According to Warren Buffet, investing is like a baseball game with no called strikes, you can just wait for the perfect pitch. Another way of seeing this is that 90% of all investments are valued in a reasonable range 90% of the time and the best investments are those rare occurrences when valuation is at extremes. You just got to sit tight and wait for that cheap stock or bond to come down your way. Truly exceptional returns however are earned not only when an individual security is cheap relative to its peers but when the market it lies in is highly discounted as well. Of course, the broader your investment horizon is, the more likely you are to spot these six-sigma events.
Unfortunately most investors’ perspective is limited to what’s going on in North America’s stock exchanges, thus ignoring the vast majority of the world’s markets. Consider the strong performance of emerging markets in the last few years. For instance had you put your money in a basket of Eastern European stock exchanges in 2001– for example Russia, Romania, Bulgaria, Croatia, Czech Republic – you would have earned returns ranging anywhere between 500%-1000%, not counting dividends. The same goes for many Latin American stock exchanges such as the Buenos Aires SE – a ten bagger-, Mexico SE – a four bagger – even politically challenged Venezuela, a six bagger since 2001. The last three years have also done wonders for ay SE - up 400%-, Cairo SE - up 1100%- , Istanbul –up 600% - Beirut, up 350% and many, many more. In fact emerging markets as a whole are up on average 250% since their bottom in November of 2001. My objective here is not to recommend the purchase of shares in emerging markets; quite apart from the fact the fact that I am not a licensed financial consultant, I have not personally been able to find any stock exchanges that still look cheap based on traditional metrics. Furthermore, while many of these exchanges have the potential for dramatic growth – for example all 3,500 companies listed on the Bombay Stock Exchange have a total capitalization of only C$150B or about the same market value as Google - it’s probably not a good idea to get in now after the major run up in prices we have seen. No, I mention these because they illustrate the multitude of “unconventional” investment vehicles that exist out there. I actually resent the word “unconventional”; one would be surprised how accessible these stock exchanges really are, even to the retail investor. The following brokerages offer real time quotes and transaction fees are reasonable: INTL Trader, Interactive Brokers, Intisinet and CSFB.
For those who like to walk off the beaten path, I have an international speculation to suggest: buying real estate in Argentina. My personal opinion is that the best way to find undervalued assets is when there is a pervasive and entrenched consensus that some market or sector is a pariah not even worth to be looked at. This was the status of most energy and metals stocks until just three years ago. There are some markets however that inherently suffer from a lack of attention because they literally are off the beaten path. International real estate for instance is highly impracticable and as a rule takes longer to get noticed by foreign capital. For instance while Argentina’s stock market has recovered from the devaluation crisis quite well, the same remains to be said about real estate; indeed a spacious and trendy apartment in Buenos Aires runs for only a fraction of the price in Spain or Italy. This is quite astonishing since Buenos Aires probably comes closest to a European city, except everything is much, much cheaper. What is more, when the government basically confiscated everyone’s bank accounts during the 2001 crisis, most European immigrants went back to their respective countries and tourism was a beat sector for years. This is all changing now thanks to economic reforms and a free floating currency. Of course, as I have mentioned, buying foreign property is impracticable and probably not feasible unless you know the country well. There may however be the odd person who might be interested in doing this, in which case here is a website that might be useful:
