A New World Order

By Roger Nusbaum | October 14, 2008 | 11:30 AM | 0 Comments

World stock markets are obviously trying to digest enormous moves in both directions and a whole lotta news.

I'll worry about effectiveness and future consequences in future posts.

Regardless of how we got here the US could not solve this crisis by itself and more interesting is that it could be argued that the US did not provide much leadership. A potentially less important US, less important in the world economic order, is a theme I have been working on for several years now. 

There is visibility for less demand for dollars and less need for dollars. A lot of transactions globally get done in dollars but every now and then there is news of two countries starting to avoid the middleman (that being the greenback) and transact directly.

This is a slow moving boat that started to turn in the harbor a couple of years ago and will continue for many years to come.

Australia and New Zealand may have more showed leadership than the US. Canada (and Australia too) have sounder banking systems than the US, Chile is on very solid footing with very little exposure to the US, China has one point something trillion in the cookie jar, if the world needs resources Kazakhstan will be swimming in tenges (their currency) and countless other countries are caught up in a massive ascendancy that will play out for years.

Most of these places are currently dealing with cyclical downturns at the moment but stand poised to recover much sooner than the US.

This global evolution means US based investors must move further and further away from the home bias. Instead of wondering whether 20% or 30% in foreign is right, we may want to use those number to think about US equities. 

That might sound odd but it has been right for Japan based investors and their home bias for 18 years. I don't think the US is facing something as bad as Japan but I do think we need to plan for slower growth than what we have been accustomed to.