Tuesday, February 12, 2008

Foreign Interest in American Assets

One of my favorite blogs that I read daily is All Financial Matters. Today JLP shares an excerpt from an article by Geoff Colvin in the recent issue of Fortune.


I think this is a little bit alarmist, but it displays perfectly the power of compounding. Anyone with a high interest savings account or reinvesting dividends back into stock accounts will agree that over time compounding shortens the distance between you and personal wealth. Same principle applies to the foreign holdings in the U.S. It also shows that the interests we are invested in abroad are not appreciating at the same rate. Is this contibuting to the decline of the strength of the dollar and leading us toward inflation? I think that it is more realistically attributable to the normal ebb and flow of the business cylcle. Even though they are getting slammed right now, stock portfolios heavy in emerging markets have performed exceedingly well over the past 12 months. Before you run for the hills, look for a reversal of that trend. Reversal, not correction (>10% decline). Something else to think about ... why send all of our money overseas when it is still so profitable for us to invest here as well? Those are the things that occurred to me while reading the article.

No comments: