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Elliott Morss | October 2, 2014

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The World Bank Agrees With Me

by Elliott R. Morss, Ph.D.

Introduction

On April 1, 2009, I said:

The global recession started in US banks that did not believe there was a real estate cycle. And while the recession is global, its effects will be most severe in the United States, Europe, and Japan. Prospects in the rest-of-the-world are more promising than in the developed nations.

On June 11th 2009, I made specific emerging market recommendations. I also argued that you should get out of dollars and that by investing in emerging markets, you would.

Today’s press release from the World Bank:

WASHINGTON, September 27, 2010—While the rich world puts its house in order, developing countries are becoming a new engine of global growth and a pulling force for advanced economies, says a new book by World Bank economists.

According to The Day After Tomorrow: A Handbook on the Future of Economic Policy in the Developing World, almost half of global growth is currently coming from developing countries. As a group, it is projected that their economic size will surpass that of their developed peers in 2015.

“Developing countries have come to the global economy’s rescue,” said Otaviano Canuto, World Bank Vice President for Poverty Reduction and Economic Management (PREM), and co-editor of the book. “They are the new locomotives of growth which will move global growth forward while high-income countries remain stagnant.”

According to the publication, growth in developing countries is estimated to reach 6.1 percent in 2010, 5.9 percent in 2011, and 6.1 percent in 2012, while corresponding figures are 2.3 percent, 2.4 percent, and 2.6 percent for high-income countries. These diverging growth prospects continue in the medium term. Five factors account for it: faster technological learning, larger

middle- classes, more South-South commercial integration, high commodity prices, and healthier balance sheets that will allow borrowing for infrastructure investment.

Investments

The performance of my past investment recommendations are presented in the following table:

    Percent Change
    6/11/2009 to
Item Vehicle 9/24/2010
S&P 500   22%
Morss Investments    
India (MINDX) Mutual Fund 67%
Latin America (PRLAX) Mutual Fund 47%
South Korea (EWY) ETF 44%
China (MCHFX) Mutual Fund 44%
South Africa (EZA) ETF 37%
Brazil (EWZ) ETF 28%

Source: Yahoo Finance

Based on the World Bank’s pronouncements and my own thinking, I see no reason to change these recommendations. It is interesting that my lowest-performing investment is Brazil. Interesting because I view Brazil as the strongest economy in the world.

Why do I invest via ETFs and mutual funds? Mutual funds should out-perform ETFs because the mutual fund managers can hand-pick stocks. But some fund managers are real bad. Before deciding which vehicle to use, I check the last three years’ return. If the fund significantly out-performs the ETF after fees, I buy the mutual fund. If not, I buy the ETF. Since I am a long term investor, I don’t mind not being able to sell mutual funds until the end of the day.

I am not an investment adviser and nothing I say should be taken as a recommendation to buy or sell an asset.

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