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Sharpen Your Pencil – And Put These Three Stocks on Your "Shopping List"

Ask any of our gurus for advice on how to survive a stock-market sell-off – or even a whipsaw period like the one we’re navigating now – and you’ll get a surprising answer.

Keep a shopping list ready, they’ll tell you…

  • Emerging Markets

  • Three Ways to Profit From the World's Luckiest Country – Australia. When the late Donald Horne called Australia the " Lucky Country" in 1964, the professor and well-known social critic meant it as an insult: He believed that while other countries were getting rich by developing special skills and embracing new technology, Australia prospered just because it happened to sit on a pile of valuable natural resources.

    Well, in the global world of 2010, skill and technology are " two-a-penny" ubiquitous in an emerging-markets world in which billions of industrious people are competing against one another. In this new reality in today's world, natural resources are the key to global wealth.

    And Australia is a prime beneficiary of that new reality.

    For three ways to profit from this "new reality," please read on...

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  • Despite Talk of a Bubble, Indonesia Is Still a Profit Haven for Investors Several readers who know of my affinity for Indonesian stocks have sent me articles reporting that one of the country's bank officials had expressed discomfort over the Jakarta's rising stock market and raised the specter of new capital controls.

    I have been investing in emerging markets for a long time, and have found that the news services often pick up these kinds of comments from random officials that are then contradicted a day later by some other random official.

    And that was the case this time, too.

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  • Buy, Sell or Hold: Is Pfizer Inc. (NYSE: PFE) the Right Prescription for Your Portfolio? In 2008, the journal Health Affairs reported that 25% of China's adult population - about 375 million people - was "overweight" or "obese."

    That number is expected to double by 2028, and obesity is just one health issue in a densely polluted nation that finds itself battling a growing list of ailments.

    So it's no surprise that China's pharmaceutical market has been surging at a compounded annual growth rate (CAGR) of more than 16% -- the fastest pace in the world, according to research by market-intelligence leader IMS Health Inc. (NYSE: RX). IMS Health estimates that by 2020 the Chinese market for pharmaceuticals will be $110 billion, second only to the United States.

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  • How Long Will Emerging Markets Continue to Prosper From U.S. Debt Ills? A surge in purchases of emerging market debt and a dip in buyers' appetite for U.S. Treasury bonds has sparked speculation that developing nations have become the next safe haven for bond investors. But the more likely scenario is a reversal of capital flows that will sustain Treasury debt for a little while longer.

    Emerging market bonds have enjoyed the best first quarter on record as new issuance has surged and interest rate spreads over U.S. Treasuries have narrowed to their lowest since 2008.

    Sovereign bond markets in developing countries have sold a record $157 billion so far this year, a 42% jump over the same period in 2009, which marked the previous record, according to data from Dealogic Holdings plc.

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  • Buy, Sell or Hold: BHP Billiton is Poised to Pick Up Big Gains on the Back of a Global Commodities Bull Face it, commodity prices are in a secular rally - and there are three big reasons why.

    • Loose Monetary Policy
    • Growing Demand in Emerging Markets
    • And the Congruent Devaluations of Major CurrenciesWe've already profited from this inflationary trend in the Money Map VIP Trader. And - just like I did with the broadband revolution - today I am presenting you with a stock that stands to benefit from these developments - BHP Billiton Ltd. (NYSE ADR: BHP).
    First, let's talk about policy. Immediately following the 2008 financial crisis, the Group of 20 (G20) countries agreed to stimulate their economies simultaneously. And, while the emerging economies almost unanimously have already returned to strong rates of growth, most advanced economies are just now turning the corner.

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  • Why the Bulls Can Stand Strong at Home and Overseas Stocks enjoyed another plus week, closing one of the better Marches of the past 80 years. It seems like ages since volatility has been this low, and there have been many complaints about complacency and listlessness. Yet those concerns may be misplaced if indeed we are enjoying the second leg of a normal bull cycle. Low volatility in a bearish phase does suggest complacency, to be sure, but in a bullish phase it serves more to keep expectations in check.

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  • "Capital Waves" Point to High-Tide Profits for Commodities, Tech and Emerging Markets It was November 2008, and a global financial crisis that started in the U.S. credit markets had already leveled such one-time corporate stalwarts as Lehman Brothers Holdings Inc. (OTC: LEHMQ), Fannie Mae (NYSE: FNM) and American International Group Inc. (NYSE: AIG). The U.S. economy was in an apparent freefall, and stock prices wouldn't hit bottom until early the following March.

    In the midst of that chaos, Money Morning's Shah Gilani made five predictions, anticipating five looming "aftershocks" he said were certain to come true.

    He was correct on all five counts - every prediction came true.

    This wasn't the first time Gilani has made such bold predictions - and been proven right. In July 2008, for instance, when crude oil was trading at a record high of $145 a barrel, he predicted that the "black gold" was destined for a major fall - even though many pundits were calling for prices to spike as high as $200, $250, $300 and even $500 a barrel.

    Once again, Gilani was right.

    Gilani, a retired hedge-fund manger, Money Morning columnist and noted expert on the global credit crisis, has been able to do this time and again for one simple reason: He understands the power and profit potential of the global financial market's "capital waves."

    "Capital waves create some of the biggest trading opportunities in the markets today," Gilani said in an interview last week. "Investors who are able to spot capital waves and identify their likely impact have a huge advantage over those who don't."

    And the profit plays that loom are shaping up as the biggest and best, yet.

    For the full transcript of Gilani's detailed question-and-answer session, please read on.

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  • Money Morning Mailbag: The Capital Wave That Could Blunt the U.S. Recovery Question: How can banks justify not giving out mortgage money in light of the fact that they can now qualify their applicants to a level not previously seen? I am talking about literally millions of people applying for loans with 800-plus FICO scores and Loan-to-Value (LTV) Ratios that are better than ever before.

    How can banks and lending institutions take our money and then turn around and shut nearly everyone out - which simply prolongs this recession? Can anyone explain why the present administration and regulatory bodies are not forcing the banks to loan monies to qualified applicants?

    At this rate, we will be dead soon. Without borrowing, we will die.

    (Signed) Living in Costa Rica

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  • Money Morning Mailbag: Capital Wave Investing Strategies Spotlight the World's Top Profit Plays Question: Shah, your article on capital-wave investing was outstanding. In fact, I would love to see a follow-up piece for those of us who are not traders and who are not out and about following the current short-term market trends.

    For example, when you talk about the Obama administration's determination to keep interest rates low - this has consequences. What will those rates be in, say, a three-year to five-year time frame? What if the European countries keep having implosions like Greece - meaning that countries like Portugal, Spain and Italy follow suit?

    In your opinion, will that eventually sink the euro, or does the Eurozone have to bail out those countries with a plan that's similar to the one that it is developing for Greece? What happens to other currencies in either of these scenarios?

    Finally, is it your opinion that China is trying to curtail its growth to keep itself from overheating? Can Beijing successfully continue to do this - or will this blow up in China's face? If you look down the road, say, three to five years, what do you believe the consequences, if any, will be?

    Again, Shah, this was a really informative article. I would love to hear your views on what you actually see playing out in each of these areas during the next few years.

    Answer: Thank you for your kind words about the article and for taking the time to pose your questions - which are excellent ones, by the way. Let's take a look at them, one at a time...

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  • U.S. Loses Crown as King of M&A to Emerging Markets Maybe U.S. investment bankers are losing their touch.

    For the first time since Thomson Reuters began keeping track in 1976, fewer merger and acquisition (M&A) deals were done in the United States in the first six weeks of 2010 than in emerging-markets.

    During that stretch, emerging markets such as India, Mexico, Brazil and China accounted for 43% of global M&A volume with $91.2 billion worth of deals. That outpaced the United States, which completed roughly $55 billion in deals, accounting for a 29.5% share.

    Surprisingly, Mexico alone did more volume, with 19.1% of the market versus Europe's 17.1% share.

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  • How Capital Waves Are Creating the Biggest Profit Opportunities in Today's Markets Back when oil was trading at a record high of $145 a barrel - and was generally expected to go higher - I concluded that the forces at play were speculative, not fundamental - driven by new institutional money looking to diversify away from too many concentrated equity bets. I argued these forces were temporary, and not entrenched, meaning that oil prices were actually headed for a fall.

    The "forces" I was referring to are called "capital waves." Capital waves create some of the biggest trading opportunities in the markets today. Investors who are able to spot capital waves and identify their likely impact have a huge advantage over those who don't.

    With oil, for instance, pundits were calling for new highs of $200, $250, $300 and even $500 a barrel. But behind the curtain, there was a major capital wave at play: I knew that oil was being pumped out of the ground like mad, and that shipping rates were exploding because oil was being stored in offshore, idled tankers. I knew that as little as $20 billion had been "re-allocated" out of the equity markets and into this new-asset-class investment for pension fund accounts.

    As a speculative frenzy seemed to be enveloping the oil market, I called for oil prices to plummet - to more than a few looks of incredulity or outright guffaws.

    When the secondary capital waves took hold, the speculative advance in oil prices first stalled - and then oil prices plunged as capital exited in another wave.

    Don't feel bad if you missed this opportunity. That's the important thing to remember about capital waves - they're out there if you know where to look and how to interpret them. In fact, as good as this oil play was, I see even better opportunities ahead.

    To learn about the Top Five "capital waves," read on... Read More...
  • European Bailout Fund Proposal … Just Another Bad Idea Has bailout mania finally reached Europe?

    The 16 nations that make up the Eurozone are seriously exploring the creation of a "European Monetary Fund," a bailout fund that would help euro-member countries that can't pay their debts.

    This has the potential to be a pretty good idea. If structured correctly, the EMF could provide the discipline and stability that the euro needs.

    However, I'm not holding my breath: Given the EU's track record, the EMF bailout plan will most likely evolve into yet another slush fund for politicians - as well as a drag on the European economy.

    History proves Europe's bailout-fund proposal is unworkable. Read on to see why...

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  • Six Ways to Profit as Brazil's Economy Takes Off In many ways, Brazil offers some of the best prospects among emerging markets and deserves to be a core holding in any international portfolio.

    Brazil's economy had only a shallow recession and is now recovering nicely. Its market has been one of the best performing since Dec. 31, 2008, and both inflation and the budget deficit remain under control.

    Yet one can be only moderately bullish - and I'll explain why.

    To find out how to profit from Brazil's bullish prospects, read on...

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  • If China Sneezes, Wall Street Will Catch A Cold Investors who needed proof of China's increased importance in the post-financial-crisis world only have to look at the nervousness of recent weeks to get a glimpse of the future.

    When U.S. stocks fell sharply late Friday, they capped off a harrowing 10-day span that has seen the broad U.S. market benchmarks drop by nearly 7%. Emerging markets are down 9%. Not surprisingly, investor fear has sent volatility rocketing 40% - the largest two-week increase since the global financial crisis went nuclear back in October 2008.

    Complicating matters was the continued strengthening of the U.S. dollar - something we've been discussing and warning about for a few weeks. With fear on the rise among global investors, many are abandoning risky positions in emerging-market stocks and bonds and moving cash into the safety of U.S. Treasuries. This bolsters the dollar, which was up 4% in two weeks. That exerts a lot of pressure on commodities. Crude oil fell more than 7% during the week. Gold is down 5%.

    The corporate bond market - which has been red hot lately, helping to underpin stock-market gains - continued to advance, but slipped relative to ultra-safe government debt. Tim Backshall of Credit Derivatives Research wrote in a note to clients that both high-yield and investment-grade credits have been making the longest and most consistent run of lower lows versus ultra-safe U.S. Treasuries since February 2008.

    While government debt has the edge for the moment, the long-term corporate-credit bull market remains intact, according to WJB Capital Group Inc. strategist Brian Reynolds. He sees the credit bears making a run at credit-derivative products that insure against bond defaults, which are a cheap way to try to manipulate the market.

    Indeed, the cost to protect against default at banks like JPMorgan Chase & Co. (NYSE: JPM) and Goldman Sachs Group Inc. (NYSE: GS), not to mention Greece, jumped noticeably last week. But the damage has been limited as bears have failed to get traction against the instruments that they used to catalyze the 2008 credit crisis.

    This lays the groundwork for a powerful snapback rally for stocks.

    To find out more about the China Surprise, read on ... Read More...
  • The Seven Themes That Will Lead to Maximum Profits in 2010 If the crippling financial events of 2008 and 2009 proved one thing, it's that investors need to rethink the entire philosophy of "portfolio management."

    Today, the best-performing managers around the world manage their portfolios based on broad-and-potent market themes. And with good reason.

    It's much easier to follow macro trends based on broad-based themes than it is to cobble together a bunch of different stocks into a portfolio and call it diversified. Theme-based investing is also much more profitable. And it allows you to better manage your risks.

    In short, theme-based investing lets you have your cake and eat it, too. Read More...