It’s truly a sign of the times.
In Vail, Colorado, as you come across an icy bridge into the heart of town, you can’t help but notice just how the economy has ground down this glitzy mountain village.
Deep discounts are everywhere, and tired skiiers munching on salami sandwiches are interspersed with the few left eating haute cuisine.
The talk on the mountains is mixed, too…
Vail is renowned for its international clientele—signs towards the bottom tell you to "slow down" in no fewer than five languages, echoing the worldwide economic halt.
How much powder snow fell the night before is of course a concern, but so is the economy. Above all, the multilingual chatter I’m picking up is about what governments will do to lead us out of recession.
There are certainly more foreigners on the lifts than I thought I’d encounter in a recession year. They must be weathering the storm, right?
Well, like them I’m planning to go global in ’09, by investing in international stocks.
Reward Investors, Don’t Punish Savers
If you’ve gotten spooked into clutching your cash because economic conditions keep deteriorating, no one can blame you. But most central bankers’ plan of attack is clear, as outlined in London daily The Times on January 8:
Punish Savers and Make Them Spend Money.
The columnist, Anatole Kaletsky, summarizes the line we’ve been hearing from the Fed, the Bank of England, and other control rooms where they have their hands on the global money supply throttle—if you have money, they’re bent on making you believe it can turn into more.
Where Mr. Kaletsky and I differ greatly is in his support of a tax on secure savings, essentially forcing you to invest in "productive assets" that create returns on the open market.
Taking a weed-whacker to those who have managed to salvage money from market losses isn’t my preferred approach. I choose "market Miracle-Gro"… looking for the best opportunities to grow wealth even as most of the market stays wilted.
At Vail and elsewhere, some money is still circulating, but the psychological damper is down.
Don’t let that keep you off the slopes, or out of the market completely.
Instead, use the prod of lower rates and higher volatility to pay off high-interest debt and build positions in oversold ADR stock listings and international ETFs, starting at the crossing point where the public and private good meet.
International Infrastructure Stocks
Infrastructure is the basic muscular system of the global economy, and infrastructure stocks will receive massive public spending steroids in the Obama Administration. And since we know politicians are all too tight with corporate lobbying interests and pals in the business world, the assumption is that Depression-era WPA-style government works projects will bulk up with 21st century public-private partnerships (PPP or P3).
I’ve had the fortune to sit in on PPP planning meetings in emerging European countries like Latvia. There, the fall of the Soviet Union brought an influx of project money from British, Finnish, and even Asian investors looking for secure returns in "shovel-ready" initiatives.
New entrepreneurship and market access in Eastern Europe, Asia, and other rapidly developing regions hadn’t been matched in roads, electricity grids, or water infrastructure; so, public-private efforts helped kickstart development.
Companies like Switzerland’s ABB Ltd. (NYSE:ABB) have prospered from development initiatives from my home of Baltimore (where ABB light rail cars traverse the city) to the Baltic Sea Estlink grid project and even Algerian recycling projects. ABB’s diversified business operations and current billion-dollar cost-cutting program add to a traditionally healthy cash position to make its shares a strong and productive place to put some money.
For a broader base in international infrastructure stocks, take a look at the Australian-based SPDR FTSE/Macquarie Global Infrastructure 100 ETF (NYSE:GII). It’s based on the index of the same name, and it’s market-cap weighted to maximize holdings like Spain’s Iberdrola and UK/US utility network operator National Grid PLC (NYSE:NGG).
Those large-scale plans for public spending and schemes to underpin new economic growth are great long-term investments.
When it comes to you or I spending on things we need today, though, basic consumer goods top the list of direct consumer-to-company stimulus.
International Consumer Goods Stocks
These days, we’re prioritizing stocks that normally get ignored in a bull market. After all, how sexy is grid infrastructure if CNBC is hyping year-old startup companies that will triple your money?
But now we’re aiming for core companies that can withstand an international economic cataclysm. In consumer goods, the international all-stars include Unilever, a titan of things like soup and soap.
Unilever (NYSE:UL) is one international company that has sunk less than the S&P by sticking to its boring traditional product list.
The British company even dropped its olive oil and premium vinegar business in December, since evidently that was too decadent. Unilever did, however, keep control of Bertolli margarine, pasta sauce, and frozen dinners—three staples of strapped households.
And the iShares Dow Jones US Consumer Goods Index ETF (AMEX:IYK) holds blue chips like Procter & Gamble (NYSE:PG), Coca-Cola (NYSE:KO), and Philip Morris (NYSE:MO), among other domestic shares that capitalize on a general retreat from high-dollar items.
But don’t buy the line that consumption is dead or that the economy is doomed to inactivity for another year or two.
The chairlifts may be lighter these days, but people are still hitting the slopes. Likewise, remaining invested with the roots of consumption and growth in your portfolio will lead to outsized gains once everyone else gets wind of the recovery and starts racing to returns.