DrHelen: One area I'd like to understand better is the question of country or regional choice. M* tells me I have too much in Asia and not enough in Europe; when I posted my regional distribution a few weeks ago several people thought I had too little in South America. But how do we decide? How can we be sure we're avoiding some of the dreadful crashes of the past in emerging markets? What are the country/regional characteristics that make a good choice?
Concerning M* country Allocation, it is way off base. I sent notes to M* to correct this. They are using a model that promotes developed markets in the Allocation.
I support the slice and dice approach. In my global portfolio, below is how M* classifies them. The misc is my term for 'world, tech, realestate', based on classification, style box..
- em 20%
- europe 15 %
- foreign LC 5%
- foreign small/mid 10%
- Latin Am 18%
- pacific rim 15%
- misc 5%
Xray considers it:
| Stock
Exposure
( % ) |  | Foreign
Stocks
( % ) | MSCI-
EAFE
( % ) |
 | | U.S. & Canada | 20.77 | | 0.00 | 0.00 |
 | | Europe | 13.88 |  | 17.52 | 68.54 |
 | | Japan | 1.56 | | 1.97 | 21.15 |
 | | Latin America | 16.78 |  | 21.18 | 0.00 |
 | | Asia & Australia | 30.04 | | 37.91 | 10.14 |
 | | Other | 16.97 | | 21.42 | 0.17 |
My view is:
- Americas (no US) 20%, LA & canada
- Pac rim (mostly Matthews)
- korea 2%
- all, mgr choice 5% (maptx, matfx)
- china 10%
- India 7%
- EME 20% (eurox, letrx, tramx,tremx,mpymx)
- BRIC (gbrax) 2%
- General LC, MC, SC 25% (aemgx, fdivx, dregx, dridx, demax, jaosx)
- 'mad money' 5%
- energy / resources 5% (enpix, icenx)
So the big difference in the classification is Russia is listed as europe along with eastern europe & Euro based. India & china are pac rim along with JPN, Aussy, NZ,,,
Since currency in europe comes into play from euro based to eastern europe, pacific rim, emerging mid east and Americas I like to consider the region. My plan was to use the BRIC general fund gbrax, as a guide to balance between the individual country funds. Since the BRIC funds don't have a history, I just use it as another data point.
Why the slice and dice? I think there is a paradigm shift, meaning past 10 yrs are not a valid comparision. Past 3-5 are most relevant. Each region/ country has a different set of rules, and they are not equal. How it will work out? I'll tell you in 5 yrs... So, I decided to cover as many bases as possible. I think the euro is in trouble, hence I didn't want to grow in Euro economies, the LC,MC, SC part of the portfolio can provide coverage.
I've been in LA, pac rim, russia, emerging europe for over 5-7 yrs. I've increased my % as the dollar has dropped over the past 4 yrs.
Going forward, I see russia, china, brazil, and emerging europe as growth investments. Korea ?? Japan??
I see commodities (food) as good investments over the next couple yrs.
China, can be be a game changer. They can change the rules at any time, but they also want to be global players. Right now they are inviting investments into china in controlled segments, such as banking, insurance, food products, technology. Their style is to leap into the modern age, they can skip some infrastructure, such as land lines for phones, tv's, bulldoze areas & build brand new cities.
Will the emerging markets crash? They will drop, but they are producing and consuming too much to crash in this global market. The developed nations rely on the rest to stay afloat. The developed nations are no longer self sufficient, producers and consumers that can ignore the rest of the world.
