If all actions are reactions why are Americans hated? Well this is a finance site..so let me stick to what I know.

Almost all literature we have read on equity markets is American. The great American investors have written all this literature in the past 50-100 years. This was the time when American companies (fairly or unfairly) dominated world markets. Whether it was Boeing, Coke, McDonalds, General Motors, Citibank….so all of them sent back a lot of money home and helped the US. This meant you could have a portfolio of 80% American stocks and still look smart.

Things are changing. Obama’s 10 faces are looking like Ravana’s 10 faces!  Will Narendra Modi ban Mc Donalds for filling stomachs with lousy nutrition? Will more schools ban Coke and Pepsi? Will my daughter think Pepsi can be used as a pesticide? Whatever happens American domination will reduce. Banking, Insurance, Food, Oil…

This means all of us will have to create a portfolio with European, Japanese, Chinese, Indian companies if we are talking of  a world portfolio.

However all the American heavy weights still suffer from recency bias and ‘ownership’ bias. Most of them like Warren Buffet and the others are still suffering from an American hegemony bias, ignore them.

Be Indian, buy Indian will help here. Then Euro, Chinese, Brazil….you need more variety in at least 30-40% of your portfolio.

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  1. Subra,
    You hit the nail. Almost any book one reads,has a US Bias. Except for one ( i think two) on Behaviorial Finance by Parag Parikh (God bless him) and the other one by you on “How to retire rich’, there are rarely any books or data which has more reference to India . Its time we have more such information and books with the India story…Why don’t you try one ?

  2. To your last statement Subra, “you need more variety in at least 30-40% of your portfolio.”, maybe I don’t understand this, but surely you are not suggesting our porfolios have 40% of international exposure ? Can you kindly clarify. Many thanks.

  3. Wealthwisher…i mean this only if your portfolio is fully in the US. Indian portfolios < Rs. 5 crores cannot afford international unless it is through Indian mutual funds investing in indices abroad. In fact the attraction of the US EQUITY markets now is unbelievable - some attractive dividend yields are available. If you think the $-Re will remain stable, it is possible to get 4-7% dividend yields in US. Why people invest in US bonds beats me.

  4. Too much American domination, yes. However remember most of our ‘branded’ consumers use American products. Coke, Pepsi, Lays, McDonalds, Gillette, Colgate, P&G, Levis, – and all these dividends go back to US….and these are products with an amazing margin.

  5. Subra,
    US domination will definitely come down but do not underestimate them. They still have companies with immense brand value and in the new technology they are the boss. Think of any new technology you have Americans dominating the field, be it Google or Facebook or Apple it is all American companies. Also, look at the stable consumer goods, you may ridicule Pepsi but the fact remains more and more Indians and Chinese and other developing nations will consume more of these brands as they have more money. You and I have hardly used a branded product when we were young, today we and our children go to Multiplexes and buy all the American products. In fact the whole world looks very similar to America as time passes.
    Their Stock market has not returned much in the last 10 years but their companies are still strong and they have a unique Immigrant culture which will ensure they will attract best minds from all over the world and thus create new products which we cannot even imagine. India and China have their places, we will continue to mass produce or provide cheap and efficient service but the basic idea generation and design work will be done in the US as long as they have the best universities and best ecosystem for business.

  6. Ujjwal – you had to be a Mehta or a Patel 🙂 :). I agree with you – the American domination of consumption is real, but if you see Indians, they will adapt. The greatest achievement in recent times by an Indian (the press is too dumb to understand I think) is Ratan Tata turning around JLR. When he took it, I was a skeptical – If Ford could not make profits for 20 years what could Tata do? But in 20 months, viola! he has done it. However brand power will work, – in the next twenty years things will change. When the Japanese economy was not so strong the Yen was 330 to US $. Remember? I was in school. An American had joked in Time magazine..here is a $ give me a Yen..now is it headed there?

    Surely we in our life time will see the $ at Rs. 12. It was there when I was in school /college. Man the world is still round.

  7. If the $ goes to 12rs then it (may) be the end for our domestic growth too. All our present domestic consumption growth is due to the IT, Exports etc which depends of on a cheap rupee. Think if rupee appreciates to 40rs then the IT companies can’t give salaries also (may be exageration) & exports are not feasible.

  8. if 1$ = Rs. 12 then Information Technology company = ?

    difficult psychological equation to resolve…isn’t it

    do you think growth of india will affect drastically if this ever happens.

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