U.S. investors to buy or sell.

Second, because nearly all of the global ETFs he has introduced to Money and Markets readers have appreciated very nicely in value. Indeed, in his May 14 column of last year, the very first ETF he cited — the iShares MSCI ACWI Index Fund — is now up from $33.22 per share at that time to $40.28 per share on Friday, a gain of 21.3 percent.

And third, because most of the emerging market ETFs, which have been his focus, have done even better …

The very first time he introduced them here was on July 16 of last year. Assuming you bought them on that day and held them through last Friday, you would now have:

• A gain of 23.3 percent in the South Africa ETF (EZA),

• A gain of 27.7 percent in the Brazil ETF (EWZ),

• A gain of 33.5 percent in the Malaysia ETF (EWM),

• A gain of 33.6 percent in the India ETF (INP), plus

• A gain of 63.8 percent in the Russia ETF (RSX).

All despite the fact that you would have bought them rather late in the 2009 rally … AND despite the fact that global markets have recently suffered a moderate correction!

In other words, you don’t have to be an astute trader or pick the tops and bottoms to see these kinds of results … which leads me to a fourth reason I think you should pay attention to Ron Rowland’s Thursday columns: He IS an astute trader.

Ron started managing international portfolios 14 and a half years ago. And for that entire period, his cumulative performance has been 15 times better than the benchmark index of global markets (MSCI EAFE) — all with less risk than the benchmark, with real money, and in real time.

Separately, he started publishing his recommendations 17 and a half years ago. For his cumulative performance from inception, he has consistently received top rankings from Hulbert — #1 and #2 in every one of the past 15 years, among all mutual fund and ETF analysts that Hulbert has covered.*

Nor is the emerging market phenomenon a new one. Since January 1, 2003 …

• South Korea’s major market index is up 194 percent,

• Singapore’s is up 274 percent,

• Mexico’s is up 363 percent, and

• Brazil’s is up 972 percent …

… not to mention some smaller ones with even better performance.

If you had simply bought and held Brazil’s blue chips, $100,000 invested in 2003 could be worth $1,072,000 today.

Amazingly, that’s 41 times more than the rise in the Dow during the same period. And it’s despite the broad, global market declines we saw in 2008.

So we have two factors converging here:

• We have the unusually good performance of global markets.

• Plus, we have Ron Rowland’s great outperformance of the global market index.

And it’s this fortunate combination that implies some very significant opportunities for our readers.

This is why I’m holding our second Weiss Annual Global Forum tomorrow. This is why I’ve invited Money and Markets’ global experts — Mike Larson (for the U.S.), Claus Vogt (for Europe), Tony Sagami (for Asia), and Rudy Martin (for South America) — to present their eight bold new forecasts for 2010.

And it’s the reason I’ve also invited Ron to give you his five top picks for global markets — whether up or down.

Why, in 1952, in the Prime
Of His Wall Street Career,
Dad Decided to Establish
A Second Home in Brazil

If you think these big gains in emerging markets can be achieved risk free, think again. All investing involves risk, and emerging markets are certainly no exception.

What gives us confidence in most — but not all — of the emerging markets is something very simple and basic: Steady, wholesome, and broad growth on all levels — their population, their GDP, and their modernity.

Plus, what gives me confidence personally is my own life experiences in foreign countries. I was brought up in Brazil. I lived in Japan for years. I’ve traveled to every continent except Antarctica. I’ve studied every major world language except Arabic and Hindi.

It started almost six decades ago, when I was six years old. My father announced, with great fanfare and excitement, that the entire family was moving from Stamford, Connecticut, to Anápolis, Goiás, on the central Brazilian plateau — to establish a second home there.

Two Hollywood movie stars, Janet Gaynor and Mary Martin, also moved down with their families to the same exact area for the same reason.

And four years later, Brazil’s president Juscelino Kubitschek would launch the construction of Brazil’s new modern capital, Brasília, also in the same region.

But at the time, my grandmother (Dad’s mother-in-law) thought he was nuts.

Even Florida was too far for her. Central Brazil? Heck, the Hudson Bay in Canada or the Outback in Australia would have sounded more familiar and less wild.

Dad responded calmly, “Countries like Brazil are the future.” And he was ultimately right … except for one nagging problem: It seemed the future never came.

To finance the construction of Brasília, Brazil’s presidents, starting with Kubitschek, ran the printing presses. And when that wasn’t enough, they got trapped in a vicious cycle of borrowing money from abroad … and then borrowing still more for the interest on foreign borrowings.

Brazil’s currency collapsed. And everything else seemed to go down the tubes with it — infrastructure, honesty in government, even schools.

Fortunately, in more recent years, all that has changed. Brazil’s former president, Fernando Henrique Cardoso, put the brakes on inflation with the newest Brazilian currency, the real. And Brazil’s current president, Luiz Inácio Lula da Silva (“Lula” for short), has made further major changes.

When Lula was first elected, everyone said he was going to drive the country into the gutter. But our family in Brazil had known Lula personally for over 20 years, and we knew they were wrong.

Sure enough, Lula surprised his critics and imposed austerity. “Before we can spend the taxpayers’ money,” he said, “we must first SAVE the taxpayers’ money, and before we can SAVE money, we must first tighten our belts to pay off our foreign debts.”

At the same time, Lula called in the country’s ambassadors from overseas, gathered them in a room, and gave them a stern lecture: “You think you are strictly diplomats, don’t you? Well, I have news for you,” he said. “From this day forward, you’re also going to be salespeople. You’re going to sell Brazil and Brazilian exports — not just coffee but also automobiles, not just soybeans but also aircraft.”

Brazil’s exports surged, its trade surplus exploded, and the country paid off its foreign debts.

That’s the kind of approach which laid the groundwork for the explosive growth Brazil and other countries are enjoying today.
But our leaders in Washington still don’t get it. Quite the contrary, the United States is now sinking into a vicious cycle of money printing and foreign borrowing that is eerily reminiscent of Brazil’s years ago.

Until they do, and until our country can again find its footing, the risk/reward in most U.S. investments is bound to be negative … while the risk/reward in emerging markets is bound to be far more positive. Their future is not guaranteed. But it has finally arrived.

In our Weiss Global Forum at noon EST tomorrow, we’ll tell you how and when to buy … and how and when NOT to. Assuming you’re registered, I’ll see you there.

Good luck and God bless!

Martin

* revised 08/17/2010

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