Perhaps the U.S. subprime mortgage debacle that kicked off economic recessions, debt crises, and job losses all over the world can’t quite be described as an apocalypse. However, the world may seem a bit apocalyptic if you’ve lost your house and have been out of work for a year and a half.
They say what goes up must come down, but surely the opposite is true – what goes down eventually goes back up. We were all caught off guard by the severity of our latest economic downturn. Perhaps it would be prudent not to be so caught off guard when the financial world rights itself back up. Perhaps we should plan for this eventuality.
As is often the case, opportunities exist even in troubled areas. For example, the eurozone continues to dominate negative financial headlines these days. However, Europe is a very important market for U.S. multinational corporations – not to mention the rest of the world. This is something we should remember as we plan for a post-apocalypse portfolio.
According to a report published by the Center for Transatlantic Relations, over the last 10 years at least half of U.S. global foreign direct investment has gone to Europe. Even now, the region is still the most profitable in the world for U.S. companies. In 2011, U.S. affiliate income reached $213 billion – twice the earnings in Asia and South America combined.
[CLICK HERE to read the report, "The Case for Investing in Europe" at the Center for Transatlantic Relations, 2012.]
Bear in mind, too, that the performance of many large European companies is more tied to global growth than to EU economies. As is noted in an upcoming article in Kiplinger’s Personal Finance magazine, where a company is based isn’t necessarily the same as where it sells or produces its products.
[CLICK HERE to read the article, "The Case for Investing in Europe" at Kiplinger's Personal Finance magazine, August 2012.]
In this year’s World Economic Forum report, European-based companies represented 25% of global Research & Development spending – more than China (13%) and Japan (11%) combined. Even now, seven of the top 10 most competitive countries in the world are located in Europe and, as a beacon for the future, Europe has the most science and engineering college graduates.
[CLICK HERE to read "The Global Competitiveness Report, 2011-2012" from the World Economic Forum, 2011.]
So sure, Europe may be down but it is by no means out. As for the U.S., there are plenty of signs that indicate we’re in the last innings of this downtrodden game. But just as America’s favorite pastime (baseball) returns season after season, we’ll be back. Europe will be back. And it’s time to think about the future.
What would (or should I say “will”) you do when prosperity returns? Take a long-awaited, long-planned expensive vacation? Buy a second home? Invest more aggressively? Stay within your current budget and stash away all extra money for retirement? Convert a portion of your portfolio to an annuity contract that says it will guarantee* your income in the future?
Give us a call. We can help you make a plan that best suits your goals – both short and long term.
*Life insurance and annuity product guarantees rely on the financial strength and claims-paying ability of the issuing insurer.
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