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Building a 'New CASSH' Portfolio

NEW YORK (TheStreet) -- One of the benefits to exchange traded products is the democratization of sophisticated strategies and innovative ideas for do-it-yourself investors. A few days ago, a new acronym ala BRIC started making the rounds derived by John Burbank from Passport Capital -- New CASSH.

New CASSH stands for New Zealand, Canada, Australia, Switzerland, Singapore and Hong Kong. Burbank believes that those countries stand to benefit the most if the financial crisis lingers on. Additionally Burbank said the following in the Australian :

"The way the Western world is dealing with its problems is essentially trying to appreciate and print money, and that is going to the detriment of emerging markets as they have to deal with higher food and energy prices, At least in the West, where food and energy are a lot lower, they don't have this problem, at least not to the same degree. And in the case of (the New CASSH) asset class, Canadians and Australians are essentially beneficiaries of inflation, New Zealand has agriculture."

This line of thinking is certainly plausible and to the extent it is appealing there is a way to create the concept with ETFs.

One element of the strategy pertains to the financial crisis carrying on longer. If this is plausible then it stands to reason that there will be more dominoes to fall, and if that is the case then loading up on ETFs heavy in financial stocks would be a bad idea. Four of the six "New CASSH" iShares country funds have 30% or more in financial stocks including 60% in iShares MSCI Hong Kong ETF (EWH).

There are two alternatives to going all in with the six funds. One would be to simply embed some combination of these countries into a diversified portfolio that has other exposures or seeking out narrower funds or individual stocks to contribute to building the New CASSH portfolio.

The iShares MSCI New Zealand Investable Market Index Fund (ENZL) only has 14% in financial stocks which makes it a reasonable proxy for the New CASSH theme. However, there is very little agriculture exposure in the fund which is the reason that Burbank likes the country. One development to keep an eye on is whether NZ dairy co-op Fonterra ever goes public. It would be one of the largest holdings in the ETF and also be easily accessible as an individual stock making the agriculture exposure more direct.

The iShares MSCI Australia Index Fund (EWA) is fine proxy for the country but it has 43% in financial stocks with only 27 in materials; the sector that includes commodity miners. A better way to play the theme with a fund would be the IndexIQ Australia Small Cap ETF (KROO). The small cap fund is 39% in materials stocks with only 6% in financials. If world currencies devalue then the resources mined out of the ground become more valuable the creating a path for the smaller ETF to outperform the large cap iShares fund.

Canada is obviously oil rich which plays right into Burbank's theme. The iShares MSCI Canada Index Fund (EWC) is 25% energy and 21% materials. Another choice is also from IndexIQ with its Canada Small Cap ETF (CNDA) which is 50% materials and 19% energy. I think a better way still would be to use an oil stock like relative mega cap Suncor (SU).

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