Foreign Investments

The United States and China, concluding high-level economic talks, agreed to launch negotiations on an investment treaty that holds out the promise of greatly expanded opportunities for U.S. companies in China's vast market. The two countries also pledged greater cooperation to deal with energy shortages and global pollution. The agreements were announced Wednesday by Treasury Secretary Henry M. Paulson Jr.

The once-struggling U.S. dollar suddenly is the strongman of the world's major currencies. That's great for Americans' purchasing power -- but if you've noticed, it's a heavy blow to the foreign stock holdings in your portfolio. And because U.S. investors have pumped huge sums into foreign-stock mutual funds in recent years, this turnabout in the dollar may be much more painful for your nest egg than previous rallies in the currency.

Foreign stocks had been the shining stars in many U.S. investors' portfolios from 2003 through 2007. This year, they're beginning to look like black holes. With the global economic outlook fading and the dollar rebounding, Americans' foreign holdings are suffering a double-whammy. If you haven't checked your portfolio lately, you may be in for a shock. The average foreign stock mutual fund has plunged 18.1% year to date, according to Morningstar Inc. That's more than double the 8.

Major Asian banks that have pulled themselves from the depths of their own economic crisis of the 1990s are showing now just how crucial a role they may play as the U.S. tries to restore health and confidence to its tottering financial system. Japan's biggest bank said Monday that it planned to spend as much as $8 billion for a 20% stake in investment banking firm Morgan Stanley in New York.

Africa's abundant natural resources have long invited foreign exploitation. Over generations, foreign empires and companies stripped the continent of its gold and diamonds, then its oil. Rubber and ivory were plundered from Congo. Even Africa's people were exploited: captured and sold into slavery abroad. Now foreigners are enjoined in a new scramble in Africa. The latest craze? Food.

China's powerful economic machine is losing steam, raising significant concerns for many businesses that are counting on the Asian nation to help them ride out the global financial crisis. The Chinese government said Monday that economic growth in the third quarter slowed sharply from a year earlier to 9%, the lowest level in more than five years. China's economy expanded by 11.9% in all of 2007. But weakening demand for Chinese factory goods from U.S.

The U.S. gave the world the worst financial crisis since the Great Depression. In return, global investors reward us by dumping their own currencies in favor of the dollar. Make sense? Although the greenback fell slightly Thursday after weeks of soaring against most of its major and minor rivals, the world's hunger for the U.S. currency shows no serious signs of abating. The euro plunged Wednesday to a two-year low of $1.285, from $1.313 on Tuesday.

Foreign stocks were a tremendous source of wealth generation for U.S. investors from 2003 through 2007. They were the best-performing asset in many people's 401(k) plans. But most of those gains now have disappeared, wiped out by the global market meltdown of the last few months. The accompanying chart puts the 2003-07 rally -- and this year's plunge -- in perspective. It gives a sense of how much foreign markets would have to rebound just to get back to their 2007 peaks.

This attractive old mill town along the Chattahoochee River, with its brick downtown and streets of cozy, unpretentious homes, could be the backdrop for a patriotic American car commercial -- lacking only the plaintive croak of a Bob Seger or John Mellencamp. But America's Big Three automakers, which are teetering at a financial abyss, shouldn't expect much sympathy here.

Nearly three-fifths of the employees at General Motors Corp. work for a company that makes cars that are admired, popular and profitable. They just don't work in the United States. GM has a bigger presence outside the U.S. than in it, employs more people in other countries than here, and actually makes money selling cars everywhere from Sao Paulo to Shanghai. Its U.S. revenue has sunk 24% in the last three full years, but in the rest of the world, GM can boast a 28% increase.