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Global Markets

Eight Ways to Profit From the World's Biggest Spending Boom

Back in the 1970s, environmentalists feared we were going to "blacktop the Earth." It's not likely that will ever happen. However, governments around the world do have plans to pave a good portion of it in the decade to come. And they also plan to build bridges, power plants, water systems, and to develop other infrastructure projects that will bolster the global recovery and meet the needs of an increasingly modern global population.

What's more, the projected pace of new infrastructure spending is accelerating, meaning there's still plenty of time for new investors to climb aboard – and profit from – the trend.

Just a year ago, an analysis by CIBC World Markets (NYSE: CM) predicted worldwide government spending on public works projects would total $35 trillion over the next 20 years. By the middle of 2009, a number of analysts – reviewing projected demands in the commodity and raw materials markets – had raised that forecast to $40 trillion, with nearly $4 trillion of that coming in 2010 and 2011 alone.

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U.S. Joins Global Parade of Countries Plagued by Debt Bomb

The most important fundamental development of the week was not any of a slew of economic reports at all but the new federal budget proposal released by the White House. And it was a doozy: The Obama Administration proposed to spend $3.8 trillion, with $1.6 trillion on the equivalent of the national credit card.

Investors did not overtly seem to mind today, but they will. It is almost mind-numbing to think we've gone from the surplus that President Clinton left President Bush to the trillion-dollar hole we're in now. There is nothing good about the scenario of bone-crushing debt, as we have seen repeatedly throughout the world recently in places like Dubai, Greece, the United Kingdom and Japan. The fact that the U.S. dollar has managed to hold its own despite representing a country deeply in hock is only testament to the weakness of every other major developed-world government.

It's ironic in fact that plenty of emerging-market countries are managing their books far better than the United States and Europe. They include Chile, Azerbaijan, Angola, Ukraine and Romania — all with debt at less than 15% of national GDP, while we are knocking on 60%!


Arctic Chill Frames Divergence in G-7 Economic Policies at Canada Meet

In between bites of seal meat and dogsled races, the financial heads of the Group of Seven (G-7) countries met near the Arctic Circle in Canada last weekend to hammer out differences in how their respective countries will approach monetary policy as the economic recovery takes hold. Windchill temperatures hovered around -40°C in Iqaluit, just […]

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As Greece's Woes Demonstrate, the Fuse Has Been Lit on the Global Debt Bomb

The big story in the international markets so far in the New Year has been the increasing shakiness of a number of countries' government bonds, with Greece right now being the most troubled of all.

Since U.S. investors tend to avoid foreign government bonds, many will dismiss this as an irrelevant development.

That's a mistake. The reality is that the international implications of this bond-market problem are serious for the world's stock markets, as well as for the global economy as a whole.

The fuse has been lit on a global debt bomb. And Greece has quickly become a poster child for the explosion that's all but certain to occur.

To find out all about the "Global Debt Bomb," read on...

Why the Shipping Industry is Finally Ready to Reverse Course

"Rock bottom" is one of the gloomy cliches recently associated with the shipping industry. The industry's profitable boom from 2006-2008 was followed by 2009's dramatic fall in shipping rates and billions of dollars in company losses. Shipping line operators bled money due to decreased trade, shipyards were flooded with order cancellations, banks tightened up lending […]

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Will Greece Default on its Debt, and Take the Eurozone Down with It?

As the European Commission holds its regular monthly meeting in Brussels this week, ministers find themselves debating what to do about the Greek debt crisis — the biggest credibility test the Eurozone has faced since the single currency was created.

The question is whether the 16 countries that share the European Union's (EU) currency can force a rogue member with a weak economy to take drastic measures to cut its budget deficit without calling in the International Monetary Fund (IMF) or sparking social unrest.

Still in the depths of recession, Greece is plagued by a spending deficit that rose to 12.7% of gross domestic product (GDP) last year, far in excess of the 3% ceiling permitted to countries in the union. It's also saddled with debt amounting to 113% of GDP, which prompted Moody's Corp. (NYSE: MCO) to downgrade its debt to A2 from A1 on December 22.

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In an Uncertain Market, Defensive Investing is Smart – And Profitable

For U.S. investors looking to profit in the near term, the best offense may be a good defense.

"Defensive investing" becomes a mantra for investors who are seeking to navigate periods dominated by high risk, slow growth or excessive uncertainty. Given that the current market outlook probably contains an element of each of those scenarios, a strategy that includes elements of care and caution will make for a wise course of action.

This is actually a healthy thing, and will likely include a pause in the broader market. But all indicators point to the prospective pause being just that – not a new bear market, just a time out as overfed risk appetites take a breather before being reinvigorated.

Despite the emphatic negative trading session we saw on Friday, most of last week was rather buoyant, with a net gain in the broad market averages. Yet measures of internal market health continued their slow deterioration, with much more volume appearing on down days than up days.

My belief: U.S. stocks are in the process of remedying the overbought condition created by the big upward move in the first week of the year, as well as the overbought condition that's visible on some monthly charts.

For the Top Defensive Plays to Make Now, Read on...

U.S. Escalates Trade Dispute With China

The United States launched another salvo in a trade dispute with China last week when it imposed new duties on imports of steel pipes, escalating tensions between the two powers.

The Chinese government quickly fired back, accusing the U.S. of "protectionism."

The U.S. International Trade Commission (ITC) voted unanimously on December 30 to impose duties between 10.36% and 15.78% on the pipes, which are used mostly by the oil and gas industries. Those new tariffs are designed to negate the subsidies that the U.S. government says China gives its steelmakers.

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Asia's Economic Recovery Gathering Steam with China at the Helm

Manufacturing data today (Monday) confirmed that Asia's economic recovery is gaining strength, and China – whose economy may have expanded at a rate of 9.5% in the fourth quarter – is leading the revival.

The China Federation of Logistics and Purchasing on Sunday said the country's official purchasing managers' index (PMI) rose to 55.2 in December from 54.3 a month earlier. That's the biggest increase since April 2008, and it was aided by an increase in trade. The gauge of export orders rose to 54.5 and the reading for imports climbed to 52.8.

Similarly, the China Manufacturing PMI produced by HSBC Holdings PLC (NYSE ADR: HBC) and Markit Economics jumped from 55.7 to 56.1 last month. The index's average monthly increase in the fourth quarter was the largest on record.

Economists point to these numbers as further evidence of a robust recovery for China's economy, which grew at an 8.9% annualized pace in the third quarter.

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Four Ways to Profit From the World's Shrewdest Government

Three powerful investment trends will separate the winners from the losers in the new year.

  • Global commodities prices will continue to move higher.
  • Emerging economies will outgrow their richer, more-mature counterparts.
  • And the countries that were stingy with their monetary and fiscal bailout plans will now reap the benefits; they will outpace the countries that slashed their interest rates to zero and allowed their deficits to soar.

One country is poised to profit from all three of those trends. What's more, the political worries that always seem to diminish its allure to investors are poised to recede, making this emerging southern hemisphere heavyweight one of the premiere profit opportunities for 2010.

I'm talking about Chile.

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