munKNEE.com Your Key to Making Money
Martin Weiss’ team of international experts – Mike Larson in North America, Claus Vogt in Europe, Tony Sagami on Asia, Rudy Martin on South America – and Ron Rowland, one of the nation’s foremost experts on international exchange-traded funds (ETFs), met recently to discuss and determine what they think is coming next. They came up with eight new forecasts for 2010 — some very negative, some very positive – and put forth specific, actionable recommendations based on their conclusions. Words: 1969
Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com, presents below reformatted and edited [..] excerpts from an article* by Martin Weiss (www.uncommonwisdomdaily.com) for the sake of clarity and brevity to ensure a fast and easy read. (Please note that this paragraph must be included in any article reposting to avoid copyright infringement.) The article goes on to say:
1. The Obama administration and Congress will be paralyzed and unable to pass another big stimulus package and unable to prevent a double-dip recession!
Just in the past few weeks, we’ve seen an outpouring of bad data and news on the economy — GDP slowing sharply, a key manufacturing index hitting a seven month low, home sales running at the lowest level in nearly a half-century, bank lending falling – and horrendous jobs reports.
Voices are clamoring for another stimulus package but… Congress is paralyzed… and the President does not have the political – or financial – capital to make it happen. The Congressional Budget Office has estimated that the U.S. budget will produce a deficit of $1.5 trillion this year and $1.3 trillion in 2011, already far worse than they thought just a year ago… and now they’re going to get far lower income tax revenues… and far bigger bills for unemployment checks than they’ve been expecting. Even if the economy just slows down moderately, the deficit could explode well past $2 trillion in 2011 and it’s the exploding deficit that’s bringing massive political resistance to more stimulus on both sides of the aisle.
2. The entire burden of fighting recession and financing deficits will fall on central banks and, as such, Bernanke and his counterparts in Europe will launch a second, even bigger round of money printing!
These [new] paper dollars will not create real prosperity in the United States or Europe… and, [unfortunately,] a substantial portion of that money [will] wind up flowing to other countries where there is true, fundamental growth.
3. The sovereign debt crisis will soon return with a vengeance — first in Eastern Europe, then in the U.S. and the U.K.!
The sovereign debt crisis is not over by a long shot… even though the IMF and the EU [primarily Germany] bailed out Greece, Portugal, Spain and all the other PIIGS countries. Everyone seems to forget that the PIIGS countries are not the only ones in trouble. According to one of the world’s most respected institutions, the Bank of International Settlements (BIS), the sovereign debts of the United States (90% of GDP) are worse than the sovereign debts of PIIGS countries like Ireland (83%) and Spain (73%). Furthermore, the BIS says that, if the U.S. government allows current trends to continue, then …
4. The government debt burden in the United States will soon be worse than the debt burden in Greece!
Ultimately, the debt burden in the U.S. will reach 400% of GDP, more than triple the debt burden of Greece today… [This will result in] more recession in Europe and the U.S., more money printing to offset the shocks, more declines in the euro and the U.S. dollar … and at best, more false prosperity.
5. Growth in China will continue to be at least four times greater than that of the U.S. and Western Europe!
As mentioned above, a substantial portion of that money [will] wind up flowing to other countries where there is true, fundamental growth – and where the growth is based on real demand – and that’s China and the rest of Asia. Let’s compare the performance of the U.S. versus China:
a) the U.S. economy contracted by 2.4% last year despite all the bailouts while China’s economy GREW by 9.1%
b) the U.S. is growing at an annual rate of about 2.5% while China is expected to grow 10.5%
c) retail sales in China soared 18%, six times better than in the U.S.
d) China’s exports in June surged 44% compared to last year while U.S. exports increased by a measly 2%
e) China now consumes more energy than the U.S. and General Motors now sells more cars in China than it sells in the U.S.
China is not alone, however. Consider Singapore, for example, whose GDP has expanded year-to-date at an annual rate of 19.3% and that’s eight times faster than the GDP growth in the United States. Then there’s Indonesia…
6. Over the next 12 months, investors in Indonesia will make even more money than investors in China!
Indonesia has growing like a weed and now it’s growing even faster. Its stock market is up 20% so far this year. Its currency has surged 5% – and it’s just warming up. There is a massive shift in capital and wealth from the West to the East… and Indonesia is getting a supersized share of that wealth. Foreign investment in Indonesia has surged 51% compared to last year. This is a megatrend of far-reaching consequences.
7. While Asia outperforms the U.S. and Europe, Brazil and Chile will outperform most of Asia!
The big growth spurt in China and Asia was the first wave. Now, the big growth spurt in countries like Brazil and Chile is the second wave. If you’re looking for the next China, the next massive growth spurt that will carry forward for many years, you should go to South America. South America exports to China and Asia, and that was the starter engine for growth in South America but now South America’s growth engines are powered by domestic demand.
a) Brazil
Just a few years ago, over half of Brazil’s people were at the margins of society, outside the cash economy. Now, those same people open bank accounts. They use credit cards. They pay taxes. Just a few years ago, Brazil was importing energy. Now it’s entirely self-sufficient in energy and awash in new oil discoveries.
b) Chile
Chile has come so far so fast it’s now classified as a developed economy. Chile produces more copper than any other nation in the world — five times more than the United States. While U.S. consumers are strapped for cash and cutting back, Chile’s are cash rich and spending more. While U.S. banks are struggling, Chile’s banks just enjoyed a 57% jump in profits in the first half… Plus here’s the biggie: unlike the U.S., Brazil and Chile have virtually no foreign debts.
The big picture is very clear — bad news in the U.S. and Europe, good news in Asia and South America. Now let’s get down to the heart of the matter — how investors can make money.
8. Some of the greatest fortunes in the world will be made in international ETFs
Right now, there are 86 single-country ETFs — one or more for each of the major countries in the global markets today. You can pick almost any country with a viable stock market… click your mouse or call your broker to buy an ETF for that country… and you’ll instantly have a nice, liquid, diversified basket of that country’s leading companies. [In addition,]there are 103 other indexes in other countries that have all outperformed the best performing index in the U.S. For example, since the March lows of last year, the Chile ETF is up 104%, Australia’s +105%, one of the leading China ETFs is up 111%, Brazil is up 114%, Singapore +127%, South Korea +130%, Thailand +143%, and India +158%.
On a 2009 calendar year basis, if you had bought the ETF that tracks the Dow Jones Industrials at the beginning of the year and sold it at the close of last year, you’d have a gain of 22.8%, including dividends. On a comparative basis, however, the Singapore and Australia ETF were both up 68%, South Korea was +71%, Thailand was +81%, Chile was +86%, India +102% and Brazil +121%.
Year-to-date the Dow Index is up a meager 2.2% while the Dow ETF which includes dividends is up about 3.7%. A couple of foreign markets, like Brazil and Australia, are down a tad but many foreign markets are, again, greatly outperforming the Dow ETF. South Korea and India are up 2 times more than the Dow and Chile, which we talked about earlier, is beating the Dow by 5.5 to one this year.
The above results are kind of short-term oriented, just 2009 and 2010… but if you want to invest with core, long-term money, go all the way back to the beginning of 2003 and consider how much you could have made. In Singapore, you could have made 274%, South Korea +194%, Mexico +363% and, again, in Brazil +972%! That was eighteen times better than the Dow.
If you’re not confident in just a single country, there are 90 international ETFs that focus on broader regions — the Pacific Basin, East Asia minus Japan, Southeast Asia, Latin America, and many more. All told, including all the different ones mentioned previously, there are at least 225 international ETFs available to U.S. investors — all regulated by the U.S. authorities, all listed on major U.S. exchanges.
The aforementioned is all for up markets. In down markets… buy inverse ETFs. With inverse ETFs, the more the market falls, the more money you can make. It is easy to buy inverse ETFs and they number exactly 100! One hundred ETFs that are designed and built, from the ground up, for declining markets. You never have to go short. You never buy options. You never open a margin account or borrow money. You just buy low and you sell high — exactly like you would with any stock, in a regular stock brokerage account, online or offline. That’s it.
[An excellent] long-term strategy… is to use strength in the West to reduce your exposure and use weakness in the East to increase your stake, i.e. wait for rallies in the U.S. markets to sell and wait for declines or corrections in Asia (and South America) to buy…[and when that occurs] buy Market Vectors Indonesia (symbol IDX)… and iShares MSCI Chile (symbol ECH).Knowledge alone is not enough, however, because the only people who make money are the ones who also have the courage to transform their knowledge into action. Same for investors. Until you act on what you know, those kinds of profits will continue to be out of your reach.
*http://www.uncommonwisdomdaily.com/8-bold-new-forecasts-for-2010-9964?FIELD9=3 (Uncommon Wisdom is a free daily investment newsletter from Weiss Research analysts offering the latest investing news and financial insights for the stock market, precious metals, natural resources, Asian and South American markets. To view archives or subscribe, visit their web site.)
Editor’s Note:
– The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.
– Permission to reprint in whole or in part is permitted provided full credit is given.
– Sign up to receive every article posted via Twitter, Facebook or RSS feed.
– Subscribe to our Weekly Newsletter.
– Submit a comment. Share your views on the subject with all our readers.