Cases in point came in this week's emailed financial teasers. Sovereign Investor swung for the fences with a broad endorsement of emerging market small cap stocks as insurance against a U.S. debt default. International Living recommends investments in Intel (INTC), Philip Morris (PM), Coca-Cola (KO) and Microsoft (MSFT) for their "above-average emerging markets exposure," whatever that means.
I usually stay away from broad-brush approaches that are "plays" on anything other than fundamental analysis. I can address these with some broad-brush critiques of my own. Small cap stocks in emerging markets are no better than penny stocks here in the U.S. They may be scams and the lack of robust securities regulation in emerging markets means you'll have a tough time doing due diligence or filing a complaint. The four stocks named above may indeed derive significant revenues from emerging markets, but a bad year here in the U.S. can negate such results. It's better to look at their whole pictures. A second act to the Great Recession is imminent, and tech stocks like INTC and MSFT will be hurt badly if businesses curtail IT spending to survive.
S.I. and I.L. are outside the box in thinking about solutions to the sovereignty crunch, Good for them. That's why I read their stuff.
Full disclosure: No positions in companies mentioned.