By Geoff Colvin, senior editor-at-large
FORTUNE -- In a global investment bazaar, where's the best place to invest right now?
Depends on who you are, as three recent responses to that question make clear.
I asked David Rubenstein, co-founder and co-CEO of the giant Carlyle Group (CG) private equity firm (assets under management: $180 billion), where he's looking to buy companies now. He answered immediately and enthusiastically: "The greatest market in the world, without doubt, is still the United States. Because of the rule of law, the transparency, the quality of the managers, the quality of the financing, the opportunities to exit, the United States, despite its 2.2% growth and despite the inefficiencies of Congress, let's say -- there's no doubt that it's still the best place to invest."
A few days later I asked about 100 CFOs from major corporations where they were finding their greatest growth opportunities. Using an audience response system, they were given a menu of nine countries. Their No. 1 choice by a mile was the U.S., named by 44% of them; China was No. 2 with just 8%.
Not long after that I was talking with Rob Arnott, famed investment researcher and strategist. Would he buy U.S. stocks at today's prices? Absolutely not, he said. What looks better? Stocks in emerging markets, he answered; an overall index of them, weighted by fundamental measures like revenue and cash flow, not by market cap, is priced well below long-term multiples. They're a bargain, he argues.
Can all these smart people be right? I think they can be and are. The key is to remember that Carlyle and major corporations aren't investors like you and me. When Carlyle buys a company, it controls the managers. When a big corporation builds a new facility or launches a new product, it obviously controls the whole process. In light of the many U.S. advantages that Rubenstein details, it makes sense that he and the CFOs see the world as they do. While their bets won't all be winners, they'd rather play the game in the U.S.
But when you and I invest in stocks, we're just going along for the ride, and research shows overwhelmingly that we shouldn't even try to pick winners and losers; we should buy the whole market, or not. That's why Arnott is also right. Buying the U.S. market at today's prices will likely produce paltry returns over the next decade.
The U.S. is the world's greatest business environment. But just as a great company can be a bad investment if it's priced too high, so can a great country. We individual investors need to find cheaper markets.
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Now that the economy finally seems to be firmly in recovery mode, it may be time for investors to brace themselves for a slowdown.
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