The Best Global Market for Your Money

Rudy Martin

With the dollar’s value weakening and with smaller, nimbler economies running circles around large economies like the U.S. and Europe, placing your bets outside the developed-world’s borders can not only help increase your profit potential, but also your purchasing power.

In my Emerging Market Winners service, my subscribers are sitting pretty in several global plays that trade right here on the U.S. exchanges. But if you asked me to pick just one country to invest in for both the short- and longer-term, it’s definitely an America … but not the one we live in.

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The best global market for my money—and it could be for yours as well—is Latin America. In particular, I believe Brazil in will be the key to the emerging profit story for a long time to come.

Now, Brazil is not without its challenges. But I think every challenge you can name is instead an opportunity. Remember, one person’s end-of-the-world story is another golden buying opportunity.

I remember visiting Hong Kong before the Chinese took back the island. And those who bought when that panic set in are big winners today. And I believe Brazil can produce a similar outcome for today’s investors.

So right now, I encourage you to consider seven of Brazil’s current challenges … and to see why they’re really opportunities in disguise.

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No. 1: Growth is slowing

Brazil’s central bank recently (and sharply) cut its 2012 GDP forecast for the country to 1.6% from 2.5% previously. However, my suggestion is to focus on relative growth.

In other words, there are always areas that are growing faster than the economy. So, target a sector like the Internet in Brazil that is growing at blazing speeds.

No. 2: Commodity demand is mixed

Brazil is a large exporter of commodities to China. While soybeans, meats and grain exports are likely to rise, there is still some indigestion from the hot volatility in materials like iron ore.

For now, I’ve been avoiding metals-and-mining company Vale (VALE) on concerns about iron ore prices. At some point, however, these will level off and I’m looking for this “reflation” stock trade to make another leg up.

No. 3: Infrastructure issues continue

The country is starting to address some of its infrastructure needs in anticipation of the coming World Cup and Olympic games. But the overall infrastructure in Brazil is substantially below that of developed countries. (One study ranks it 104th out of 118 countries.)

Correcting this might take much longer than the government is estimating. But these events are coming in 2014 and 2016, and Brazil has a lot of work planned to prepare for them.

No. 4: Banks are still hogging capital

Over the past decade, financial sector assets more than doubled, owing to the stable economy.

Despite Brazil’s larger size, diversification and sophistication, the International Monetary Fund recently pointed out some transition risks. Moving the financial system away from high-interest-rate/low-duration equilibrium to serve economic growth will require careful handling. But implementing broad-based reforms is not an impossible task, and there are good values in this sector.

The idea here is that lower rates will re-accelerate a struggling economy as 500 basis points of central-bank rate cuts work their way through.

The trick here is to watch the non-performing assets, and there may be a buying opportunity if the banks there hold up credit quality.

No. 5: Industrial earnings are also export-based

China is among the biggest emerging markets for regional jet-makers. And my favorite, world-class industrial stock is Embraer (ERJ), the Brazilian airplane-maker.

Embraer estimates that China-based airlines will order 975 jets in the regional jet category from now until 2030. It already commands a 70% market share for regional jets in the Middle Kingdom.

While the stock is drifting, expect second-half earnings to be supported by a still-significant backlog and tax breaks from the Brazilian government for the industry.

No. 6: Regional politics is heating up

The recent inclusion of Venezuela into the MercoSur trade bloc — composed of Brazil, Argentina, Paraguay, Uruguay and now Venezuela — creates a wonderful story about a larger common market.

But the political realities do not match up. These “friends” in this economic and political alliance are still going at each other with trade limitations, especially Argentina.

But because companies like Chevron (CVX) are willing to send teams to get at the South American shale bonanza, well then count me in too.

Oil politics is a BIG factor. Right now we are getting almost-daily news items about an impending showdown with Iran. It’s not a positive for most stocks, but could be a reason to load up on oil stocks.

No. 7: Finally, there are better deals elsewhere

This is true. So maybe in the end, the only reason I would hold off is that there are other great opportunities to make money without all these considerations.

One telecom stock that I’m looking at has been locked in a boardroom battle over dividends and control. By year-end, it’s likely to see this resolved. But the stock has started to move and is on my list to consider for the fourth quarter and beyond.

So, stay tuned for the coming picks. There are a lot of great names that are nearing good entry prices, and you can be sure that some of them are headquartered in Brazil and other Latin American countries!

Happy Trading!

Rudy

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P.S. Emerging nations are gobbling up energy as quickly as they can get their hands on it. And one place they will be getting it from is an America … this time, it’s the one you’re living in!

Yesterday my friend Sean Brodrick released his urgent Global Energy Summit, with expert interviews that detail the surprising energy trends in store for 2013 and beyond … and how you can profit. This eye-opening video is only online for just a couple more days—click here to watch it now!

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P.S. Emerging nations are gobbling up energy as quickly as they can get their hands on it. And one place they will be getting it from is an America … this time, it’s the one you’re living in!

Yesterday my friend Sean Brodrick released his urgent Global Energy Summit, with expert interviews that detail the surprising energy trends in store for 2013 and beyond … and how you can profit. This eye-opening video is only online for just a couple more days—click here to watch it now!

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