Aaron Anderson
The Global View

The Paparazzi Economy

By, 07/20/2007

We Americans rightfully take a great deal of pride in our economic prowess, so it's understandable to feel a ping of jealousy reading the US's role in the global economy has diminished.

It's best to check your emotions at the door when it comes to investing because the financial press preys on our emotions to keep us reading. Sometimes it seems like the line between financial and tabloid journalism is imperceptible. Are we reading about Paris, France or Paris Hilton? The emergence of paparazzi-style economic news has become so pervasive, we at MarketMinder wouldn't be surprised to open the paper one morning and read the following:

OMG! Have you heard? South Korea's economy is decoupling from the US! That's right – decoupling! And right in the middle of a pending free trade agreement too. I know the US and South Korea are having some problems, but I had no idea a decoupling was in the offing. Even worse, I hear South Korea is now coupling with China! As if the tiff over currency manipulation and threats of protectionism weren't enough, Sino-American relations now have to deal with this whole decoupling issue. I'm glad I don't have to sit through those US-China economic summits. Talk about awkward!

I just hope China doesn't get its heart broken when South Korea decides it's not ready to jump right back in to a serious relationship. Sure China has become the world's dominant low cost manufacturer. And what country wouldn't find the pace of China's economic growth attractive? But I can't shake the feeling China is just South Korea's rebound economy. Once the honeymoon is over, don't be surprised if South Korea casts a wandering eye elsewhere. I've even heard rumors South Korea is going to get back together with North Korea. They're still at war for Pete's sake! What does North Korea have to do to show South Korea it's over? Detonate a nuke in their backyard!?!? LOL.

Not that China is hurting for economic partnerships, if you know what I mean. China's even been cozying up to Hugo Chavez and Venezuela's economy. Something tells me China is going to regret that decision when it wakes up in the morning (wink, wink). Just ask Exxon and ConocoPhillips…ouch.

In the meantime, Hong Kong can't be happy about all this. I mean, one day China is celebrating the 10th anniversary of getting Hong Kong back from England, and before the smoke from the fireworks has settled China is coupling with other countries!?!? If I were Hong Kong, I wouldn't lose England's number.

Personally, I don't know what the US saw in South Korea anyway. Having to listen to South Korea go on and on about won appreciation and territorial disputes with Japan. Enough already! Then there's the whole bi-polar "I'm-an-emerging-market-no-I'm-not-I'm-a-developed-market" debate. Geez. Get over it. You were the world's twelfth largest economy last year according to the IMF. Why get so hung up on labels?

And South Korea isn't the only country decoupling from the US. It turns out a lot of economies are finding non-US markets increasingly enticing. It's no wonder. Did you see what the U.S wore to the G-8 summit? Stars and stripes are soooo 1776…

Cheer up America! These economies aren't moving away from the US because we're getting weaker. On the contrary, they're getting stronger and developing more robust domestic markets. Globalization is increasing the fortunes of countries throughout the world. And believe it or not, the US is one of the biggest beneficiaries of this phenomenon.

That's right—all this decoupling is actually great for the US economy and investors. Sure, some still clinging to the idea of a US-centric world might find their egos bruised by the fact that foreign economies are less reliant on us for growth. But more prosperous foreign economies mean more markets for US goods and services. In fact, many of the best known US companies already do or plan to generate the majority of their revenue outside the US.

Additionally, US investors with globally diversified portfolios (which frequent MarketMinder readers know is a must) benefit from more opportunities for diversification too and, especially in the last several years, strong returns overseas.

It's natural to feel a little like Jennifer Aniston post Brad Pitt with all this decoupling going on, but we in the US shouldn't fear the decoupling trend. Free capital markets enable the creation of wealth, not just the redistribution of wealth. Weakening our neighbors doesn't make us stronger – quite the opposite, in fact. The global economy is booming, and we're all better off as a result.

*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.

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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.


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