Bankrupting our Wealth of Nations

As advisors to a variety of Fiduciaries, we often find ourselves having to mix history with economics, anthropology and contemporary politics in explaining our recommendations. For example, let's think about international equities as a separate asset class. Rigorous economic analysis leads us to the conclusion that including such a class offers the opportunity to increase returns while, at the same time, allowing us to spread and thus reduce the overall risk. This is good for the portfolio, but is this strictly an economic decision?

Picking the right international investment involves more than just economics. Historically, we look at the market as a variety of needs and wants, buyers and sellers, who used to come from mostly one region...the Anglo-Saxon markets of Northern Europe and America. Those "other countries" supplied the raw materials and labor. That was 30 years ago. Now we see the needs and wants being increasingly shaped by Pakistanis who live new Dehli, Chinese who live in South Africa, and Iranians who work/live in the UK. If there is one mistake that we in the Anglo-Saxon market, that we have made over and over again, it is to underestimate the influence of culture and tradition in shaping the world's economic welfare. The Romans did not understand this in the 1st Century (BCE) and British were blind to this in the 18th Century (AD). We see this in our business leaders and politicians who fervently believe that "our way is the right way" without regard to what values that other cultures may in common with us. Let's hope that we can continue to find ways to share our common values and ideas so that, as Fiduciaries, we can be ready to spot investment opportunities in an increasingly more complex global economy.