Financial Crisis Investing

Global Markets

Time for More Double-Digit Gains from "the Country of the Future"

"Boom and Bust" Brazil's long political drama is reaching a fever pitch. Yesterday morning, the Brazilian Federal Senate voted to impeach President Dilma Rousseff. While the Senate still has to convict her, she'll be suspended from office until her trial ends.

Rousseff stands accused of being at the very heart of a vast web of corruption that's brought South America's biggest, most diverse economy into a biting recession.

Rousseff and her many supporters call the impeachment proceedings "a coup," while her opponents call it "justice." Brazil's divided society has taken to the streets with near-daily demonstrations and violence between the two sides.

What's more, all of this is taking place against a backdrop of plunging commodities, double-digit inflation and interest rates, a collapsing real, and, yes, even the dreaded Zika virus.

In other words, conditions are perfect for what could be the contrarian play of the year.

Remember, the United States has seen low growth, political gridlock, and social upheaval, all while its stock market went stratospheric. The effect in Brazil is likely to be stronger and more lucrative; GDP shrank 3.95% last year, but Brazilian stocks have surged 35% in the past three months alone, and they've historically shot up by more than 1,000% at times like these.

There's always opportunity in chaos, if you go where the growth is. And we're going to get huge exposure to that growth, with almost none of the downside, on this play...

Market Crash

George Soros: We Are Repeating 2008

George Soros offered a grim prediction for the markets yesterday, likening this environment to 2008.

This time, however, he blames China's over-indebtedness as the primary factor responsible for global market woes.

Here's the Hungarian-born hedge fund manager's full warning...

Wall Street

Will These Wall Street Criminals Finally Be Punished?

Seven years have passed since the peak of the 2008 financial crisis, and still, not a single too-big-to-fail chief executive officer (CEO) is in jail.

Sure, civil suits have been filed against the guilty Wall Street firms – civil suits that result in settlements that barely touch these global financial institutions' balance sheets.

As for the Wall Street criminals behind the toxic loans that tanked the economy in 2008 – the actual people, not the institutions they hide behind – there has never been so much as a wrist slap, let alone a criminal conviction.

That's why we were pleasantly surprised when The Wall Street Journal reported last week that U.S. officials are finally pursuing criminal charges against three Royal Bank of Scotland and JPMorgan execs...

The Fed

Federal Reserve Approves Capital Surcharges for Nation's Largest Banks

Yesterday (Monday), the U.S. Federal Reserve System approved a rule to require the nation's largest banks to hold a larger capital buffer.

These "capital surcharges" are in addition to the 7% capital requirements set forth in the Basel Accords in 2010.

There are two takeaways from this action....

U.S. economy

With 40% of Americans One Bill Away from Financial Disaster, What's Next?

Despite hundreds of billions of dollars in bailout money and U.S. Federal Reserve stimulus, the U.S. economy is still not working very well for the average American.

According to a survey by, 40% of Americans say they are just one big bill away from financial disaster. That tells Money Morning Chief Investment Strategist Keith Fitz-Gerald that the government's efforts to rescue the U.S. economy have failed.

He said there's one figure he's watching this week that will show if there's much hope for Main Street at this point...

Economic Recovery

Forget the Doom-and-Gloom, Now Is a Time to Be Bullish

A little girl named Carol Anne became famous for saying "They're h-e-r-e" in the 1982 movie Poltergeist.

She was talking about the "TV people," and they ended up being from way out of town.

Well, we have our equivalent digital denizens, and they're also returning in force. Except ours are largely from the investment shadows, awaiting the next opportunity to brandish heavy fear tactics to convince you the energy market is about to collapse…again.

It makes me want to shout, "They're b-a-a-c-k!"

It is enough to prompt a recall of that old saw about market analysts.

You know, the one that says they have correctly predicted eight of the last three recessions.

At issue this time is the latest financial obstacle the market must overcome: the sequestration scheduled to hit a week from today. Now the draconian cuts will occur automatically, although it will also take some time for them to have any impact.

Most will not result in anything significant for at least a month.

Of course, the markets are not going to wait that long. For the past two days, the first wave of nail biting started. It will get worse as our darling Congressmen return from their well-earned (satire here folks, satire) vacation to play politics instead of reaching an agreement.

After this, we will get back to business. We can ignore those talking heads for one major reason.

A developing and accelerating economic recovery waits on the other side.

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QE3 is on Its Way – Here's How to Prepare

Federal Reserve Chairman Ben Bernanke spoke to the U.S. Senate Tuesday and yesterday (Wednesday) in his two-day biannual meeting with Congress – and failed to make any promise to institute more stimulus measures.

He did leave the door open for the Fed to do something – even if it won't commit to what that will be.

The markets rallied, although investors were disappointed that the Fed chief couldn't deliver a bigger commitment.

But make no mistake – quantitative easing, or QE3, is coming.

That is assured for one simple reason.

The U.S. government can find few buyers for its debt at current low interest rates. And as Bernanke has stated publicly, low interest rates will remain in place until at least 2014.

That means the Fed will have to continue its role of financing the budget deficit of the U.S. government through the inflation of its balance sheet.

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How to Avoid the Approaching Bond Market Debacle

If you're an income investor, you probably feel like you're in one of those nightmares where you're trying to run like hell – but aren't getting anywhere.

Martin Hutchinson and I were talking about this predicament last week.

As editor of the Permanent Wealth Investor, Martin is our income guru here at Money Map Press. His advice on how to thrive in this lousy-income environment was so good that I had to pass it along to you – along with one of his favorite income plays.

Traditionally, bonds – especially U.S. Treasury bonds – are the favored holding of income-seekers. But bonds face two big challenges right now – and we have the U.S. Federal Reserve to thank for both of them.

First, thanks to the ultra-low-interest-rate policies of the nation's central bank, Treasury bonds are yielding next to nothing. When I looked Friday afternoon, the 10-year was yielding 1.94% and the 30-year 3.12%.

Now, according to the latest federal figures, the U.S. consumer price index (CPI) fell to 2.7% in March from 2.9% in February. The CPI is the "official" gauge of U.S. inflation. But as we explained back on March 2, this is a bogus number.

The American Institute for Economic Research (AIER) says everyday prices – the ones that matter most to working Americans – are up a good 8% over the past year.

So income investors who stick to traditional tactics are actually losing ground to inflation. And you absolutely don't want to outlive your money.

If that were the only problem, it would be pretty bad. But there's a second challenge – and it's a doozy.

You see, the central bank's Federal Funds rate – the benchmark that helps determine most borrowing rates that American consumers and businesses pay – remains down near zero. And while no one can predict with certainty when rates will change, there is one thing you can bank on: When rates do change, they can only go up.

And since bond prices move opposite interest rates (bond prices fall when rates rise, and vice versa), those fixed-income securities will take a beating when rates increase.

And so will the investors who hold them.

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How the European Debt Crisis Could Smother Fiat S.p.A. (PINK: FIATY)

Around this time last year I warned you that the Eurozone debt crisis would trample the Italian economy and take carmaker Fiat S.p.A. (PINK: FIATY) down with it.

To profit from this debacle, I told you to short Fiat. Since then, the stock has tumbled 76%, from $19 a share to yesterday's (Wednesday's) closing price of $4.66.

Fiat is a perfect example of how an unstable home market – like Italy – will kill a struggling company's stock. Fiat is Italy's largest private sector employer, and the past year's market performance mirrors the weakness unleashed by the European debt crisis.

Sadly, Fiat won't be the only company whose shares will plunge.

TheEuropean debt crisis has grown from a problem on the edge of Europe to a problem inside the region's core. You only have to look at the series of bank stress tests that Europe has rolled out to see that things are getting worse, not better.

In fact, the European Central Bank (ECB) announced yesterday that it would provide $638 billion (489 billion euros) in three-year loans to more than 500 banks in the Eurozone. More than a dozen Italian banks borrowed $143.52 billion (116 billion euros).

But the solution is only short term, and the region's grim long-term outlook hasn't changed. We're heading toward a point of maximum pessimism – one I think we'll reach sooner rather than later.

So, it's time to thank the Eurozone, Italy, and Fiat S.p.A. for a great short trade and close it out. While the stock could go all the way to $0, the meat of the move is over, and we want to take profits before a major short-covering event gives the share price a temporary boost.

Fiat S.p.A.: Stung by the European Debt Crisis

The European Central Bank forecasts Eurozone growth will slow to a near standstill next year, with gross domestic product (GDP) only expanding 0.3%. The ECB said area-wide inflation will reach 2.7% in 2011.

This slow-growth, higher-priced environment won't bode well for the region's automakers, which are already feeling the effects.

Automobile registrations in Europe in November dropped 3% to 1.07 million vehicles from 1.10 million a year earlier. That's the biggest decline since June, according to the Brussels-based European Automobile Manufacturers Association. The Italian auto sales market led the region's declines, slipping 9.2%. France was close behind at 7.7%.

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Hear the Latest Top 2011 Investing Strategies from Money Morning Financial Experts

As investors you are in one of the most uncertain periods in market history right now – and you want some clarity.

To shine light on how to navigate the rocky path ahead, Money Morning editors recently gathered in St. Petersburg, FL with other global financial experts for the Investment U Symposium. From March 23 to 26 they presented in-depth workshops, joined in panel discussions and mingled with investors like you to analyze the hottest and most pressing topics and investing strategies in the global economic landscape today.

Attendees were able to get detailed advice from our regular Money Morning contributors on a variety of topics.

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