A country’s overall financial health impacts a lot more than its government bonds. It can also help determine the flow of money into that nation’s stocks and currency. So you can use the Weiss Sovereign Debt Ratings to help guide your investment decisions. Just register — ratings are free!
China is a prime example. Some readers have questioned why we give it an A rating despite its politics. But the fact is, politics have not interfered with China’s success for over two decades, and until it does, we see no reason to downgrade it.
Also look at the difference between Sweden (B+) and the U.S. (C). Sweden grew at a 7.3 percent year-over-year rate in the fourth quarter, the fastest since at least 1970. The U.S., on the other hand, has been growing much more slowly — 2.3 percent in the most recent quarter. Meanwhile, Sweden’s central bank hasn’t taken the rise in inflation lying down the way the U.S. Fed has. Instead, it has raised interest rates six times since last July.
Result? The Swedish krona jumped 36 percent in value over the past 12 months while the U.S. Dollar Index tanked 18 percent. That’s a huge divergence — and you didn’t even need a highly leveraged currency trading account to profit from it.
You could have simply bought the CurrencyShares Swedish Krona Trust (FXS) and the PowerShares DB US Dollar Index Bearish Fund (UDN). Total combined profit, including slight variance on the ETFs versus the underlying currencies? 56 percent in a year!
What if you wanted to buy stocks instead of currencies, using the Weiss sovereign ratings as a guide? That can work too! Malaysia is rated A-, for instance. If you had bought the iShares MSCI Malaysia Index Fund (EWM) roughly a year ago, you’d have a profit of 27 percent. That beats the pants off the 12.5 percent return of the SPDR S&P 500 Trust (SPY).
So does the 27 percent return of the iShares MSCI Switzerland Index Fund (EWL) and the 53 percent return of the iShares MSCI Thailand Investment Market Index Fund (THD). (Switzerland is rated A-, while Thailand merits an A.)
Naturally, the Weiss Sovereign Debt Ratings are not a sure-fire guarantee of success. Other factors can affect the value of global currencies, bonds, and stocks. But as these examples demonstrate, they are a valuable addition to your toolbox — and mine!
You can also check out my Safe Money Report to get more information.
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Could have, should have, would have … but none of these have been in the “safe money” portfolio this year.