Going Global

Keynote speaker Dr. William Seale, chief investment officer of the ProFunds
Group, began the night with an offbeat icebreaker (discussing the difficulty he
has clearing airport security with his metal joint replacements), which set the
tone for his lay-it-all-out-on-the-table approach. Right from the get-go, he
let everyone know he's a Democrat with a capital "D," although he
considers himself more of a libertarian. In other words, he's not a huge fan of
the current government or its wavering economic policies.

All labels aside, his outlook was rather pessimistic: He believes we're in a
recession now and that it will last for quite a while as a normal part of the
ebb and flow of the economy. Recessions, although not favorable, are part of
the economy's natural "what goes up must come down" cycle. The big
question: How long and how deep will the recession be?

Dr. Seale believes it won't be too deep, but it will last. And he believes
the US
is going to have a devil of a time climbing out because of the following
factors:

1. Rising energy prices: Food and gas prices are on the rise and are set to
continue on the upswing. The average family now spends about $1,200 more per
year on gas alone. (So much for that economic stimulus check. Looks like my
car's going to eat that right up before summer's over.)

2. The Iraq
war must end, but it doesn't look as if any end is near. It's destroyed the
mental health of soldiers (incidents of post traumatic stress disorder are steadily
rising), and we haven't even begun to fit the bill for this meaningless
venture. If we were to end the war today, costs would mount in the $3 trillion
range. Who's fitting that bill? Are we tacking it onto the already astronomical
National Deficit? Talk about setting a great example for America's
youth. How about "do as I say, not as I do." (i.e., Spend as I say,
not as I do.)

3. Government policies aren't being implemented effectively. And the Federal
Reserve's quick-fix fed funds rate cuts boost the markets for a day, two if
we're lucky, but those actions are fleeting. We need something lasting that
will have an effect on the overall economy. Moreover, we need to get a handle
on state and local taxes. We've got to devise a system that will allow for
effective economic policies without hiking taxes. (As Dr. Seale put it, the
current policymakers are "a Parliament of whores that spend money like
drunken monkeys.")

The problem is, it's not just the government that's spending money like
drunken monkeys. Americans can't seem to grasp the concept of financial
planning. Just look at the ludicrous rise in foreclosures and people's
inability to pay off debt. The credit crunch has spilled over into student loan
lending as well, and it's spiraling out of control.

Dr. Seale suggested a solution, which I think would--in the very least--help
the current situation and perhaps even prevent another catastrophe in the
future: Require every high school student to complete a course in personal
financial management and prove an ability to calculate a mortgage payoff plan
in order to graduate. But I'd also add in a lesson on credit card interest
rates and how a simple $5 purchase can, over time, end up costing you hundreds
of dollars if you don't pay off the card's balance in its entirety each month.
No credit card debt=no credit crunch. It's important that we educate our kids
so they understand how imperative it is that they don't live beyond their means
and make purchases with money they don't have (or credit cards they can't
afford to pay off).

As for investing, Dr. Seale suggested using leverage because it's cheap. He
also supports overweighting and underweighting portfolios in certain sectors.
(He cited energy as a great overweight play in the current markets. But be
aware of the eventual downswing.) He cited non-correlating assets as a good
portfolio addition but cautioned that they will eventually start correlating.

Overall, Dr. Seale made a strong case for the obvious: We need to get a
handle on the Federal government. The problem is getting them to say, "No,
we can't spend anymore money."

Next on tap came the international investing panel, made up of three fund
managers: Joe Axtell, CFA of DWS Scudder; Don Elefson, CFA of Harding Loevner
Management; and Lee Giannone, senior VP of Mondrian Investment Partners.

The panel was broken up by asset class: global small cap, emerging markets
and fixed-income bonds, respectively.

Each gave a short rundown of the funds and proceeded with a Q&A session to
speak on the following factors affecting the global economy.

The whole world is globalizing, but the problem is that the US is falling
behind. Mr. Giannone gave a sound example: In Europe, when you turn on the
news, you hear of economic goings-on from perhaps seven or eight different
countries in various regions of the world. But in the US, the media
reports economic news that's very regionalized and focused on mostly
surrounding areas. This US
de-globalization in the news reporting world is having a serious effect on our
economy and is driving it into the ground because we're not paying attention to
economic conditions outside our borders.

Growth is now abundant outside the US, and it's not concentrated
solely in the Eurozone, either. The BRIC countries (Brazil,
Russia, India and China) aren't the only emerging
market resources that are worthy to have in a portfolio. Asia is making
headway, building infrastructure as it moves westward, and the Caribbean is also part of the next frontier. Japan and Mexico (considered semi-developed
markets) are also making waves in the global investment pool.

So, how are we going to turn around from a US slowdown that trickling into
economies all over the world? The challenge is controlling inflation rates not
just domestically but on a global scale.

For the time being, it looks as though seeking potential bets outside the US is more than promising. International investing certainly isn't anything new, but there are
groundbreaking plays outside the US clamoring for your portfolio.
There's so much growth potential in untapped (or undertapped) markets
throughout the world. The key is pinning down the investments that work best
for your needs, particularly as the US economy continues to struggle to
get back on its feet. Don't tear your hair out during this market mess. Rest easy with this mantra: Going forward, think
globalization.