In 1912, 21-year-old Williams gained fame as a survivor of the sinking of the RMS Titanic.

Later that year, he went on to earn his first U.S. mixed tennis championship.

Now a member of the International Tennis Hall of Fame, there wasn’t much Williams didn’t win.

He was a 1924 Olympic gold medalist, Wimbledon champion and a five-time U.S. tennis champion.

On top of all his accomplishments, he was also a highly successful investment broker. Unfortunately for Williams, that was also his unraveling.

He became a partner in an investment firm called C. Clothier Jones & Co. in 1929. His business partners in the small $5 million firm ($61.5 million today) were some of the brightest, most successful investors in the world.

Of course, after the stock market hit the skids in 1929, the company took a hit. But thanks to the rally in first half of 1930, C. Clothier Jones & Co. was in better shape than ever.

He was on top of the world in the spring of 1930. But just like the year before, market speculators pushed stocks higher than they were worth. By late summer, the rally turned into another massive sell-off.

When October came around, Williams and his partners were doing everything they could to stay in business. Their investments turned to dust, and they were so incredibly overleveraged the only course for them was to fudge some numbers and blatantly lie to shareholders.

Williams left the country in mid-October to get married in Europe. By the time he returned, he was a wanted man, for market manipulation. Four of his colleagues and large investors in the company had ended their own lives in that single week.

We are facing another summer of 1930. The rally that started in March of this year is eerily similar to what made Williams and his partners look like kings of investing.

Luckily, you don’t have to end up like them when the house of cards falls again…

Take Advantage of the Global Edge

We’re fortunate to have history lessons when trying to figure out the market. But there are certain aspects of today’s market that just weren’t there in 1930.

Some, like trade imbalances and foreign lending, make today’s global economy a scarier environment. Others, like emerging economies, give us a serious advantage over our forefathers.

Even if the average investor of 1930 were aware of a possible second downturn, his options would be incredibly limited. Only a millionaire in 1930 could invest in other, safer economies. Of course, even that would’ve been difficult, since those were so few and far between.

Today, it’s as effortless as buying an ADR through your online broker. But as last time, figuring out which ones to buy is no easy task.

I ramped up my Lifetime Income Report portfolio to reflect my favorites: Asia, Africa and Latin America. Every single one is showing strong double-digit gains and safe, growing dividends. And I expect them all to thrive even if this is another 1930…

I just added another international giant in my absolute favorite country, and it’s set to do even better. To learn more, just click here…

Sincerely,
Jim Nelson

November 19, 2009

A Lesson from 1930: Avoid the Second Collapse with This 6.9% Brazilian Yield was originally featured in the Penny Sleuth.

You see, the economic recovery in prices started in EVERYTHING last March — but to be clear, the overall market and the profitable commodities market are inextricably tied together.

The S&P 500, my proxy for the stock market in general, has been a leading indicator for commodities. With stocks up over 50% from the lows it provides insight into future moves in other markets.

The CRB Index, Commodity Research Bureau, recently broke above the 267 level making new yearly highs. It’s now on target for a new near-term goal, which represents a 50% rally in commodities since last years dip.

Higher Oil prices are also a good sign that the global economy is on the mend. In addition, it is supportive of stocks with Exxon and Chevron adding major points to the DOW sending it above 10,000.

Add it all up and it’s easy to see that the CRB, and other commodities in particular, are on target for now.

The Best Opportunity for Commodities Profits…

My recent commodities travels took me to the west coast to revisit acquaintances made during the July National Chicken Marketing convention.

My big takeaway from the exhaustive chicken information was that corn was deemed undervalued by most of the presenters and professionals in attendance. And I trust these guys, after all, it’s their business to know the cost inputs from the egg to the bird on your plate.

The corn crop at that time looked set to make it through the summer months in great condition with no fears in sight to disrupt high yields.

Though my view on trading weighs heavily on technical analysis I learned long ago not to ignore important fundamental information. The upside was greater for corn to rise than drift below $3.00 on perfect growth.

How to Turn Price Charts into Quick Gains…

Corn prices were low (just over $3 a bushel), and that’s exactly when I told readers of Resource Trader Alert to get into a corn play. Over at RTA we use options to directly play commodities themselves – options help limit our risks while giving us a nice risk reward payout.

(I normally don’t give out the specifics of my trades — but I’ll make a special exception for today’s article.)

For our corn option play the maximum risk was a little over $1100 dollars with six full months of fundamental factors to boost prices to $4.00 a bushel. Chicken convention consensus was that our goal should be reached by year’s end – but in fact it was much sooner. The recent high on our RTA option play was around $2,400 – which represents more than doubled our initial investment.

That’s just how quickly the commodity options can move.

The price of corn rallied 25% but our corn options ended up doubling in that same time. By using options we were able to maximize our profit potential and completely limit our risk.

The Charts Know More Than the Farmers…

The reality of fundamental trading on weather, planting intentions, yields, exports or crop disease is that the information does not flow freely to everyone at the same time. The farmers, seed salesmen and grain elevator operators use their legal inside information in the market before others. The price charts are one way of seeing what people know — without having to “really” know.

At the July chicken conference the major fundamental support of grain prices was slated to be ethanol demand. But the present grain rally connection to ethanol is difficult to prove at best. In fact, the correlation with crude oil gains has just now only started to kick in as prices rise above $80 a barrel.

With that in mind it’s fairly safe to say that the combination of weather premium and dollar weakness started this grain move instead of the much-anticipated demand from ethanol and biofuel production.

The chicken men were right on price but maybe wrong on the reason. This is a perfect illustration of focusing on “what” the market is going to do, not “why.”

And although huge chicken-related profits aren’t quite hatched they are definitely on the right path to growing healthy, big and strong.

It all comes back to commodities,
Alan Knuckman

November 13, 2009

The Single Best Move for Quick Commodity Profits was originally featured in the Penny Sleuth.

But you’re not out of luck just yet…

Many countries around the world will be able to steer around this extended recession. Some are even in prime position to explode.

And it’s not as difficult to invest abroad as it may seem. Today, it’s as effortless as buying an American Depositary Receipt — same thing as a stock — through your online broker. Figuring out which ones to buy is the hard part.

In Lifetime Income Report, we’ve ramped up our portfolio to reflect our favorites: Asia, Africa and Latin America. Today I’m letting Penny Sleuth readers in on two south-of-the-border plays you can play immediately…

Escape the Second Downturn on Lula’s Coattails

Our favorite international plays come from Brazil. This probably doesn’t come as a surprise. We’ve been bullish on Brazil for over a year now.

The Brazilian economy has never looked better. For starters, the democratic government of President Luiz Lula da Silva is both popular and smart. Instead of leading the Brazilian people down the same road they always seem to end up on — collapsing currency and enormous income disparity — Lula re-cemented the federal and state budgets, brokered trade deals across the globe, and brought the country’s economy into top-ten status.

This success helped him win a landslide reelection in 2006. Even his political opponents can’t discount the success he’s had in making sure Brazil didn’t fall into the same recession that’s now captured the rest of the globe.

Sure, smaller export numbers and commodity prices have put a small hold on Brazil’s growth. But by this time next year, the country’s GDP should be back up to a 3.5-4% growth rate.

Lula has been able to do this by placing a little fiscal responsibility into a system that’s rarely had it. It’s been just 11 years since Brazil suffered from its last currency crash. Thankfully, the country adjusted its currency after that fiasco, completely taking the real off the U.S. dollar peg.

This is probably the most important reason Brazil is now starting to garner some recognition as a safe haven for growth investing.

The federal deficit and spending habits here in the U.S. can only hold for so long. Even China — the country holding more U.S. Treasury Notes than any other — recently remarked that it would like to drop the dollar as the world reserve currency.

Having a currency that’s not pegged to the dollar is a huge benefit in today’s inflationary world.

But besides a superior currency, Brazil investments come with many other perks that interest smart investors.

The Brazilian Advantage

Take tax rates for instance. It’s easy to find foreign plays that pay large dividends. It’s difficult to find ones that don’t have a cut taken off the top just because you’re a foreign investor.

Canada is the most common example. Until very recently, Canada had some of the best royalty plays in the world. The vast resources of our neighbor to the north translated into large income distributions for investors.

That all changed in 2006, when the Canadian Finance Minister Jim Flaherty decided to take advantage of all the rich American investors coming across the border for those large yields. Now, if you are an American, you have to pay his government 15% on all Canadian income trust distributions you receive.

This is a new trend developing throughout the investing world. Fortunately, there are a few safe income havens left. Brazil, Great Britain, Indonesia, Hong Kong, and Mexico are the five zero-tax-withholding countries that we are focused on.

Another perk Brazil has to offer is its rapid acceleration on the world stage. Lula’s popularity and successful reforms have helped put a spotlight on South America’s largest country.

Not only is Lula’s voice highly anticipated in any international gathering, his ability to highlight his country’s tourism-friendly assets helped Brazil lock in the 2014 World Cup and 2016 Summer Olympics.

Of course, just having a great investment location isn’t enough. You need to have the perfect investment to take advantage of it. And we have two of them…

Grab Green Income with the World-Leading Hydro Generator

When most people think of renewable energy, they think of wind farms and solar plants. But one of the most widely used forms of renewable energy is hydroelectric. And no country knows more about hydropower than Brazil.

The Itaipu hydroelectric dam, located on the Panara River between Brazil and Paraguay, is currently the largest in both capacity and annual generation in the world. The site generates nearly 100 billion kilowatthours (Bkwh). That would be enough to power 11.2 million U.S. homes. That might be why the American Society of Civil Engineers picked it as one of the Seven Wonders of the Modern World.

Brazil entered into an agreement with Paraguay in 1973 to build and share the electricity produced from Itaipu. Currently, Paraguay uses it to power more than three quarters of its electricity needs, selling the rest of its share to Brazil.

It was during that 1973 treaty signing that Brazil decided to go headlong into the hydropower business.

The South American leader now generates more than 372 Bkwh per year from hydroelectricity — 85% of total generation.

Brazil is also expanding its capacity at a rapid rate. Over the next 20 years, only China will be generating more electricity from hydropower plants.

Lula’s government has spent plenty to back hydropower expansion. Most of the $221 billion earmarked for infrastructure, transport and energy in Brazil’s stimulus plan is slated for hydro capacity increases.

To take advantage of Lula’s hydropower initiatives, and reap the rewards of Brazil’s fast-growing economy, you should take a serious look at these two hydro giants:

• Companhia Paranaense de Energia (NYSE: ELP) is a major player in the Brazilian hydro market. The company owns 17 different hydro plants, most of which are located on the Panara River. The stock is in position for an easy double from here.

• Enersis (NYSE: ENI) owns and operates 53 power plants — most of which are hydroelectricity plants — that have an installed capacity of more than 14,000 MW. We could see units of ENI continue to climb over the next year. Meanwhile, you’ll be able to collect large dividend yields for as long as you hold it.

While they’re bigger than most of the opportunities that we talk about in the Sleuth, they offer the some of the best exposure to the burgeoning utility sector in Brazil. I expect them — and other Brazilian ADRs — to do well in the coming months regardless of where the market heads here at home.

Sincerely,
Jim Nelson

November 6, 2009

Two Brazilian Plays to Beat the Market was originally featured in the Penny Sleuth.

But like most investments, successful commodities trading requires knowledge of what’s going on in the market right now.

Buying oil or corn contracts without a deep understanding of where these resources stand is a sure way to lose. That’s why today I’m going to fill you in on where some of the most popular commodities sit, and how they relate to the stock market…

That last sentence may surprise you. Even though the stock market is a few levels removed from commodities trading here in Chicago, I’ve said it before and I’ll say it again: “It ALL comes back to commodities…”

Up, up and away Superman…Dow hits 10,000 again.

Stocks have made new yearly highs and the prognostication of the S&P 500 climbing back to the breakdown point of 2008 on the downside at 1200 seems very attainable. The technically driven stock market ignores the news and sees earnings only through rose-colored glasses.

For the week ending October 16 stocks kept the rally moving with new highs in all the major indices. The broad based S&P 500 was up 16 points, +1.5%, to lead the way followed by the Dow up 131 points, +1.3%. Technology struggled to keep pace with the NASDAQ only up 18 points, +0.8%, to finish the week.

The economic recovery in prices started in everything last March – to be clear the overall market and the commodities market are inextricably tied together.

The S&P 500, the stock market in general, has been a leading indicator for commodities. With stocks up over 50% from the lows it provides insight into future moves in other markets. The CRB Index, maintained by the Commodity Research Bureau, broke above the 267 level making new yearly highs last week. It’s now on target for the 335 objective, which represents a 50% rally in commodities.

Higher Oil prices (wow what a turnaround in the last two weeks from $65 to $80) are a good sign that the global economy is on the mend. In addition, it is supportive of stocks with Exxon and Chevron adding major points to the DOW sending it above 10,000.

Lower Gas Bills – 20% Off Sale

One market that my Resource Trader Alert subscribers have been keeping an eye on is natural gas.

This from Reuters:

“U.S. consumers are expected to pay lower natural gas bills this winter compared with last year due to above-normal gas supplies and cheaper energy prices, the American Gas Association said on Monday.

“Plentiful domestic natural gas supplies and lower wellhead prices will drive bills down this winter and provide relief for natural gas customers struggling in a trouble economy,” the AGA said in its annual winter outlook.

“Natural gas inventories have already hit an all-time high and are expected to remain at record levels by Nov. 1, which is the start of the U.S. heating season. Utilities built up those stocks throughout the year with gas that was much cheaper than in 2008.”

I get emails here at RTA asking why I’m in bullish positions in almost everything we trade. Well the easy answer is in the risk to reward. At historic low levels the upside is much greater than the limited downward potential. One market for me that is possibly setting up for a bearish play is Natural Gas. It used to be very tied to Crude but that relationship has changed dramatically in the last few years.

Gains in the Grains

The Grains, namely Corn and Beans have reverted back to fundamental news to move prices. New relative highs last week were a result of weather fears delaying harvest and hurting yields. When the near term forecast showed less extreme temperature drops a profit-taking sell off hit the trend Thursday.

After further analysis the 60 cent ($3000 per contract) run for Corn and over a one dollar move ($5000 per contract) in Soybeans can be traced to a technical breakout rally October 5th. That day also marks the month low for the S&P, a break in the Dollar Index below 77 and Crude finding support levels. So in reality this Grain rally is as much about global economic recovery and the weakening Dollar adding inflationary fears as the temperature outside tumbles.

As the stock market continues to climb – justified or not – commodities trades are going to keep seeing those bullish sentiments trickle over to commodities floors. Right now is as good a time as any to take the market to task for some serious short-term gains. And I’ll continue to be here to help you do just that.

It ALL comes back to commodities,
Alan Knuckman

October 22, 2009

Your Exclusive Glimpse at the Commodities Market was originally featured in the Penny Sleuth.

As recently as September 2008, realtors could claim that no one had lost money in the Dubai property market. That’s no longer true. In fact, now the market has too much of just about every property type. One headline story noted how 32,000 homes are about to come on the market next year, which is a big number to choke down in any city. Dubai had a huge property boom and now must suffer the flip side.

The hotels, too, are pretty empty. I’m staying at the new Address Hotel downtown, which has been open for only 25 days, we are told. I’m the first person to stay in my room. It still has that new carpet smell.

I wandered down for breakfast and was alone in a cavernous dining room. The hotel is brand-spanking new and everything looks wonderful. It’s just mostly empty. I think there are more hotel workers than there are guests.

In Dubai, revenue per room is down 35% from a year ago. Yet there is still an expansion going on. Next year, estimates call for a 15% increase in the number of rooms. This would mean a 40% increase in two years.

Over breakfast, I perused my complimentary copy of The National. One of the things I like to do in a foreign city is to read the local newspapers. I’m kind of a newspaper junkie anyway — I get three dailies delivered to my doorstep at home. In any event, I always find interesting nuggets from a perspective you might not get if all you read is The Wall Street Journal or Financial Times.

Today’s business page carried an array of tales… There was the arrival in Doha of a new LNG tanker, fresh from Seoul’s shipbuilding docks. There was a story about how UAE consumer confidence is up. Also, notes on bond issues in the Gulf, the latest figures on money supply in Kuwait (it’s rising at a frighteningly quick pace of 18.7%), the price of villas in Dubai and more. All sorts of little odds and ends that help paint the picture.

There was also a lot of chatter about infrastructure, which I found particularly interesting. Abu Dhabi, the capital of the UAE, which I will visit on this trip, is looking to raise $100 billion for infrastructure projects. From The National: “The emirate needs to fund new transport, electricity and telecommunications schemes…”

Dubai itself also has ambitious infrastructure spending plans. Last night, as we made our way to our hotel, we could see the new Dubai Metro stops along the way, which, lit up as they were in soft blue and white twinkling lights, looked like something out of the future.

Incredibly, the Dubai government last year spent about 45% of its budget on infrastructure projects — mostly on the roads and ports. But there is a lot more on tap, as The National reports:

“Dubai could invest as much as $20 billion in desalination projects in the next decade alone as it increases its water output by 2.72 billion liters a day… [There are also] plans to add 14,405 megawatts by 2017… Construction costs for those new plants amount to $11.6 billion, while infrastructure costs, including substations and transmission lines, will be about $11.6 billion.”

Sincerely,
Chris Mayer

October 6, 2009

Dubai’s Infrastructure Opportunity was originally featured in the Penny Sleuth.

It seems like utilities are the only industry that haven’t had a great year in 2009. That’s a shocking fact for many investors who counted on stable recessionary profits from utilities stocks.

In the past, utilities have been touted for their recession resistance. Brokers even went so far as to call them “widow-and-orphan stocks” because as USA Today’s John Waggoner puts it, “A stockbroker could sell utilities stocks to old Widow Brown (or Orphan Annie) without worrying that the townspeople would someday chase him down Main Street with dogs and torches.”

The torches would certainly have come out in 2008 when the sector shed 27% of its value – and again this year, when utility stocks lost another 30% as the S&P 500 rebounded by 15%.

Indeed, while the average publicly traded stock has increased in valuation by 40% since March, utilities have only seen a 24% reprieve from the depths of the market’s lows.

Believe it or not, that’s exactly why one subset of the utilities industry is such an attractive investment right now.

Why an Industry Mired in Doubt Could Pave Your Path to Profits

Don’t get me wrong; there are plenty of reasons to continue to stay away from the utilities sector as a whole. Utilities stocks are slow growing, they deal with all of the drawbacks of extensive government regulation, and with interest rates again on the rise, the cost of capital is liable to increase dramatically for the second-largest corporate borrower behind the financial sector.

But each of those arguments against investing in utilities is a double-edged sword that falls short when it comes to international utility stocks.

That’s because international utilities that operate in emerging markets are actually growing at a breakneck pace as countries like China and India develop their infrastructure and deliver things like electricity and clean water to their citizens. Overseas, where in many cases utilities have more say in the regulatory process, these companies act like government-sponsored monopolies.

And with dovish economists nervous to overcompensate on the interest front, it’s unlikely that any interest rate increases that we see in the next several quarters will materially hurt utilities stocks – especially those in high-growth areas.

So while domestic utilities continue to be mired with doubt and concern, investing in international utility stocks seems like a pretty exciting recession play right now.

Another of the utilities sector’s biggest draws is dividend income. Historically, utilities are one of the top-paying sectors when it comes to dividends – yet another reason why they’re so well-liked during recessions. When capital gains dry up during a bear market, dividends can often mean the difference between keeping your head above water and sinking with the ship. Even as utilities staged their disappointing tumble last year, consistent dividend income has lived up to expectations.

International Utility Profits Through ETFs

Naturally, one of the best ways to get exposure to international utilities is through exchange-traded funds (ETFs).

At present the ETF offering for utilities is staggering – from broad based utilities index funds like the Utilities SPDR ETF (NYSE: XLU), which is based on the S&P 500’s utility components to the PowerShares Progressive Energy ETF (NYSE: PUW), which invests in utilities that engage in environmentally friendly practices. But for international exposure, there are only two funds that stand out right now…

First is the iShares S&P Global Utilities ETF (NYSE: JXI). This fund, which is based on the utility components of the S&P 1200 Global index offers investors a good spectrum of international utility stocks as well as the stability of a few domestic plays thrown in. The fund’s top five holdings are all diversified overseas utility providers that operate in emerging and high growth markets, including E.ON AG, GDF Suez, and Enel SpA.

A relatively low expense ratio (0.48%), coupled with a 4.81% dividend yield make JXI a very attractive fund right now.

The other fund worth looking at is the WisdomTree International Utilities Fund (NYSE: DBU), which has thinner volume than JXI and a somewhat higher expense ratio (0.58%), but offers slightly more exposure to small-cap utility plays. Both funds share a very similar investment philosophy and hold many of the same stocks.

A 20% Upside in the Technicals

Taking a look at JXI’s chart above, even at first glance it’s pretty clear that this ETF is already in a sustained uptrend, one of the most important things that we look for in any trade. In early July, the stock’s 50-day moving average (the light blue line) crossed over its 200-day moving average (the dark blue line). Moving averages, which chart the average price of a stock over a given number of days, give us a glimpse at how a stock is trending relative to its past. Seeing a shorter-duration moving average cross over a longer-duration average is a bullish signal that suggests the real uptrend is only just beginning in the stock.

What’s also significant to us is the trading channel that JXI finds itself in right now. The fund has been bouncing in the same channel since March, and is currently toward the bottom of the channel, primed for a bounce back to the top. If this stock follows the pattern that its been exhibiting for the last six months, there could easily be a 20% upside on a JXI play.

As you might expect from such a closely related fund, DBU’s chart is nearly identical to JXI’s… That means that these two ETFs can be traded interchangeably.

From a fundamental perspective, it’s clear that international utilities are being undervalued by investors right now. And from a technical perspective, these two ETFs look primed to take off in the short term with a potential 20% upside for investors willing to take the plunge.

Cheers,
Jonas Elmerraji

September 11, 2009

These Utility ETFs Are Set to Soar was originally featured in the Penny Sleuth.

And it’s a region that holds the key to growth opportunities that could eclipse the growth in the BRIC countries.

In fact, this region collectively has a bigger economy than Brazil, Russia or India already. And in terms of growth, it is growing faster than any of these countries. In terms of population, it’s bigger than the U.S. and nearly as populous the EU. It holds 60% of the world’s proven oil reserves and nearly half of its natural gas.

That last clue probably gives it away. I’m talking about the Middle East and North Africa, or MENA.

Among its largest economies are Saudi Arabia and the United Arab Emirates.

In one of my presentations at Agora Financial’s 10th Annual Investment Symposium in Vancouver, I focused on the growth in these economies because it touches on nearly everything we’ve talked about here recently – water and food scarcity issues, infrastructure needs, energy and the growth in non-U.S. trade. To start, let’s look at a couple of basic facts that push this along.

The first is explosive population growth. MENA is one of the fastest-growing regions in the world. Over the last 50 years, MENA’s population is up more than fourfold. And the population is still young, with the majority of the population under 25 years old. Over the next 30 years, MENA’s population will grow more than 60%, to nearly 700 million people.

The second is that trade is expanding in this part of the world, as I highlighted in last month’s letter. To show this in a different way, let’s look at Syria.

Yes, Syria. Long a pariah state with which the U.S. maintained frosty relations, all that is beginning to change. In July, the U.S. made a couple of announcements that I thought signaled an important shift. First, the U.S. would send an ambassador to Damascus after a four-year absence. Second, the U.S. would ease export bans to Syria.

But more important than this political thaw is the economic story. Syria has been a mercantile crossroads between East and West since its days as a link on the old Silk Road.

Put Your Money Where China Puts Theirs

The ancient city of Aleppo, for instance, was a key stop along the old Silk Road. Even today, it still has the longest covered market in the Middle East – a souk seven miles long. There you can find goods that take you back in history – soap made from olive oil or silk scarves and keffiyehs of a variety of colors. Head down an alleyway and find gold jewelry and stands of fresh pistachios and sacks of spices and more. Then there are the backstreets of hawkers with lamb – always plenty of lamb – and you smell the scent of lime, garlic and mint.

But much has changed, as Ben Simpfendorfer relates in The New Silk Road. Today, for the first time in 22 years, banks in Syria can set their own interest rates on loans and deposits. Today, you can change money on the street without the threat of a ball and chain winding up around your ankles. A stock market even opened for business in March.

The largest investor in the country is Haier, a Chinese company. It makes 50,000 washing machines and 50,000 microwave ovens in Syria every year. Another Chinese company, Sichuan Machinery Import & Export, recently completed a $180 million hydroelectric plant here. There are big real estate projects, including a new $300 million resort on the Syrian Mediterranean coast. There are some 40,000 new hotel beds coming online in the next three years – up from 48,000 currently. Tourism is already 13% of the economy.

Syria is basically following the “China model” of maintaining a closed political order but carving out free zones and allowing trade.

Of course, this isn’t some Big Rock Candy Mountain fantasy where the sun shines every day on the birds and the bees and the cigarette trees. There are all kinds of problems in Syria, and elsewhere, but I find the changes taking place so far absolutely remarkable.

In a sense, we’ve seen this movie before. Roger Owen wrote the classic study on the Middle East and its place in the economy. In his book, he covers the period 1800-1914. This was a time of growth and transformation. At least a few points are similar to today. Then, as now, the region experienced a huge population growth. The Middle East’s population alone grew 300%. Then, as now, trade grew even faster under a more liberalized economic regime.

Then, the Middle East benefited from growing demand for agricultural goods from European markets. Today, the region benefits from expanded trade with China and the rest of Asia for the region’s oil.

But that’s not to say that oil has solved the problems of the MENA countries…

Right now, these countries are looking to invest in farmland overseas. The Saudis have grabbed farmland in Indonesia. The UAE has locked down farmland in the Sudan and Pakistan. As Eckart Woertz of the Gulf Research Center in Dubai says: “In a global food crisis, you may find it difficult to secure food supplies at any price no matter how many oil revenues you have.”

When I got back home from Vancouver, there was an issue of The Economist waiting for me. It had a cover story on the Arab world titled “Waking From Its Sleep” and a 14-page special report within. What’s happening in this part of the world is starting to get more attention.

The key takeaway from all of this is to recognize this other, non-BRIC, growth engine and the needs and opportunities it creates. Once again, we’ll see enormous investment in food and water resources to feed and slake the thirst of all these people. And we’ll need all of the infrastructure and burn all of the hydrocarbons that come with that growth.

Sincerely,
Chris Mayer

August 26, 2009

Forget BRIC… These Emerging Economies Hold the New Keys to Growth was originally featured in the Penny Sleuth.

Diaz was willing to give up his presidency, but apparently not to Madero. Diaz imprisoned Madero on election day. Madero broke out and escaped to Texas, where he published his “Letter From Jail” — a manifesto for suffrage and term limits. 

In this letter, the hint of agrarian reform and socioeconomic changes was enough to start the Mexican Revolution and seat him as the new president in 1911. While his presidency was a failure, his principles lived on.

After a bloody revolution from 1910- 1921, Mexico started implementing many of Madero’s suggestions, including free land distribution to peasants and constitutional social rights. These changes helped Mexico’s GDP grow sixfold between 1940-1970.

Nearly 100 years after Madero’s pen spurred economic and political change in Mexico, a second “Mexican manifesto” was published, and we have a chance to get in on Mexico’s revolutionary growth. 

Studying the Subtleties of Obrador’s Manifesto to the People of Mexico

On July 29, 2009, disenfranchised former presidential candidate Andres Manuel Lopez Obrador drafted Manifesto to the People of Mexico.

The 2006 presidential election in Mexico was a brutal, down-to-the-wire fight. In fact, many Mexicans still don’t recognize the current president, Felipe Calderon, as the legitimate leader of Mexico. Obrador contested the results and even ends his pronouncements — including the Manifesto — with the sign off, “Andres Manuel Lopez Obrador, Legitimate President of Mexico.”

The left-leaning Obrador continues to mock and fight with supporters of Calderon, as well as the president himself. In his manifesto, Obrador slams Calderon’s handling of this economic recession. But there is another message articulated in this document — one you need to familiarize yourself with.

He writes, “It is crucial to continue creating alternative networks of information to break our enemies’ manipulation of the media. It should be borne in mind that the very instrument of domination that the oligarchy uses is through controlling television, radio and the press.” This simple paragraph is the third of five changes he claims the Mexican people need to fix their political and economic systems. It’s also a giant opportunity for us.

If media control goes back to the people of Mexico as Obrador suggests, it will do so in one of two ways: dissolving the current media outlets completely or restructuring them.

Dissolving television, radio and newspapers as they stand today would probably be a disaster. In today’s modern world, the demand for information is incredible. 

Restructuring, however, would take only a few small tweaks and could help drive Mexico’s economy out of this recession.

While the current government does have a large amount of influence on media, it operates in a pseudo free market system. Many of these outlets — TV and radio stations, newspapers, and even international press agencies — are publicly traded. 

Restructuring would lead to billions of pesos pumped into these organizations, which would push share prices much higher. Even the possibility of spin-offs would create moneymaking opportunities.

How Mexico’s Second Manifesto Could Pay You a Fortune was originally featured in the Penny Sleuth.

Most of the time, backdoor plays offer the largest profits in growth industries like this one. Sometimes, however, a straightforward approach is your best chance at the quickest gains. This is one of those times.

Take China Mobile, for instance. This telecom behemoth is the most obvious play in the region. In the last three years, the company doubled the number of subscribers and grew its bottom line 107%. That’s a rare feat for a $230 billion company.

China Mobile’s growth is impressive, but it’s nothing compared with what a small-cap player can do in this field. And with the telecom industry in Asia predicted to almost double by 2013, there’s plenty of room for other players to grow too.

That’s why we’ve been looking for under-the-radar Internet providers in Asia. And we just we found the only place worth looking at…

The Forgotten Power in Asia: Investing in Hong Kong

Most people think of China, India and Japan when you bring up Asia. The place most often left out of the conversation is Hong Kong — a Chinese territory that in 1997 ended 156 years of British rule.

Other than the small island nation of Brunei, Hong Kong has the largest GDP per capita in the entire region. In fact, the small territory is No. 14 in the whole world, and it’s only four spots behind the U.S.

Most are writing Hong Kong off these days, however. With the recent global financial collapse, Hong Kong’s large financial services industry was slaughtered. Even so, the world can’t just forget about this tiny-but-affluent region.

The Hong Kong Stock Exchange, for instance, is host to companies worth a total $2.7 trillion. That’s 10 times larger than the American Stock Exchange!

Another surprising tidbit about Hong Kong is the resilience of its tourism industry. While nearly every country in the world saw a decline in number of tourists, as well as income from its tourism industry, Hong Kong actually saw its tourism grow. Last year, the number of visitors to Hong Kong grew 5%, and average spending per overnight visitor grew 6.2%.

Needless to say, this is an overlooked region, but it shouldn’t be. Hong Kong is very capable of producing winners.

Right now, there is a small handful of exciting Hong Kong telecom plays that are worth looking at, but unfortunately, at this stage, it’s a case of look but don’t touch. Many of them are too speculative to mention here right now.

Watch the region — we’ll let you know when that changes.

Sincerely,
Jim Nelson

August 14, 2009

How to Profit from the Asian Internet Boom was originally featured in the Penny Sleuth.

Let me explain…

From 1990 to 2004 the number of internet users in the US absolutely exploded — going from less than 1% of the population back in 1990 all the way up to over 65% in 2004.

Check out the US’s hyper Internet growth chart below:

And, as you know by now, the rapid increase in Internet usage spawned enormous growth in computer and internet-related companies. Microsoft went up 9,750%. Yahoo jumped a whopping 7,763% in just three and a half years. And AOL, the grand daddy of them all, went up 73,050%from its 1992 IPO to its peak at the end of 1999.

The trick was to identify the growth early. And to get out before the bubble burst.

Well today we’ve got a rare second chance to “turn back time.”

As investors and traders, it’s rare that we get any second chances. But when you’re presented with one, you’d be a fool not to jump on for the ride.

But rather than betting on the US internet usage though, we’ll be exploiting the next a hyper growth industry that’s still in it’s infancy – emerging market telecoms.

According to the latest from the talking heads in mainstream finance, the world’s combined GDP is expected to grow at a 2–3% pace over the next several years. But emerging telecoms is anticipated to grow upwards of 45% by 2013.

Just 10 years ago, 86 million people around the world had a cell phone. Today, that number is more than 3.4 billion. That’s as if Ethiopia’s population grew to those of China, India, the U.S. and all of Western Europe combined.

With the ever-growing global economy, and the advent of the smartphone, the future for mobile phone sales looks bright. Smartphones, such as the iPhone and BlackBerry, have caused quite a stir around the world — even in countries historically ahead on mobile phone innovations. Smartphone sales are expected to triple in the next four years, bringing the number of worldwide users to 1.1 billion by 2013.

Along with cell phones, an exceedingly large number of emerging market Internet users are expected to come online in the next four years.

According to a Forrester Research report, the number of Internet users in 2013 will be 2.2 billion, or 45% more than the end of last year.

These two growth categories – mobile phones and Internet access – are both led by emerging economies. As you can see on this map, the number of Internet users in Asia should grow 377.5 million, or a whopping 67.4% in just four years!

This report also found that 52% more Latin Americans will be online in 2013, and the number of African users should double in this period.

The best way for penny stock investors to play this trend will be through ETF’s.

Each ETF investment will let you own hundreds of these tiny – and sometimes even privately owned – emerging market telecoms. And they’re as easy as buying a stock on the NYSE…

For a list of emerging telecom ETFs, simply go to www.morningstar.com and use the ETF screener.

Although the search will return quite a few, SPDF S&P International Telcommunications Sector (NYSE: IST) and WisdomTree’s International Communications (NYSE: DGG) are two of my favorites.

Both of these will allow you to play the fastest-growing industry in the world, as well as help you diversify your portfolio.

Remember, we rarely get a second chance at making a fortune. I suggest you jump on this one immediately.

Sincerely,
Jim Nelson

August 13, 2009

A Rare “Second Chance” at Making a Fortune was originally featured in the Penny Sleuth.