Globalization - Friend or Foe?

As an investor in American equities, I have always taken comfort in the saying "American economy catches a cold, the world economies catch Pneumonia" - this has always told me that our collective standard of living (here in the US) is relatively certain to be maintained. And, that as a recovery begins, my domestic holdings should, at least in theory, enjoy a much quicker return to their original values.

However, as an investor in XLF, BAC, JPM, AXP, C, KO, and many other holdings with a global reach, I have to ask myself. Is globalization a good thing or bad? On the surface, the answers always jump out. Yes, it is a great thing. It gives us the ability to expand into new markets, with often times higher margins and escalated growth rates. It also gives the ability to entrench in some markets where advertising, and other costs of doing business are lower. It allows for the development of goodwill and reduces (for goods companies) shipping costs. However, some major concerns lurk just under that glossy surface.

Companies doing business internationally are now prone to local issues - governmental uprisings, negative US public sentiment, political instability (when leaders get replaced) and other powerful influences. Also, we face currency devaluations. As the world struggles to gain traction to get over their pneumonia, there can be increased local taxes, weaker currencies, strained labor markets, increased tariffs, etc. Magnify this across across the globe, with each region prompting different responses, at different levels, to different problems, and one can only imagine how difficult this would be to manage.

Risk management departments can be diligent, efficient and proactive, but if the scenario were challenging enough, it can cause major issues.

ALL OF THIS IS JUST MY OPINION.

I am trying to weigh the value vs. risk of these newfound markets. Also, as a long time investor in financial stocks, I am well aware of the issues in catching problems within a company. These often go undetected until the problems are way out of control. And, as witnessed with Bear Stearns, etc. this can happen literally in days. The finance, investment banking companies rely on confidence, and once that goes, the business can literally go - away.

Again, just me rambling.

Back to the question at hand though. Is it really worth it? Are these new, semi-untapped markets really that valuable to American business? I have to say no. I can understand that investors, myself included, want to see strong sequential growth. Of course. But, not at the expense of that blissful security we feel by being in the US. With the laws in place here, some of the strictest around, we still get tooled by unscrupulous business people. We still get duped into believing that an investment house is being prudent with our monies as investors, when we find that they are so far leveraged, it would make a Vegas pit boss cringe. We still get ripped off. So, how can we think that we would do any better in other countries.

I know that as a US Publically traded company, the top management is from the US - I get that, but in order to truly do business internationally, it is imperative that the management is localized. Often times that localization can come at a price.

I am not saying that non US managers are bad - not at all. But the standards and ethics abroad can sometimes be less than par. And with the status of current affairs, I do not want to leave anything to chance.

Good Luck All,

Mr. Boo 1031