By Barbara Kollmeyer, <a href=cbs.marketwatch.com>CBS MarketWatch Last Update: 12:02 AM ET May 12, 2003

LOS ANGELES (CBS.MW) - For most U.S. investors, international bonds can be too complicated to bother with, especially when measured against the comfort of good old Treasury bonds. But international bonds could be just the diversifier your portfolio has been looking for, even if you have to dust off that world atlas.

Investors have been dipping deeper into the international bond market waters in search of higher yields. Emerging market bond funds took in $1.81 billion year-to-date, nearly three times all of last year's inflows, according to EmergingPortfolio.com, which tracks foreign bond investment. And international bond funds have taken in $1.69 billion year to date, well up from the $9.47 million of net inflows last year.

Fueling this attention is a growing perception that the three-year U.S. T-bond rally is losing steam because of an increasingly weaker dollar and the possibility of rising U.S. interest rates, both downward drivers for bond prices.

"We don't think Treasury yields have lower to go," said David Rolley, senior portfolio manager at bond mutual-fund powerhouse Loomis Sayles. "If you lend money to the government today, they'll pay you 3.72 percent. That's not a lot."

Indeed, especially when compared to returns such as these: the MSCI Emerging Market Sovereign Index has gained 15 percent year-to-date, on the heels of a 45.5 percent gain in 2002, while J.P Morgan's Emerging Market Bond Index Plus is up 24.9 percent year-to-date.

Tasty returns don't come without risk, of course. Outside of most developed markets, investors need to remember that they're loaning their money to a country or company and a default risk, while remote in the case of a sovereign borrower, is still possible.

But looking beyond T-bonds can bring rewards. "Go into it for diversification," said Andrew Clark, senior research analyst at mutual fund research firm Lipper. "To hold some portion of your bond investment overseas makes a whole lot of sense."

Exploring emerging markets

International bond funds tend to hold either government or corporate bonds or both, and usually include a variety of countries. Emerging market debt has captured the spotlight lately, though the landscape is constantly changing and investors need pay close attention to individual countries, rather than regions or indexes.

"With emerging market debt, you can get nasty surprises. If you want to play that market great, you can get nice returns. Just make sure you're reviewing your holdings once a quarter to ensure you're comfortable with your exposure," Clark said.

Mohamed El-Erian, portfolio manager of the $1 billion Pimco Emerging Market Bond Fund (PEBIX: news, chart, profile), says Brazil, along with Peru, Columbia and Ecuador are "return engines," with more volatility, but better rewards. "The driver is good fundamentals," he added.

He also likes investment grade countries that are relatively stable, which promise yields of 6 to 8 percent. His picks in this category include Mexico, Panama, Poland, Hungary, Malaysia and Russia, the latter a favorite for many fund managers.

"Russia's credit has benefited from high energy prices, reflected in record level of international reserves -- they've benefited from the impact of the crisis of 1998," El-Erian said. "They have strong fiscal accounts and their credit worthiness has been enhanced significantly in the last few years."

One factor that has drawn in more investors to emerging market bonds is a long-term, favorable re-pricing of the emerging market asset class -- helped by improved fundamentals and credit quality of countries, said El Erian. "Whether you look at the amount of upgrades, downgrades or average quality or investment grade credits, now over 40 percent of credits are investment grades," he explained.

Ultimately, though, those playing the emerging market debt game should view it on a three-year cycle, said El-Erian, whose fund concentrates mostly on sovereign debt rather than corporate. And some countries just don't compensate enough for the risk. He cites patients in his "intensive care unit" such as Venezuela, Turkey and the Philippines, where even the short-term fiscal outlook is questionable.

A window on the developed world

The three-year U.S. bond rally has benefited Europe and Great Britain as well. Of course, flattering returns for debt in some funds have stemmed from the euro's appreciation against the U.S. dollar rather than high yields.

"People need to keep in mind that these funds tend not to be fully hedged from a currency standpoint," said Lipper's Clark. "As long as the dollar continues to weaken, they'll get a nice kick." But if the euro flattens out or reverses course, international bond fund investors could be hurt.

European bonds also have seen benefits from the view that interest rates on the Continent can go lower, while U.S. rates are believed to be bottoming.

Loomis Sayles' Rolley says non-dollar denominated debt could outperform over the next 12 months, particularly the euro. "When the dollar goes down, something has to go up. The euro is the most likely candidate. There's not much inflation in the U.S. and even less in Europe.

Rolley also likes Australia, New Zealand and Canadian bond markets, which all have higher yields than the U.S. and appreciating currencies. His group does dip into corporate bonds, but he says investors need to build a broad portfolio of companies rather than focus on a few.

Get the mix right

Just how much to devote? Peter Needham, a financial planner with American Economic Planning, prefers Europe to the more speculative emerging markets. He uses funds such as Julius Baer Global Income (BJBGX: news, chart, profile), which has 20 percent of assets in foreign bonds. He also likes PIMCO Foreign Bond (PFRAX: news, chart, profile), which has some exposure to Mexico and Canada.

Bridget Hughes, senior analyst at Morningstar Inc., points to another couple of top performers -- American Century International Bond (BEGBX: news, chart, profile) and Federated International (FTIIX: news, chart, profile).T. Rowe Price International Bond (RPIBX: news, chart, profile) is also inexpensive with a good manager and track record, she said.

Adds Rolley, the Loomis Sayles manager, "Global bonds as an asset class has been almost a perfect diversifier for a portfolio that includes equities." But watch this market carefully. If a worldwide bull market in stocks ever returns, international bond investors could be left without a ticket home.

April 24, 2003: 2:47 PM EDT

NEW YORK (Money Magazine) - Think about your retirement savings. For many of us, that nest egg is our single largest asset -- and now that nest egg is under assault.

 After three years of steep market losses, Americans are changing their assumptions about retirement. Portfolios have been decimated and 401(k) balances have shriveled.  

 How serious all this is depends largely on how close you are to retirement.  

 For that reason, MONEY's retirement guide offers three age-based plans. Select from the groups below to start getting your retirement plan in order.  

20+ years to go

 The losses seem devastating now. But you also have enough time to bounce back, especially since what you've saved so far is only a fraction of what you will save. <a href=http://money.cnn.com/2002/03/20/retirement/guide_youngest/index.htm><b>READ COMPLETE ARTICLE.</a></b> 

10 Years to go

 If you're in your 50s or early 60s, preparing for retirement can be a schizophrenic pursuit. You need to invest aggressively enough to make up for losses or lack of planning, yet conservatively enough to preserve the wealth you've created so far. <a href=http://money.cnn.com/2003/04/23/retirement/guide_middle/index.htm><b>READ MORE</a></b>.  

Living in Retirement

 There's no worse time than a bear market to start drawing down your nest egg. As a retiree, you have one overriding concern: making sure your money lasts as long as you do. In an era of reduced return expectations and rock-bottom interest rates, you face the daunting task of figuring out how to use your portfolio without using it up. <a href+http://money.cnn.com/2003/04/23/retirement/guide_inretirement/index.htm><b>READ MORE</a></b>.  

(This article, originally published in the April 2002 issue of Money Magazine, has been updated.)  

CBC News 08:35 PM EDT Apr 23 MALCOLM MORRISON

TORONTO (CP) - Despite a generally positive tone to earnings reports, stock markets were mixed Monday morning as investors wait for a catalyst to take markets higher.

Information technology shares helped keep Toronto's S&P/TSX composite index in positive territory, up 18.79 points to 6,544.47 at late morning, after gaining 1.5 per cent last week.

The TSX Venture Exchange was up 3.79 at 1,049.96.

The Canadian dollar was down 0.05 cent to 68.83 cents US.

New York's Dow Jones industrial average edged 11.48 points lower to 8,326.17, after rising 1.6 per cent on the week.

The Nasdaq slipped 5.03 points to 1,420.47; the tech-laden index had climbed 4.9 per cent last week. The S&P 500 index was off 2.18 points to 891.4.

"It continues to be a story of cross-currents - a bit of good news, a bit of bad news," said Patricia Croft, managing partner at Sceptre Investments.

"This just leaves people in a quandary, not knowing which way to go, so it feels like more of the same again."

Investors generally liked what they saw in corporate reports Monday.

3M, best known for Scotch Tape and Post-it Notes, said its quarterly profit rose to $502 million US from $452 million a year ago. Sales were up 11 per cent and 3M stuck to its earnings outlook for 2003. Its shares nudged four cents higher at $130.02.

Shares in American drug giant Merck jumped $1.30 to $57.19 after it earned $1.71 billion, compared with $1.63 billion a year ago. Sales rose 10 per cent, slightly ahead of expectations.

Whirlpool lost 38 cents to $53.30 US after the appliance maker notched a first-quarter profit but lowered its 2003 outlook, citing the uncertain economy.

"People are looking very closely at the quality of earnings," Croft said.

"And so you can beat in the quarter, but if it's all through cost-cutting then it doesn't leave you feeling a lot better about the prospects ahead."

One area unlikely to cause disappointment is the Canadian energy companies. The top oil and gas companies start reporting Tuesday and soaring prices because of the Iraq war, civil unrest in Venezuela and a long, bitter North American winter will result in substantially higher profits.

Energy stocks were higher in anticipation of those reports, with Petro-Canada ahead 48 cents to $48.06 and Shell Canada up 64 cents to $48.

Also supporting energy stocks was an oil price holding above $30 US a barrel. Crude futures were 15 cents higher at $30.70 US a barrel in New York, ahead of an OPEC meeting Thursday which is expected to tighten crude supplies.

All sectors of the Toronto stock market were higher except financials.

Information technology led the advance. Nortel Networks was ahead 13 cents to $3.62 and Zarlink Semiconductor up 18 cents at $7.12.

The gold sector also lent support as the price of the metal climbed $3.70 to $330.70 US an ounce in New York. Kinross Gold gained 30 cents to $9.35 and Placer Dome was ahead 20 cents to $14.70.

Nevsun Resources soared 47 cents to $3.55. The Vancouver-based mine explorer's shares had dropped last week after one of its geologists was murdered near its camp in Eritrea.

Active Toronto stocks included Rogers Communications, ahead 61 cents to $18.60; CAE, down four cents to $3.25; and Tour operator Transat A.T., off five cents to $4.15.

Monday's Canadian corporate reporters include Methanex, the world's largest producer of methanol, and base-metal miner Teck Cominco.

Other big Canadian companies reporting this week include Canadian National Railway, CP Rail, steelmakers Dofasco and Stelco, miner Noranda, CP Ships, software maker Open Text, Goldcorp Inc., Manulife Financial and printer Quebecor World.

On Friday, Air Canada is scheduled to report, as the airline continues to operate under protection from creditors, and faces a court hearing Tuesday at which unions, suppliers and creditors are expected to file motions seeking to protect their positions. Air Canada declined three cents to $1.15.

In economic news, a key indicator of short-term future economic activity in the United States declined in March. The Conference Board said its index of leading economic indicators lost 0.2 point last month to 110.6, pushed down by worries over higher oil prices, the war and potential terrorist attacks.

Most overseas financial markets were closed for Easter Monday, but Tokyo's Nikkei stock average gained 94.57 points to 7,969.08.

Singapore's Straits Times index ended at a three-week low on worries about SARS, as the Health Ministry moved to quarantine all 2,400 workers at the city-state's largest wholesale vegetable market.

<a ref=www.thestar.com>The Toronto Star Apr. 21, 2003. 11:47 AM MALCOLM MORRISON CANADIAN PRESS

Stocks were mixed this morning with New York markets giving up initial small gains that followed positive quarterly reports from a pair of Dow components.

Information technology stocks helped keep Toronto's S&P/TSX composite index in positive territory, up 19.18 points to 6,544.86 at midmorning after gaining 1.5 per cent last week.

The Canadian dollar was down 0.19 cent to 68.69 cents (U.S.).

New York's Dow Jones industrial average edged 10.64 points lower to 8,327.01 at midmorning, after rising 1.6 per cent on the week.

The Nasdaq slipped 7.04 points to 1,418.46; the tech-laden index had climbed 4.9 per cent last week. The S&P 500 index slipped 0.98 point to 892.60.

3M, best known for Scotch Tape and Post-it Notes, said its quarterly profit rose to $502 million (U.S.) compared with $452 million a year ago. Sales were up 11 per cent and the company reaffirmed its earnings outlook for 2003. Its shares nudged 70 cents higher at $130.68.

Shares in American drug giant Merck jumped $1.95 to $57.84 after it earned $1.71 billion, compared with $1.63 billion a year ago, in line with expectations. Sales rose 10 per cent, slightly ahead of expectations.

Whirlpool gained 74 cents to $54.42 (U.S.) after the appliance maker notched a first-quarter profit but lowered its 2003 outlook, citing the uncertain economy.

Last week's modest gains came after a mixed presentation of corporate reports. So far, earnings for the first three months of the year have been mixed, with disappointments often attributed to the impact of the war in Iraq and to unusually cold weather.

One area unlikely to cause disappointment is the Canadian energy companies. The top oil and gas companies start reporting Tuesday and soaring prices because of the Iraq war, civil unrest in Venezuela and a long, bitter North American winter will result in substantially higher profits.

Energy stocks were higher in anticipation of those reports, with Petro-Canada ahead 52 cents to $48.10 and Shell Canada up 49 cents to $47.85.

Also supporting energy stocks was an oil price stubbornly holding above the $30 (U.S.) a barrel level. Crude futures were 18 cents lower at $30.37 (U.S.) a barrel in New York, ahead of an OPEC meeting Thursday which is expected to tighten crude supplies.

Nevsun Resources soared 49 cents to $3.57. The Vancouver-based mine explorer's shares had dropped last week after one of its geologists was murdered near its base camp in Eritrea.

All sectors of the Toronto stock market were higher except financials.

Information technology led the advance. Nortel Networks was ahead seven cents to $3.56 and Celestica added 28 cents to $15.63.

The gold sector also lent support as the price of the metal climbed $3.20 to $330.20 (U.S.) an ounce in New York. Kinross Gold gained 25 cents to $9.40 and Placer Dome was ahead 20 cents to $14.70.

Other active Toronto stocks included Alcan, up 45 cents to $44.15 and Tour operator Transat A.T., off five cents to $4.15.

Monday's Canadian corporate reporters include Methanex, the world's largest producer of methanol, and base-metal miner Teck Cominco.

Other big Canadian companies reporting this week include Canadian National Railway, CP Rail, steelmakers Dofasco and Stelco, miner Noranda, CP Ships, software maker Open Text, Goldcorp Inc., Manulife Financial and printer Quebecor World.

On Friday, Air Canada is scheduled to report, as the airline continues to operate under protection from creditors, and faces a court hearing Tuesday at which unions, suppliers and creditors are expected to file motions seeking to protect their positions. Air Canada declined three cents to $1.15.

In economic news, a key indicator of where economic activity in the United States is heading fell in March. The Conference Board said its index of leading economic indicators fell by 0.2 points last month to 110.6, pushed down by worries over higher oil prices, the war and potential terrorist attacks.

Most overseas financial markets were closed for Easter Monday, but Tokyo's Nikkei stock average gained 94.57 points to 7,969.08.

Singapore's Straits Times index ended at a three-week low on worries about SARS, as the Health Ministry moved to quarantine all 2,400 workers at the city-state's largest wholesale vegetable market.

04/20/03 - Posted 11:36:03 PM from the Daily Record newsroom By Warren Boroson, Daily Record

It's a good time to invest in closed-end funds -- especially, emerging markets' funds. That's the view of Mark Mobius, who runs various Franklin Templeton foreign stock funds.

Closed-end stock funds are cheap, he believes, because most investors have been piling into bond funds.

"Look around the world," he said at a closed-end fund conference last week. "Things are so cheap. The gap in price-earnings ratios and in book value between the United States and emerging markets is as great as it's ever been. Everyone owns bonds, but bonds are at their top. Now is the time to look at stocks."

His favorite foreign country: South Africa.

Mobius, who has a doctorate in economics and political science from MIT, is a peripatetic investor, traveling around the world on his private Gulfsteam IV jet. Advertisements for his funds have featured his shiny bald head -- a posture in accord with his easygoing, cheerful, I'm-just-an-ordinary-guy charm.

He will even talk about his mistakes. Such as the time that he invested in a company in a tiny foreign country because when he visited its stores, the parking lots were jammed. Later, he discovered -- to his chagrin -- that it had been raining cats and dogs there for two weeks and this was the first opportunity that people had to do any shopping.

Another example of his modesty: In his talk last week, he mentioned that a Scotsman -- not overjoyed about Mobius' recent track record -- called him Dr. Dubious.

Once Mobius was scheduled to appear on a radio program that I was hosting. He didn't make it: Stuck overhead in an airplane. He fell over himself with apologies and quickly arranged another interview.

Where would he invest today?

"South Africa is at the top of my list," he said. "Some of the best companies in the world are in South Africa."

He also mentioned South Korea. And he said Argentina and Brazil were "interesting." As for China, "You're not going to step into a pile of gold there, but there will be growth there."

Closed-end funds are mutual funds that trade directly among investors, through a stock exchange, not through the fund. One result is that shares of a closed-end fund may trade at prices higher, or lower, than the total value of the securities that it owns. The whole may be worth less, or more, than the sum of its parts. (Usually less.)

Such funds have one big advantage, Mobius noted. If investors become agitated and sell their shares, a closed-end fund doesn't have to sell its holdings to pay them off. Investors must sell their shares to one another. This is a blessing in particular for emerging-markets funds, where it's often tough to sell large blocs of shares -- which is why so many emerging-markets funds are closed-ends.

With an open-end fund, the fund company may be forced to sell its securities when investors become agitated -- securities that the fund probably was eager to continue owning. Mobius said, "There's no way an open-ended fund can be in emerging markets."

A big disadvantage of closed-ends is that they often trade at a discount to their underlying value. "And there's no way we can raise the prices -- apart from road shows" (appearing at public meetings), Mobius said.

Buying back shares might seem to be a solution, he went on, but it doesn't always work. The fewer shares outstanding, the higher the costs of running the fund.

Besides, the Securities and Exchange Commission has enacted restrictions against closed-ends buying their shares. Mobius said he would love to be able to buy back shares of his funds at certain times when investors sell.

The question of how to eliminate the discount, without open-ending a closed-end fund will remain a hot topic, Mobius said.

Another disadvantage of closed-ends, Mobius said: Brokers don't want to sell closed-ends funds. "We have to make it more attractive to brokers to trade closed-ends."

He acknowledged that some investors are skeptical about foreign markets in general because of problems with corporate governance: crooks running stock markets. "I am happy to say," he added with a laugh, "that these days, the United States has the same problem."

What countries doesn't he like?

He said he'd probably get into trouble by answering, but he mentioned Venezuela, Colombia, Ecuador, Peru. He is also out of Pakistan -- its market is "illiquid" -- and he considers the Philippines a "problem."

Japan?

Everyone else seems to think that the country is "a mess," but finally, Japan seems to be paying attention. "I have a lot of faith -- I think Japan will pull through."

As for Iraq, "Its market is booming," he said. "We're looking at both Iraq and Iran. Muslim countries are interesting."

Someone asked: What exactly are emerging markets?

The leading definition, Mobius said, is all the low- and middle-income countries. Later, he said -- with a laugh -- that he invests wherever he wants.

Closed-ends began in 1822 in Belgium, Mobius said, and the first U.S. closed-end started in 1893, 30 years before the first traditional, open-end fund. The first Templeton emerging-markets fund was a closed-end, Mobius said.

In 1993, he said, his sister-in-law bought one of his emerging markets funds at the top of the market. The next year, he was scheduled to have dinner with her at her home in Buffalo, N.Y. He rang the bell; opening the door a crack, his sister-in-law told him that she wouldn't let him in until he gave her back the money she had lost.

So he said to her, "I'll tell you how to make the money back." "How?" she asked.

"Buy more shares.

"She slammed the door in my face."

I'll be teaching a course on "All About Investing … for the Absolute Beginner" at the County College of Morris from 7 to 9 p.m. Wednesday. Cost: $25. To register, call (973) 328-5000.

Warren Boroson can be reached at wboroson@gannett.com or (973) 428-6647.

Boroson on Money appears Tuesday, Fridays and Sundays in the Daily Record.