At age eleven, I began to spend summers in Gaeta, Italy, a small city located on the Mediterranean coast between Rome and Naples. Gaeta was, at one time, an old fishing town, but in the 1960s it became a tourist destination for Europeans and the home base of the United States’ Sixth Fleet.
On my summer excursions, there seemed to be just as many Germans and Americans in Gaeta as Italians, and I quickly began to notice the cultural differences: Italians, and Europeans in general, were bilingual; drove smaller cars; didn’t have great TV shows; kids didn’t drink milk; alcohol was not restricted by age; and my cousins at the same grade level at school were far ahead of me in math.
True to their hospitable nature, my Italian relatives always did their best to accommodate me. I’ll never forget my first morning. We stayed with my grandmother, who had an American friend pick up a few things at the NEX or PX (base retail store) so that I would have a seamless transition to living on Via Indipendenza. When I awoke, my grandmother proudly poured Cheerios into a bowl of milk for me.
I placed that first spoonful of Cheerios into my mouth and then immediately discharged all of the contents over the kitchen table. My relatives were stunned and a few choice Italian phrases that cannot be repeated here flew from my embarrassed father’s mouth.
“The milk’s warm and bad…real bad,” I said quietly.
Apparently, my grandmother didn’t have her friend pick up regular old cow’s milk at the PX. Instead, she bought fresh goat milk. No offense to lovers of goat milk, but that foul tasting liquid has yet to pass these lips again since that memorable morning.
Here’s an interesting point I quickly learned during my vacations. I might be considered to be Italian here in the U.S., but to native Europeans, I’m American. No matter how many vowels my last name has (approximately 5), I was an American at 11, and still am today.
I spoke Italian—sort of. My parents never spoke English at home. They spoke to my brother, sister, and me in Italian, and we responded in English. Here’s the problem. My parents talked to us in a dialect that was only spoken in the Naples region of Italy prior to World War II. My Italian relatives loved to hear this 11-year-old speak in a dialect they hadn’t heard in decades. One time while traveling on a train to a nearby city, I began talking to a lady sitting next to me. She asked my Dad if we were from some remote Italian town on some mountainside outside of Naples.
Everyone with “Napolitano” roots over the age of 40 understood me, but kids my age throughout Italy had no idea what I was saying, so everyone eventually just spoke to me in English.
Later, while I was in college, I had the opportunity to travel the European continent on a Euro Pass and stayed at youth hostels. There are around 50 countries in Europe, including Vatican City (yes, technically the Vatican is a country), which is situated on 110 acres inside of Rome. It is interesting that despite the pervading religious iconography and architecture throughout the continent, most Europeans are not very religious and they clearly separate politics from religion—a far cry from our domestic leaders who constantly refer to the Lord in political speeches.
Over the past several years, Europe has suffered from a multitude of economic problems, ranging from serious recessionary pressures to the potential demise of the economic powerhouse known as the European Union. News often bordered on catastrophic, and Europe’s decline would have had tremendous economic impact, as the world relies on many European products and companies, from Royal Dutch Shell gasoline to Nestle’s Quik.
In a recent article in Financial Planning Weekend Update, Cindy Sweeting, Director of Portfolio Management at Templeton Global Equity Group, asserted, “Europe is a once-in-a-generation buying opportunity right now. Today, the price of European equities as a whole is at a 40-year low relative to U.S. equities. And we believe the current gap in earnings is likely to close over the coming months and years.”
Growing up, I was very lucky to have a once-in-a-lifetime opportunity to backpack through both western and eastern Europe during the Cold War era. Is this a second one? Can I actually have a second once-in-a-lifetime European opportunity?
You may ask, why would I suggest you invest in an area of the world fraught with problems? Because, looking forward, Europe will recover and investors will be handsomely rewarded.
As you know, I have been recommending the Vanguard Europe ETF (VGK) for some time, and since then, I have been slowly increasing my exposure to the European continent. VGK has a year-to-date return of 11.4%, over a 5% yield and carries a net expense ratio of only 0.12%. Holdings include Nestle, HSBC, Novartis, Vodafone, BP, GlaxoSmithKline and Royal Dutch Shell.
Simply put: Europe is an important long-term opportunity that should not be ignored.
By the way, my favorite European cities are Paris, Prague and of course, Gaeta.
Have a productive week.
This update was written by Ron Mastrogiovanni and Chris Leone.
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