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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
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- "Capital Waves" Point to High-Tide Profits for Commodities, Tech and Emerging Markets
- Money Morning Mailbag: The Capital Wave That Could Blunt the U.S. Recovery
- Money Morning Mailbag: Capital Wave Investing Strategies Spotlight the World's Top Profit Plays
- U.S. Loses Crown as King of M&A to Emerging Markets
- How Capital Waves Are Creating the Biggest Profit Opportunities in Today's Markets
- European Bailout Fund Proposal … Just Another Bad Idea
- Six Ways to Profit as Brazil's Economy Takes Off
- If China Sneezes, Wall Street Will Catch A Cold
- The Seven Themes That Will Lead to Maximum Profits in 2010
- Four Ways to Profit From the World's Shrewdest Government
- Emerging Markets Consider Capital Controls to Combat "Hot Money" Inflows
- Jeremy Grantham: With Great Depression II Nowhere in Sight, Look to the "Emerging Markets Bubble" for Maximum Profits
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.
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.
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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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.
- 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).
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.
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
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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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.
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.
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...
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.
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.