When Jim Cramer first got involved in the stock market, he believed that international markets were so "Wild West" that people shouldn't be in them or trust any of their financials, he said on TheStreet.com TV's Wall Street Confidential
Web video Wednesday.
Now, however, when he looks overseas he sees that the whole template has changed.
"The financials are just as honest as ours, but the markets are all better," Cramer told Farnoosh Torabi, the host of Wall Street Confidential.
"I've realized that you have to keep diversifying overseas," he continued. "Ten years ago I would have said you should have 10% of your money
overseas and now I think up to 20% or 25% of your money should be overseas."
Cramer said that's because he considers the U.S. a "no-growth" country with a higher bent for inflation and rigid
policy that encourages no growth because growth is inflationary.
"We've flipped with Germany," he said.
While 10 years ago Germany had the mindset that it couldn't have any growth because it might cause inflation, it now believes it must have growth to generate employment.
Cramer said he would invest in the countries with the highest growth and the lowest inflation.
"There's no secret as to why Germany is up huge this year much more than any other market," he said. "It's because they are set up in their country in order to be able to have more growth than they used to have."
Even in a weaker-dollar situation, Germany's market is doing better than the U.S., Cramer said. That's because the country has a "bias upward," he explained. "You look for countries that have a bias to create great wealth and you invest in those countries."
Also, investing in U.S.-based companies that have international exposure is "the low impact way to do it."
"I call them ROWers or Rest of Worlders," Cramer said. "
He said he urges people to think that Canada, Mexico and Brazil are a part of the Rest of World complex. "It's really our hemisphere where I would put 50% of the 20% that I would put overseas," Cramer said.
Exchange-traded funds are the first thing people think of when investing overseas. However, Cramer said he doesn't believe there is any reason for ETFs. "They're just to generate fees."
If he were still working at Goldman Sachs, Cramer said he would be generating an ETF a day and trying to stretch the boundaries of ETFs because his goal was always to make his quarter.
"I think that the industry is inherently disingenuous about this stuff," he said. "The way to create good profits is to create new product."
Cramer suggested taking ETFs off the table and said he doesn't care how popular they are. "They are just not the way to go because they are a mixture of bad and good," he said. "They make you very lazy because they make it so that you don't feel like you have to do any homework, which is ridiculous."
Market players always have to do their homework if they're going to own anything other than Treasuries, Cramer stressed.
Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for
Action Alerts PLUS. Watch Cramer on "Mad Money" weeknights on CNBC. Click
here to order Cramer's latest book, "Mad Money: Watch TV, Get Rich," click
here to order his book, "Real Money: Sane Investing in an Insane World," click
here to get his second book, "You Got Screwed!" and click
here to order Cramer's autobiography, "Confessions of a Street Addict." While he cannot provide personalized investment advice or recommendations, he invites you to send comments on his column by
TheStreet.com has a revenue-sharing relationship with Traders' Library under which it receives a portion of the revenue from Traders' Library purchases by customers directed there from TheStreet.com.