Jacobson: So I know that there are parts of your portfolio outside the United States that are not dedicated to Europe…
Fuss: Oh yeah.
Jacobson: ... Can you talk a little bit about what you are doing there, particularly as regards to currency?
Fuss: Well, on the currency side, at current levels, we certainly like New Zealand a lot. There isn't a lot to buy in New Zealand--we're not alone in this view. And while they are currently just coming back into surplus again, the government is now circulating holders, asking how they will react as they start to pay down the government debt. You say, this is too good to be true, it probably is not going to happen. But by goodness, they were doing it before the recent worldwide slowdown, chances are they may continue that, and they say they want to, and everything underpins that unless they have another big earthquake, or one of the volcanoes goes off. So, that's good.
Canada on a forward-looking budget process looks excellent. For the currency, the interest rates are just a tad higher than ours, and it's hard for the Canadian dollar to get too much away from the U.S. dollar in a hurry, although it's done it a couple times. It's now roughly par with U.S., and the cross-border trade is such, it's going to take time, but I suspect they are probably ... give them another 10% on the upside relative to the U.S. dollar, and then at that time, it's going to be heavy weather trying to go forward.
Australia, yes, but the cycle impacts Australia much more, particularly the economic cycle in Asia and the Mainland. Australia is becoming more and more at the increment dominated by the mining companies. They dig the ore out of the ground, send it to China. So, if China's growth slows or if it goes flat, then they stop ordering iron ore, and that impacts the Australian dollar.
But nonetheless, those are the three places that look good--Norway also. Norway, you can't ignore that they're right next door [to Europe]. Scandinavia is part of Europe; Finland is in the euro. But Sweden and Norway both look good. Sweden much more dependent on Europe itself; Norway has got all that oil. They run this humongous surplus every year, but they've got to invest that, and they invest it outside of the area. They can't really plough it back into the oil business.
Then, we are a little more cautious than we used to be when it comes to the emerging market, a lot of which have emerged. Still good dynamics in many respects, Eric, but what you got to look out for there is, they really--I mean, Australia has some exposure to Asian demand--Brazil has all sorts of exposure to Asian demand, as well as to North America.
Politically Brazil seems OK; they have come a long, long way. Mexico also. Mexico, however, civil order is a bigger issue, unfortunately, because the economy has been strong, and obviously benefits a whole lot from us. And even without homebuilding getting going, the U.S. demand is very beneficial. But the law and order part of it has gotten really, really difficult, and that is really bad. So are we there? Yes, we are there. Are we there a lot? No. Are we there and you might say further out the credit curve? No. It's sort of OK. Statistically, very, very cheap. But [there are] some other reasons to be cautious. The election is nearly upon us, and we'll see. I suspect either way--no matter who wins the election--things ought to quiet down a bit. I hope. I have the same hope here.