The World Is Your Oyster

Chapter 1 Postcards from the Edge Five Reasons to Go Global Why go global? When all is said and done, the answer defines this book. Why, indeed, go to all the effort of putting money to work in places outside your home country when an abundance of opportunities to invest in some of the world's finest public companies exists right here in the fruited plains of the U.S. stock market? After all, in the world of 2007 more than 5,100 public companies carried the Made in America label, including some of the biggest, globally branded firms--McDonald's, Coca-Cola, General Motors, Wal-Mart, Exxon, and Boeing, to name but six. Own such companies and some portion of your money is at work in Asia, Europe, the Middle East, Africa, and elsewhere. A Pakistani buys lemon-and-spice-flavored fries for lunch at a Mickie D's in Karachi, and you profit. An Argentine buys the family's household supplies while shopping at the Wal-Mart Supercenter in Mendoza, and you profit. The United Arab Emirates' flag carrier, Etihad Airways, orders five Boeing 777 jets, as it did in September 2004, and you profit. Sure, such transactions are infinitesimal on your individual account. Yet spread across millions and millions of global transactions, those infinitesimal slivers of profit mass into real dollars over time. And here in the states, you're not limited to just American companies with global tentacles. You also have access to a few thousand foreign companies whose stocks are listed in various American markets. Many of these foreigners carry names equally well regarded stateside: Honda, Vodafone, Air France, and Unilever, among them. Indeed, you can collect a vast assortment of so-called American depositary receipts, the U.S. traded shares of foreign firms, from dozens of nations (including Malawi, the Dominican Republic, and Sri Lanka) without ever leaving American shores. Moreover, you can trade these companies' shares through a U.S.-based brokerage account as quickly and easily as you do American icons such as Apple Computer and Microsoft. Venturing abroad, then, would seem an entirely unnecessary, if not extravagant, exercise. Only it's not. The world has entered an age increasingly absent the financial barriers that once derailed the flow of investment dollars across borders. U.S. companies today buy competitors in Germany; British companies buy in America; those in Japan cross into South Korea. U.S mutual funds, hedge funds, and pensions routinely invest a large portion of the money they manage in stock markets all around the world. And today we individual investors--the mom-and-pop investors, as Wall Street calls us--can ship our money off to work in far more locales than we've ever had access to. Good reason exists for doing so: Those 5,100 companies that are Made in America represented just 10% of the roughly 50,000 publicly traded companies listed on the world's various stock exchanges in 2007. Ten percent. In that context the American market, despite its prominence globally, seems a fairly constrained investment universe. Certainly, many of the world's publicly traded companies aren't worth the effort. They trade in countries racked by war or political corruption or both; they trade on stock exchanges so small that you assume unacceptable trading risks, particularly when stock prices are falling; they exist in countries where you face limitations or restrictions on repatriating your money whenever you want; their corporate governance, assuming it exists, is questionable at best, leaving your investment in great jeopardy. Some are still owned in large part by various government entities and have about the same profit-making incentive as did those old Soviet collective farms. Managers aren't running such businesses to benefit private shareholders so much as they're running a business to preserve their job by keeping some lethargic, bloated, bureaucratic government agency content.[read more]