Leave the Worrying to Pros

03/25/2010 4:08 pm EST


Igor Greenwald

Chief Investment Strategist, MLP Profits

The world looks a lot finer on a private-sector salary these days. Governments are either neck-deep in debt or, if they’re luckier, sweating the risk of an overheating economy. Meanwhile, corporations need only decide how to deploy the latest profit windfalls. The workers they shed during the crunch are not yet missed, and for the moment they’re the bureaucrats’ problem.

No wonder public servants are depressed. China’s mad at Google (Nasdaq: GOOG) for showing up its censorship regime, though by Wednesday Google shares had perked up, notwithstanding Beijing’s wrath. Germany has had it with Greece and its pleas for aid, while other Europeans are sick of Germany’s tightfisted ways since it has been the biggest beneficiary of European union.

On Sunday, the senior American at the International Monetary Fund popped up in Beijing to admonish the US, Japan, UK, Italy, and France about their mounting debt loads. (As late as 2006, John Lipsky was a JP Morgan vice chairman “advis[ing] the firm’s principal market risk takers,” so that his warnings about excessive leverage ought to be taken with a grain of salt.)

Meantime, India’s central bank jumped the gun on a rate hike late last week as inflation neared 10%. More such moves by Asian central banks are in the cards as the region adjusts to its good fortune.

Perhaps the public squabbling and hand-wringing is some sort of covert market-support program. The Euro crisis has lifted the dollar and capped commodity prices, thereby boosting earnings in Europe and Asia. And the rate hikes overseas seem mainly to remind increasingly risk-tolerant investors where to send the money. In any case, no harm has come to stocks from all the carping. 

Instead, Europe has led the global rally this month, with stocks in heavily indebted Hungary rising 17% since March 1st, Ireland up 10%, and Italy 8% higher, while Germany and Greece advanced 7% each in mutual disgust. Socialistic Nordic markets are up 9% this month, handily outperforming Asia and the Americas. Asia’s best performer has been laggard Thailand, which is up 10% in March, yet still sells for less than 12x estimated earnings.

Stock markets in China, Japan, and Vietnam are also nowhere near their old highs, and could be poised to regain their momentum, writes David Fuller. He’s also a fan of European industrial exporters that stand to gain from a weaker euro.

Deborah Owen is partial to Brazil and India as the more dynamic BRICs, on a pullback. And Gavin Graham likes a Canadian real-estate trust with a very safe 5% yield, as well as potential for appreciation.

Canada and Germany are the only two G-7 economies not unduly burdened by debt, according to the IMF. But while Germany’s fortunes are tethered to those of Greece and Portugal, Canada’s still hinge on the US, as luck would have it.
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