James Moore: How safe is your haven? Following the flock might not be smartest choice

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The Independent Online

Outlook Such is the herd mentality among investors that it needs only the merest hint of trouble and they are falling over each other in a rush to so-called "safe havens". It really is like so many sheep clustered together at the corner of a field. Russia? Sub-Saharan Africa? Pfah. You can keep your gaudy yields and your fancy returns on capital. Even some more developed "emerging" markets – parts of Asia for example – can expect short shrift. It's German Bunds and US Treasuries for us. Right on cue the former hit a record low yield yesterday morning. Baaaaa!

But should these countries be considered safe? With Spain's latest wobble – this time over the bailout of Bankia – creating yet another panic, it's a question worth asking.

Charles Robertson at Rennaisance Capital argues that they should not. He points out that they have public debt to GDP ratios of between 90 and 100 per cent (worse than Spain's). And they have central banks (the Federal Reserve and the European Central Bank) which can no longer really guarantee that investors' money will be protected if they return home. In Germany there are even some voices contemplating just a little dose of inflation, which would ease the debt but erode investors' capital). Those sheep clustering at the far side of the field? There's a whole pack of wolves waiting.

However, while the US and Germany might no longer be such safe bets from an economic standpoint, they do have one thing in their favour: governance. They are democratic and politically stable. The rule of law is another big plus point.

But Mr Robertson doesn't actually argue for a wholesale shift into Russia or Sub-Saharan Africa (where governance is often troubling). He just argues that exiting is short-sighted and suggests that we seek new "safe" havens, perhaps Scandinavian bonds. Perhaps even (apparently) solid stocks like Apple.

He has a point. And remember this: the US came within a whisker of a de facto default when Tea Party backed Republicans – for whom compromise is anathema – threw their toys out of their cots over the setting of the federal budget. It's not only emerging markets, then, that that have "issues" when it comes to good governance.