What No One Else Will Tell You About 9/11

What kind of person rushed out after 9/11 and invested their money in the stock markets of Muslim countries?

Turns out: A shrewd one.

As you may have noticed, it's the 10-year anniversary of "the day that changed everything." I thought I'd scan the performances of different investments and asset classes over the intervening years to see how they'd done.

You know about gold, and Apple stock.

But one thing stood out immediately.

Defying the conventional wisdom, let alone the gloomiest predictions: Someone who invested in the Muslim world following 9/11 has done just fine.

Indeed: Better than fine.

These markets have for the most part left Wall Street, and other Western markets, in the shade.

MSCI, the stock market performance company, has been tracking the markets of six mainly Muslim countries for all of that time. Their annual gross returns range from about 8% a year, in the case of Jordan, all the way up to a stunning 30% a year for the biggest, that of Indonesia.

Let's put that in terms of results.

If you'd invested $1,000 in the stock markets of the developed Western world 10 years ago, and just left it there, today you'd have about $1,500. (That includes dividends, but ignores taxes).

The figure for Jordan: $2,100.

In the case of Turkey and Morocco, you'd have around $4,500 each. Pakistan would have left you with more than $6,000, and Egypt around $7,600.

As for the stock market of the world's biggest Muslim country, Indonesia?

You'd have about $14,200, says MSCI. No kidding.

The figures for someone who invested in these markets right after 9/11 would be even greater. Most of these "risky" markets tanked in the aftermath of the terrorist attacks. Western markets also fell, but by far less, and they rebounded more quickly.

(I'm not surprised I haven't read this anywhere else. In today's cartoon, candy-coated culture, inconvenient facts are simply ignored, or worse.)

It's tempting to shrug this off as an anomaly. After all, these countries are emerging markets, and that's the reason they've done so well. Most emerging markets, from Latin America to Indochina, have done about as well over the same period.

And selective Western countries, such as Canada (13% a year), Australia (15%) and Norway (14%) have also done well.

But there are three lessons for investors in this, nonetheless.

The first is that the things that grab the headlines are rarely the things that actually matter to your long-term investment returns. This may be as true of 9/11 as it is, say, of the three monthly announcements out of Europe that that the European debt crisis has magically solved itself.

In September 2011 most people — most investors — assumed that the terrorist attacks and their aftermath would dominate everything for years, and decades, to come. They haven't.

The second is that the way to benefit from major events may not be obvious. What really mattered about 9/11 was our country's official response. We launched two wars without paying for them, diverted our national energies from our ailing manufacturing base and infrastructure, and watched our national political culture shredded to the point of dysfunction . The best investment at the time was to bet against the dollar. Gold (GCU11.CMX - News) was around $270 an ounce then. It's nearly $1,900 now. The Swiss franc (USDCHF - News) has boomed.

The third lesson? You can often get the best returns by investing in precisely the things that terrify you — and other investors — the most. That's because that's where you get the best deals. You don't face a lot of competing capital, driving down returns.

Consider the Aberdeen Indonesia Fund (IF - News), a closed-end fund trading on Wall Street. On Sept. 10, 2001, it sold for $2.14 a share. When the market re-opened after 9/11 it collapsed to $1.42 — a 20% discount to its underlying assets.

Imagine telling people around the water cooler that you were buying an Indonesian fund around that time. Indonesia is the world's most populous Muslim country.

They'd have called you a nut. A crazy person.

Today the fund trades at $13.90 a share. Throw in $2.50 in dividends, and the you'd invested $10,000 at the lows just after 9/11 is sitting on nearly $120,000 now.

Crazy? Like a fox.