BlackRock’s Koesterich: Investors Should Jump Into the CASSH Countries

Monday, 03 Dec 2012 12:23 PM

By Michael Kling

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It's time to invest in CASSH, says Russ Koesterich, BlackRock's global chief investment strategist. No, not putting your money under your mattress or in a bank savings account.

In the latest Wall Street acronym, CASSH stands for Canada, Australia, Singapore, Switzerland and Hong Kong.

Koesterich, who coined the term, argues that several factors make those countries especially attractive to investors, according to CNNMoney, including that they largely escaped the financial crisis, weathering it much better than the United States or Europe; they lack anything comparable to the eurozone debt crisis or U.S. fiscal cliff; they have advanced economies and liquid financial markets; and by and large, they have balanced budgets and low unemployment.

Editor's Note: Prophetic Economist Warns: “It’s Curtains for America.” See Evidence.

Investors, he says, can find stocks of first-class companies at good prices trading in those countries.

Koesterich thinks the gross domestic product in CASSH countries will increase 3 percent, on average, next year, compared with about 1 percent in the eurozone and just over 2 percent in the United States and Japan.

Currency risk is one drawback, he admits, according to CNNMoney. To minimize that risk, Koesterich recommends spreading investments equally among the countries, perhaps through exchange-traded funds (ETFs).

"On both a price-to-book and price-to-earnings basis, the CASSH countries are, on average, about 10 percent cheaper than the average valuation of the United States, Europe and Japan," Koesterich wrote in an article for Seeking Alpha in August.

Although skeptics say the CASSH strategy is simply a commodity play, as Canada and Australia are heavily involved in commodities, the group as a whole is more diversified, he argues.

"Hong Kong and Singapore are largely driven by financials, and Switzerland has a significant weight to defensive sectors, specifically pharmaceuticals and consumer staples," Koesterich pointed out.

He recommends underweighting larger developed regions, particularly southern Europe, and putting that money into CASSH countries.

For ETFs investing in the countries, he suggests the iShares MSCI Australia Index Fund, the iShares MSCI Canada Index Fund, the iShares MSCI Hong Kong Index Fund, the iShares MSCI Singapore Index Fund or the iShares MSCI Switzerland Index Fund.

Editor's Note: Prophetic Economist Warns: “It’s Curtains for America.” See Evidence.

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