Chapter 7. Weathering the Storm
Following the Money to Foreign Soil
Particularly with the dollar in a swan dive, it makes obvious sense to invest in foreign countries where wealth is growing, provided the offsetting risks are reasonable. As our purchasing power is being transferred from the dollar to the currencies of nations that produce the goods we consume, we simply must invest where that purchasing power is flowing so we can preserve our wealth and make it grow. Those who fail to do so will suffer substantial declines in their standards of living as consumer price increases outpace their incomes.
Steering Clear of the Garden of Worms
Foreign investing has always come with caveats, which has made investors reluctant to follow this path. As long as we're investing in established companies in developed countries, we really don't have to worry anymore about such traditional concerns as inadequate financial reporting and accounting regulation. American auditing standards of disclosure and transparency are widely applied in the developed economies. Of course, watching former executives of companies like Enron, WorldCom, and Tyco International trade their Brioni striped suits for government-issued striped pajamas reminds us that the integrity of corporate financial statements should never be taken for granted—domestically or abroad.
Political risk, which I discussed in Chapter 4, while an important consideration in emerging economies, is actually less important in developed foreign economies ...