Investing Without Borders: How Six Billion Investors Can Find Profits in the Global Economy

By Daniel Frishberg and Arthur Laffer

An insightful examination of the skills needed to be a proactive investor and find diverse investment opportunities in the emerging economy

There is no little league on Wall Street and no white belts. Here or abroad, you are put in immediately with the black belts – the best and the brightest. Think like an amateur and they will eat your lunch in China or in the U.S. Attempting to invest overseas like a robot and following the leader will produce results just as bad as investing that way at home. While many investors are smart, creative individuals, when exposed to the herd, they tend to follow group mentality and succumb to what the people around them believe. Avoiding this trap can mean big profits for you.

With The Investment Warrior, author Daniel Frishberg-a financial professional with more than thirty years experience in the industry-shows you how to break from the pack and build a winning portfolio. The investor in the old economy didn't think critically about changing economic or political conditions around the world. He never really had to. He was lulled to sleep by the enduring dominance of the U.S. economy. This book teaches you to be an awake and aware investor, ready for the changing financial environment. Throughout the book, Frishberg discusses what it takes to successfully invest both domestically and abroad and provides practical examples. This book

• Goes beyond the current crisis and explores the importance of diversifying and escaping the "herd" mentality that hinders most investors
• Contains insights into investing for the long term and taking advantage of the growing world economy
• Details the staggering amount of resources being applied to the global boom and what this means for your investments

The lessons of this book go beyond today's economic crisis. Frishberg will provide you with insights to be used in all investing circumstances. Everyone wants to oversimplify. This is one of the most costly human foibles. You can capture considerable profits by going out on your own, and with The Investment Warrior as your guide, you'll quickly discover how.

• Language: English
• Publisher: Wiley
• Release date: Feb 9, 2010
• ISBN: 9780470609309

Book preview

Introduction: My Mission

Your life as an investor is about to change forever. Let me correct that, it’s already changed. Your life as an investor, as a businessman or woman, your life as a member of the human race has changed in countless ways. And the changes are far more significant than the changes that came with the bicycle, the automobile, radio, and TV. In fact, the changes in your life from an economic standpoint are more profound than anything that’s happened to the human race in 500 years!

Before the printing press only a select few could read and benefit from the developing information, the skills, the insights, and the opportunities that were sweeping the globe. The printing press allowed the transmission of radical new ideas in the fields of science, geography, and agriculture. Suddenly kings, queens, and nobles like Isabella, Elizabeth, Sir Walter Raleigh, and Columbus were becoming richer than anyone who had come before them.

World trade developed as these fortunate few figured out that we live on a spherical planet that circles the sun. They prospered far beyond their wildest dreams, sending ships around the world and conquering continents. They brought back tobacco, rubber, spices, tea, and gunpowder and sold it to their countrymen. They used the inventions of our Western civilization—information flow, transportation, science, and the art of modern warfare—to subdue the existing empires in all corners of the globe. In the process, they were able to accumulate most of the world’s wealth, all for the benefit of that small European enclave that was the precursor of our civilization.

The seed of that revolution was planted with the development of the printing press, and it grew and developed for the next 500-odd years, culminating in the United States of America and the republic for which it stands. Since then, we’ve ruled the world. We’ve cured disease, shared ideas, and broadcasted drama, both real and imagined. We developed music, pictures, and sounds through motion pictures—then radio, then TV. We travelled to all corners of the Earth, to the moon, and then sent rockets around our solar system and our galaxy. And as the human race advanced through the transmission of our culture, we Americans—the beneficiaries of all this progress—became ever richer and ever more powerful.

It was easy to believe we’d developed an everlasting monopoly. Think of it. We owned every new idea and every new invention. We won every war, dictated policy, and defeated all comers in every competition. We created the best universities and research facilities. We accumulated almost all the wealth, power, status, and all the comfort.

We’d built a better mousetrap, and they came. The very best and the very brightest came to the United States to study and to invent. And they stayed, building the most prosperous country that could ever have been conceived in this little corner of the galaxy. To be sure, we put giant telescopes into orbit and learned to unravel the secrets of our universe going back billions of years. Can you conceive of just how long a couple of billion years is? It’s the age of our planetary development, yet humans only learned to cultivate wheat 10,000 years ago. What a ride it’s been as we developed communities, towns, cities, countries, and eventually alliances like Axis and NATO. So what now? What’s changed?

If you haven’t noticed, the worldwide web is ushering in a new order. Everyone on the planet can now easily acquire the same information and the same education. In past centuries, only that tiny group of nobles could collaborate in ways now made possible for the entire world, all due to the new technologies. But now, inspired by our freedom, ingenuity, courage, and inventiveness, the rest of the world has learned our lessons. They’ve duplicated our cultural advances. And they’re catching up.

To many of us it feels as though we’re falling back, but we’re not; they’re simply moving ahead at electronic speed. Life in this new century is all about new fuels, new power, new forms of energy and automation. All over the world, people are now having and doing everything our most creative ancestors dreamed of over the last 10,000 years.

What’s changed you ask? Look around you. Today, you—along with six billion other human beings—woke up in a world without economic borders. We now know there are few limits on what our species can accomplish. We’re taller and stronger; we run faster and live longer. And we enjoy comforts that even the nobility of the past could only dream of.

Today the borders are dissolving. There’s no meaningful U.S. economy, no meaningful U.S. stock market. You’re not limited to dollars, because you have access to every currency and every opportunity. You have access to six billion new customers, too, but you face fierce competition from six billion relentless competitors. You may find the idea frightening or daunting, but you can’t afford to pretend it’s not happening or you’ll quickly be left behind. Billions of people are ready to sacrifice more and work harder than you are, because they’re determined to give their families what you have.

But wait. We also have unprecedented advantages. We’ve been saving and accumulating surplus wealth for the past hundred years, while those new guys were still in the fields planting rice. They need our capital, and they’re willing to pay premium prices for the opportunity to use it. We know exactly what they need and what they’ll buy, and we’ve already been through all the steps they’re about to take.

We can use our insights, our position, and our capital to finance the world’s march forward, and allow those billions to work for us! We can help them win their battles and we can ride on their waves of success. Unfortunately, many of our fellow countrymen will opt instead to live in fear and denial. They’ll hang on by their fingernails and squander their energy trying to hold the rest of the world back, to stifle the relentless advance of the human race as it catches up with us.

My mission for the 20-odd years left of my life is to help you use your capital efficiently and skillfully. To help put Investor 1.0 to rest and facilitate the birth and development of Investor 2.0—a new breed of investor, conscious and awake, who gets to take advantage of every new development and lead the human race to where it’s headed anyway.

The best stock pickers, the most brilliant economists and financial thinkers join me daily on radio and TV; I meet with them socially, and we share business ideas. It’s a joy for me because I get to process the best information on the planet and pass it on to you as quickly and as thoroughly as I possibly can. This book has proven to be very satisfying to me in that endeavor.

Of course, we won’t ever be able to identify every opportunity. We’ll never know whether we’re missing something somewhere; in fact, I always assume we are. But we continue to march forward, always making progress, always stronger, always richer, keeping each other awake, and using our precious capital to help the billions around the world get what they want and need.

Turn the page and join me and the thousands of others who are getting to ride on the success and progress of our world, a world of six billion opportunities, six billion competitors. From an economic standpoint, it’s a new world. A world without borders.

CHAPTER 1

America the Dominator

How the U.S. Became the Most Powerful Country

on the Planet

In this chapter ...

• So you got the book. Let’s see what you get.

• Who were they? Why did they come in the first place? A change comes: We’re getting old, and printing too much money!

• Robin Hood, Sherwood Forest, and the Sheriff of Nuttin’ Doin’

• Let’s review: They come, they learn, they leave.

What’s First?

Throughout the course of this book, there will be times when I’ll want to get very specific with you. We’ll talk about various investment techniques, and those techniques are as valid today and tomorrow as they were yesterday. The investments themselves, however, well let’s face it, to get this book to you in the winter of 2010, I have to finish it in the autumn of 2009. I’m giving you my best ideas and strategies, although by the time you read this, some of them may have succeeded, played out, or even failed.

That’s OK, because I’m giving you these ideas as an example of how you should be thinking. Take them in that spirit, because my mission is to help you transform yourself into the new species of think-for-yourself investor you’ll have to be in this world without economic borders.

Our world is connected, networked as never before. We send our thoughts to each other everywhere and anywhere via e-mail, video conference, and streaming audio. We collaborate across borders and entertain each other across borders; we even finance each other across borders.

That means the rest of the world is at our doorstep; so yes, we’ll talk a lot about how you can take advantage of this new globalized economy. But, make no mistake about it: For all intents and purposes, it is American ingenuity that created the wealth our neighbors want so desperately to share in. And there are plenty of great American companies to invest in—companies that stand as strong as the Rock of Gibraltar, companies that will continue to stand, continue to grow, continue to be some of the best investments available to make you rich, and richer.

As I’m writing this, you and I still need and want and buy devices from Cisco Systems—devices and ideas that are bargains to us, and extremely profitable to Cisco. I have little doubt that I’ll be buying and selling that stock for the rest of my life. I’ve come to understand the company and the pricing of its stock; I can feel when it’s a bargain, and when the money has been made. You can do it, too. It only takes a little experience and practice. Play with it, and you’ll get it, just as you learned to throw a football or play ping pong, to shoot pool or draw blueprints, or to sing or dance.

I’ll also be watching (and buying and selling) the Blackstone Group. I’ll talk about these companies and others in more detail later, but for now, just imagine how Blackstone can fit into your life. This is not only about you and me buying into China, or the rest of Asia, or the rest of the world. It’s also about them buying into us—remember, it’s a global concept here. Look, the Chinese Sovereign Fund, along with smart people everywhere, has invested billions into Blackstone, and Blackstone, with its experience and savvy, used that money to buy companies, take them private, then develop and sell them, usually for a huge profit. I’m sure I’ll buy and sell Blackstone many times over the course of the rest of my life. Again, you can easily learn to do the same thing.

The point to be made here is that this is not just us and them. It’s all of us; it’s a network. A worldwide network to be sure, but hey, it takes a phone connection or a computer connection the same amount of time to go around the corner as it does to go around the globe.

As an American, you’re privileged to belong to a culture made up of inventors and innovators, a vast group of people who have been able not only to survive, but to thrive on their spirit of adventure and a vast store of knowledge—all long, long before our neighbors around the world began to catch on. The fact is they’ve come a long way toward catching up. But their doors, as well as ours, are all unlocked; the walls are down, the economic borders no longer exist. It is to that point that I’ve put this book together.

So then, are you ready? Good. Now let’s see how we ever got into this terrific position in the first place.

Why America Has Always Dominated: Part One

This is going to be the era when we Americans, the inspiration to the whole world, get to watch the ascendance of everybody else. It’s hard not to think of yourself in decline, when everybody else is catching up. The truth is if we keep ignoring the free spirit and willingness to take a chance and assume the risk of losing what got us to where we are, we will see some decline. Much of this book is about how to think globally and share in the good fortune of those around the world that we have inspired. More than that, it’s about how you can join me in getting rich helping them get what we have—that which they are determined to get!

Great. But don’t be fooled. The real long-term success of the United States is still ahead of us. At the moment we may be slowing our own development by focusing on how we split the pie, rather than how we grow the pie, but life in this great country is cyclical.

Our society has more freedom than any other on this planet, and when the government’s policies don’t work out, we are better able to change policies and governments than anyone else. That’s exactly what will happen. So, for now, you and I will make lots of money acknowledging that foolish U.S. policies are going to set us back a little, and give others with courage and initiative a chance to catch up and even surpass us in certain areas for a while.

Through that whole medium-term plan, don’t forget for one minute that the worst bet ever conceived on planet Earth has been a bet against American ingenuity, the American economy, and American power. History is littered with the limp bodies of those deceased, and the shells that remain of those still alive, who have made that bet against the United States—from Hitler and Tojo, to Khrushchev and Brezhnev, to Saddam and Kaddafi. I, for one, do not plan to join them.

There are major reasons for our success. Our advantages over other nations are so profound they’re difficult to overcome. Sometimes they lead us to make mistakes rooted in overconfidence and hubris, but we’ve always recovered, and when the whole world gets used to selling America, I can assure you, I will be buying.

The best and the brightest came to America, because they saw the big magic O—opportunity. And what created that opportunity was the very nature of the place itself. The guys who landed here way back when, landed in one of the most fertile, well-developed places on the face of the planet. It’s a well-designed place, with better resources and a better setup than anywhere else in the world. From sea to shining sea, we have good, arable land. Easy to grow stuff on, it’s the largest piece of contiguous arable land in the entire world. The middle of the country is made up of prairie land that is perfect for crops; it didn’t even need to be cleaned up before farming. And there’s more very good farmland on the East Coast, the West Coast, and down South.

There’s good, arable land elsewhere in the world, but it’s mixed in with mountains and jungles and deserts. We’ve never been saddled with the enormous burden of having to focus all our energy on trying to feed a country full of hungry, undernourished people, because it’s never been hard for us to get large tracts of land set up to feed our population. Most other nations spend all their time and energy just trying to get