Global Investing

For Rational Investors, Market Uncertainty Equals Profits

There's no question that the Washington fiasco, more commonly referred to as the debt-ceiling crisis, has injected a huge amount of uncertainty to financial markets.

That's bad news for the U.S. economy – which Friday's lousy second-quarter gross-domestic-product (GDP) report demonstrates was already suffering from bad fiscal policy, bad monetary policy and a gross excess of new regulations. This deal didn't really solve any long-term problems, won't head off a federal credit-rating downgrade and all in all only adds to the market uncertainty.

But here's the good news. Uncertainty breeds opportunity – especially for savvy, rational investors.

And with the dark clouds of uncertainty that continue to build over the U.S. economy, we can turn this situation to our advantage in a big way.

Let's take a closer look so that I can show you what I mean …

When Investors Are Certain … But Not Rational

There's an irony about investing that's not lost on savvy, rational investors – even at the retail level: If a market lacks uncertainty, it's awful tough for us to analyze and then invest with confidence.

Just consider the capital markets of the late 1990s. Back then, stocks seemed to be on a steady upward march, posting double-digit gains each year.

The fact that the investing masses believed there was a complete lack of market uncertainty made it very difficult for "rational investors" to invest. Those "rational" players understood that the markets were getting frothy, or speculative – in fact, the warning signs were there as early as the middle of 1996 (six months before U.S. Federal Reserve Chairman Alan Greenspan denounced "irrational exuberance").

The whole tech sector really demonstrated the pervasive belief that stock prices could only go up. After its August 1995 initial public stock offering (IPO), Internet-browser pioneer Netscape Communications Corp. saw its shares double on its first day of trading. And I'm sure we all remember how tech companies in general – and particularly companies with "dot-com" in their title – saw their valuations soar well beyond any rational expectations.

For rational investors, that apparent market "certainty" made it almost impossible to invest with any degree of confidence – short or long.

The market was clearly too high, especially in the tech sector, so buying made no sense. It was impossible-to-gauge euphoric speculation that was driving stock prices – not easy-to-quantify fundamentals. If you bought, you were just hoping that the "Greater Fool Theory" would bail you out with a sale to someone else at a higher price.

Selling the market "short" wasn't the answer, either. Expecting an irrational trend to correct itself is a sucker's bet. And a bullish trend like this one that doesn't correct for five years is an expensive misstep – one that will send stock-market bears straight to the poorhouse.

There was very little un-certainty in the market – the United States was the best economy in the best of all possible worlds and the federal budget was swinging into surplus.

In fact, the only uncertainty to be found was situated far away from U.S. shores. I'm talking, of course, about the Asian economies going into crisis in the summer of 1997 and Russia defaulting in August 1998.

Now there was some market uncertainty that would have let you make some real money.

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Special Report: What is the Greek Debt Crisis, and What Does it Mean for Investors?

With Greece on the brink of default – and hanging over the global economy like a financial sword of Damocles – investors the world over are asking themselves the very same question, day after day: Just what is the Greek debt crisis, and what does it mean to me?

It means a lot.

In fact, the Greek debt crisis could prove to be the first in a series of sovereign-debt defaults that could even infect the U.S. economy, tipping it into a "double-dip" recession and reprising the bear market of 2009.

In short, this crisis is one you need to watch and understand.

Given the stakes, we decided to work with our panel of global-investing experts and put together this Money Morning special report: "What is the Greek Debt Crisis, and What Does it Mean for Investors?"

Our goal was to provide you with answers to some of the key questions about the Greek debt crisis – how it started, what's actually taking place, how it could affect the U.S. economy, and how we expect it to play out.

And with the help of experts Keith Fitz-Gerald, Shah Gilani and Martin Hutchinson, we also answer the most important debt-crisis question of all: "What should you do about it?"


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The New Global Gambling Hotspot That's Set to Overtake Las Vegas

First it was Macau that leapfrogged Las Vegas as the No. 1 global gambling destination in 2006.

Now another Asian powerhouse is set to push Sin City down to third on the list of global gambling hotspots.

We're talking about Singapore – the Southeast Asian city-state that has a red-hot economy and a new reputation as a tourist mecca.

Singapore, with just two casinos, is set to pass Las Vegas as the world's No. 2 gambling hub, according to Frank Fahrenkopf, president of the American Gaming Association.

"Now more than a year old, the two integrated resorts in Singapore have exceeded all expectations and turned the nation into Asia's second global gaming superpower," Fahrenkopf told the AFP on the sidelines of a recent gaming conference in Macau. "The country's gaming market will likely overtake Las Vegas as the world's second-largest gaming center as early as this year."

Singapore's Resorts World Sentosa and Marina Bay Sands casinos will rake in $6.4 billion of combined revenue this year, Fahrenkopf predicted. That would be a sizeable increase over 2010's $5.1 billion take.

Las Vegas brought in $5.8 billion last year, after stumbling in the wake of the financial crisis and housing collapse. A report citing research by the Royal Bank of Scotland Group PLC (NYSE ADR: RBS) indicated that Las Vegas would earn $6.2 billion this year, according to Agence France-Presse.

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Tech-Hungry Investors Take the Bait With Overvalued Pandora IPO

Internet radio company Pandora Media Inc. (NYSE: P) raised $234.9 million in its initial public offering (IPO) Tuesday, luring investors who were looking to get in on this year's batch of Internet stocks.

The Oakland, CA-based company sold 14.7 million shares at $16 each, up from $9 when the company first announced its IPO. Pandora shares jumped more than 40% as trading started yesterday (Wednesday), but closed only 8.9% higher at $17.42.

While many analysts like Pandora's long-term outlook, they say the company's financials don't explain its $2.6 billion valuation.

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Four Middle East Investments That Come with Little Risk and Big Potential

As I mentioned yesterday (Thursday) in Part One of this story about Middle East investments, instability makes investing in this tumultuous region fairly tricky. But that doesn't mean you ought to avoid it entirely.

After all, the International Monetary Fund (IMF) said in its World Economic Outlook that the region's economy would expand at a 5.1% pace in 2011, outpacing the United States and Europe.

And contrary to the perception of many Westerners, that growth projection isn't based primarily on the price outlook for oil, which has trended higher for most of the past year. Rather, it's keyed to everything from construction and new-business development to banking, tourism and even Internet gaming.

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Investing in the Middle East: The Best Plays to Make

Periodic eruptions of violence and instability make investing in the Middle East fairly tricky. But that doesn't mean you ought to avoid the region entirely.

Indeed, investing in the Middle East can be extremely profitable, as the region currently is one of the world's bright spots for economic growth.

The International Monetary Fund's (IMF) said in its World Economic Outlook that the region's economy would expand by 5.1% clip in 2011. That's well above the 1.5% pace projected for Europe and Japan and the 2.3% rate forecast for the United States.

And contrary to the perception of many Westerners, that growth projection isn't based primarily on the price outlook for oil, which has trended higher for most of the past year. Rather, it's keyed to everything from construction and new-business development to banking, tourism and even Internet gaming.

So let's take an in-depth look at each sector, as well as some specific companies to invest in.

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How to Profit From a Non-U.S. Investing Strategy

After reading columnist Martin Hutchinson's latest report on the Greek debt crisis last week, one Money Morning reader posed an excellent question: Given the crises already afflicting the markets in Europe and Japan – and the clearly darkening outlook for the U.S. economy – is it possible to craft a "non-U.S. investing strategy" of some type?

The answer, surprisingly enough, is "yes." You can put together an investment plan that largely avoids U.S.-related holdings – in essence, a non-U.S. investing strategy – and you can put it to work.

But before you can do that, you must fully understand the current challenges at hand.

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How to Turn a Tidal Wave of Profit From the Global Shipping Industry

The shipping industry plays an indispensable role in connecting consumers with their most cherished goods. But many investors unfamiliar with its inner-workings underestimate its potential as a massive profit generator.

Meanwhile, investors who are aware of its importance, and can track the volatile ups and downs of the companies that provide shipping services, frequently score big gains from its oft-repeating profit opportunities.

To get a quick idea of the enormity of worldwide shipping activity, you need only look at the U.S. trade numbers.

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Global Commodity Prices: Soaring Worldwide Population Growth and a Can't-Miss Profit Play

If you read the newly released United Nations report on global population trends, you can reach only one conclusion about the long-term outlook for global commodity prices.

They're going higher.

Much higher.

In its report, "2010 Revision of World Population Prospects," published May 3, the UN now estimates that the global population will reach 9.3 billion in 2050, which is an increase of 150 million from the 9.15 billion it projected in its 2008 forecast.

Nor is that the only revision the UN made to its 2008 forecast. Instead of peaking in 2070, as it had previously predicted, the UN now says the world population won't peak until after 2100, when it will reach 10.1 billion – 44% higher than it is today.

The key takeaway: Given this expectation for worldwide population growth, it's clear that the rise in global resources prices we've seen since 2002 is for real, and is likely to continue for the long term.

The effect on global commodity prices will be clear – and dramatic. Oil prices, metals prices and – above all – food prices are likely to be much higher in 2050 (in terms of that era's overall purchasing power) than they are today.

For insights on four population-growth profit plays, please read on…

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Investing in India: First Comes the Pain, Then Come the Gains

As investments go, India has really great long-term prospects. No doubt about it.

Indeed, India has enjoyed very decent growth rates for the last decade, pulling many of its people out of poverty in the process.

But investing in India can be tricky.

Allow me to show you why.

For our forecast for the India stock market, please read on...