Investment News Briefs Wednesday, September 9, 2009

“The Obama administration, for example, expects to run $9 trillion in deficits over the next 10 years – and that number is based on a recovery! Imagine what will happen if the economy doesn’t recover?”

Now, that’s a nice comforting thought to start our day right? NOT! WAKE UP! Morning has broken, and the coffee is on… If you are still of the thought that this is all going to end up seashells and balloons, then you need to stop and smell that coffee!

Oh brother! Looks like I’m full of you know what and vinegar this morning! Let’s try to calm down, Chuck, you’ve only just begun to write, you don’t want to peak so soon!

OK… Yesterday, I told you that the Asian stocks had sold off and that risk assets were being taken off the table. But that didn’t last long, and by mid-morning, I witnessed a nice currency rally, that wiped out the overnight selling. At one point during the morning a customer called to buy some euros, and when the sales person asked me for a price, I said, “you know, they may want to come back tomorrow morning, after the overnight markets beat the euro up, like we’ve so many times lately.”

But wait! That did not happen last night! So, I was wrong! The euro is getting some real love this morning after German unemployment fell in August, which was totally unsuspected. Euros and Swiss francs are the only currencies I see that have gained on the news this morning. So the Big Dog, euro, must have told the other little dogs to “stay on the porch”… Stay Rex!

German unemployment fell by 1,000… OK, now I know that this has the same feeling as removing a bucket of sand from a beach, when unemployment in Germany is 3.46 million! But, I never said that Germany’s economic recovery was a tidal wave! It’s smoking embers, that are in need of stirring, some small twigs, and leaves… My beautiful bride is an “expert” and getting a fire started like that, I should send her over to Germany, that would really kick the domestic demand to another level! HA!

Baby steps… That’s the way we’re going here… So, we’ve had IFO and ZEW think tank reports on Confidence all print stronger… We had the GDP surprise on the upside… And there was something else last week, but it slips my mind right now. The point here is that the Eurozone’s largest economy is waking up… We just have to hope it doesn’t hit the “snooze” button, now!

A reader sent me a note yesterday asking if I thought there would be a collapse of the Eurozone and thus the euro… If I had $5 for each time these stories have hit the streets, I would be sipping on a multi-colored drink in a tall glass with one of those tiny umbrellas, in a tropical setting… The point I’m making here is that on the outside Spain and Italy have problems… But what’s changed? These two had problems before they joined the Eurozone, and have had problems since joining the Eurozone… Me? I totally believe that these two get down on their knees each night and give thanks for being allowed to join the Eurozone!

So… In case you missed my answer in there… I don’t see that happening, at least not in the near future…

OK… Enough of that! The Reserve Bank of Australia ( RBA )met last night, and left rates unchanged, as suspected they would, and the following statement regarding their thoughts on the economy was relatively upbeat… However, the markets were looking for an indication of “when” the RBA would hike rates, and that didn’t happen… So… The markets were disappointed, and when they are disappointed with a Central Bank, they take it out on the currency! So the A$ got pounded overnight.

Now… Aussie GDP for the 2nd QTR is going to print tonight, I would have to think that the RBA maybe had a peek at the report, and thus their gearing down the interest rate hike talk… So… We could be looking at even weaker A$ prices tomorrow morning… Unless, that is, 2nd QTR GDP is as strong as it was once believed it would be!

Did you see where Canada printed a HUGE Deficit last week? Not a good thing… But, the Canadian balance position has teetered back and forth between Surplus and Deficit, but recently has remained in the red… You know me and deficits, so, I put a red mark next to the Canadian dollar / loonie… But then, you hear news like last night… Get this! PetroChina has agreed to pay C$ 1.9 Billion for a stake in a Canadian oil sands project. PetroChina will buy 60% of Athabasca Oil Sands Corp.’s MacKay River and Dover oil-sands projects.

That’s 1.9 Billion Canadian dollars / loonies that will have to be purchased… And You would have to think that China will be spending the “few loose dollars” they have in their pockets, which would put pressure on the green/peachback!

Canada is still in a recession, here folks… But… Could these be cheaper levels given the merger and acquisition activity? Only the shadow knows!

OK… So, here I am, 1 hour from when I began writing this morning, and all that glossy and shiny talk about the euro’s rally is fading… The Big Dog has lost 1/4 euro in the past hour… So… I wasn’t wrong after all!

OK, you’ll love this, or maybe you won’t, but I do, and since I’m writing this letter, I get to talk about it! HA!

Here’s the title of the story that flashed across the screen, and of course, caught my attention… “Goldman Sachs Wrong on Economic Recover, Macro Hedge Funds Say”

You’ve got me on this one! I’ve got to read on… “Paul Tudor Jones, the billionaire hedge-fund manager, who outperformed peers last year, is wagering that Goldman Sachs Group, Inc. and Morgan Stanley to it wrong in declaring the start of an economic recovery.”

“If we have a recovery at all, it isn’t sustainable.” One Hedge Fund Manager said… Calling this a “ski-jump recession, with short-term stimulus creating a bump that will ultimately lead to a more precipitous decline later.”

WOW! These guys must be reading the Pfennig! OK, I kid, because these guys would never bet caught with the Pfennig in their hands… They probably put it between the pages of the “Economist” so that others think they’re reading the Economist! HAHAHAHAHAHAHA!

Speaking of “must be reading the Pfennig”… I saw a thing that came across my desk yesterday that 57% of Americans would vote out every politician if the vote were taken right now! WOW! I didn’t know the Pfennig was read by so many people! Recall, I said weeks ago, to “fire them all”… Well, let’s hope that 57% grows to 95%, and Americans really do go through with their threat to vote them all out, if they continue to take us down the road to socialism / fascism / collectivism…

OK… You may recall a couple of weeks ago, I started asking you questions about the stock market rally, and it’s ability to continue on… I truly believed that the stocks were overbought, and the P/E ratios were out of control… Now, I see quite a few jumping on that bandwagon, and calling for a stock market reversal.

Do we really think the Gov’t will allow that to happen? Didn’t the President himself, say that he thought it to be a good time to buy stocks… Isn’t that sort of like a wink and a nod from the President that everything will be OK?

Beyond those conspiracy thoughts, let’s just say the markets get to go where the participants take them ( I know, it’s not reality, but let’s just play along ), and stocks begin to reverse their gains from March… I would think it to take an adverse affect on the currencies and their gains since March too… Throw Commodities in there too!

Now, in the old days, I would look at a stock sell off and say, currencies will rise… “Honey, put on the red dress tonight, we’re going out on the town!” but… These aren’t the old days… This is the new improved way of throwing all risk assets into the same barrel! And I don’t like it at all!

Ok… The Norwegian krone, traded with a 5 handle yesterday for the first time in a month of Sundays! It has traded back over 6 overnight… But, it was a good strong move from the krone yesterday nonetheless!

Well, today, we’ll see the ISM Index (Manufacturing) from August, and for the first time in 19 months, it is expected to be above 50! New readers might wonder what I’m talking about here… But it’s simple… 50 is a line in the sand that says any number below it represents contraction of manufacturing, and any number above it represents expansion of manufacturing… So, if it prints above 50 as expected one would say that manufacturing must be recovering…

Let’s look at that closer… Come on, closer, closer, closer! We’re experiencing a global recession, and global trade has been sketchy at best… But here’s U.S. manufacturing showing expansion… And… The rise has been quite steady since March… With March printing at 36.3, April 40.1, May 42.8, June 44.8, and July 48.9… See the steady rise?

What else has happened since March? That’s right, thank you for paying attention there in the back of the class! Yes, the currencies have been rallying VS the dollar… So, the dollar is much weaker than it was in March… The dollar index was 89.05 on March 5th, and today it is around 78… So… How did manufacturing / exports rise during this period of time? Because the dollar was weaker!

Let’s keep that in mind, eh? For if we get an adverse affect on the currencies from a stock sell off, this recovery in manufacturing could go kaput!

We’ll also see Pending Home Sales for July, and Vehicle Sales for August… Cash for Clunkers will push up the Vehicle Sales… But what happens next month?

Gold has backed off by about $8 in the past two days… It’s a dip… Therefore it must be an opportunity to buy at a cheaper price! I was reminding all my friends that we spent the weekend together at a lake, that I had told them to buy Gold $400 dollars in price ago… I was booed out of the room at that point, because you see, they didn’t buy it $400 dollars in price ago!

And on that note… I’ll head to the Big Finish!

Currencies today 9/1/09: A$ .8355, kiwi .6820, C$ .9125, euro 1.4295, sterling 1.6220, Swiss .9440, rand 7.7975, krone 6.0275, SEK 7.15, forint 192, zloty 2.8780, koruna 17.9110, RUB 31.8325, yen 93.10, sing 1.4430, HKD 7.75, INR 49, China 6.8303, pesos 13.44, BRL 1.88, dollar index 78.35, Oil $69.69, 10-year 3.38%, Silver $14.75, and Gold… $949.50

That’s it for today… Well, it’s been an unusually cool summer here in St. Louis… We had two separate weeks of hot weather, and that was it! It normally is much hotter, with very high humidity… I wonder what that means for this coming winter! UGH! Just found out yesterday that I won’t be going to Marco Island this December to speak like I had the previous two years… UGH! September is the last full month of baseball, and with the Cardinals in first place in their division, this should be a good month! There are two middle of the week day games in September, and I always enjoy those! So… Summer may be coming to an end, as along as September takes a long time to work through, I’ll be OK! All righty then, let’s get going on this Terrific Tuesday, the first day of September!

Source: More Baby Steps For A German Economic Recovery

But an early rally in U.S. stocks faded about midday in New York after Treasuries rose as investors swooped in to take advantage of sharp losses on Friday.

Oil rose to a 10-month high near $75 a barrel and other commodities also surged as optimism that major economies were pulling out of recession drove hopes of rebounding demand. .

Global stocks as measured by MSCI’s all-country world index <.MIWD00000PUS> rose 1.2 percent and was on track for a fifth straight session of gains.

The yen fell while the U.S. dollar slid against commodity currencies, such as the Australian and New Zealand dollars, as investors became more comfortable with riskier trades given the upbeat assessment of the world economy.

“Economic data is in favor of a stronger recovery than expected. We can be quite bullish on risky assets,” said Romain Boscher, head of equity management at Groupama Asset Management.

Euro zone industrial new orders in June rebounded 3.1 percent month-on-month, or more than expected, the European Union statistics office Eurostat said.

In the United States, economic activity improved again in July from extremely weak levels earlier this year, suggesting the recession is waning, a report from the Federal Reserve Bank of Chicago showed.

In addition, China’s latest data for July indicated that while growth was moderating after a strong second quarter, the recovery remained on track to achieve the government’s goal of 8 percent growth for the full year.

“The Chinese news was good and we had some positive news out of Europe as well,” said Rob Montefusco, a trader at Sucden Financial in London. “Technicals are pointing upwards.”

But U.S. stocks pared earlier gains. About 1 p.m. (1300 GMT), the Dow Jones industrial average <.DJI> was up 15.34 points, or 0.16 percent, at 9,521.30. The Standard & Poor’s 500 Index <.SPX> was up 1.11 points, or 0.11 percent, at 1,027.24. The Nasdaq Composite Index <.IXIC> was down 1.49 points, or 0.07 percent, at 2,019.41.

European shares hit their highest closing level in nearly 10 months, boosted by banks and miners.

The FTSEurofirst 300 <.FTEU3> index of top European shares ended 0.9 percent up at 975.19 points, the highest closing level since early November.

Banks were among top gainers, with DJ STOXX banking index <.SX7P> rising 1.8 percent.

Japan’s Nikkei average <.N225> jumped 3.4 percent, booosted by hopes for a global recovery and lifted by camera maker Canon Inc <7751.T> and other exporters.

Investors increased their risk-taking in the wake of stronger-than-expected U.S. existing home sales data and upbeat comments from Federal Reserve Chairman Ben Bernanke.

Copper prices rose to their highest in more than a week, helped by strong investment demand and bets the economic crisis is petering out.

Jesper Dannesbee, a senior commodities strategist at Societe General, said real demand has not improved that much it but will improve gradually through the year.

“This is follow through from Friday. There is a general appetite for risky assets driven by cheap money and lax monetary policy,” Dannesbee said.

Gold edged below $950 an ounce, under pressure from a firmer dollar, but remained rangebound as support from higher oil prices and investor demand prevented it falling further.

Spot gold was at $949.80 per ounce

U.S. Treasury debt prices rose, with the 30-year bond gaining more than a full point, as investors did some bargain hunting after Friday’s sharp losses and after the Federal Reserve bought government debt.

The benchmark 10-year U.S. Treasury note was up 19/32 in price to yield about 3.49 percent.

Benchmark euro zone government bonds ended flat as data bolstered the recovery view, but caution on its sustainability eased the selling pressure.

“The stock market has been the barometer for growth and potential inflation,” said Troy Buckner, managing principal of NuWave Investment Management in Morristown, New Jersey. “And yes. it’s been an extreme correlation between equity market movements and commodities, especially copper, aluminum and crude oil.”

But Buckner said that prices have climbed “too far too fast,” leading his firm to short crude and heating oil, while reducing long positions in copper and aluminum.

Euro zone government bonds ended flat as economic data bolstered the view the global economic recovery is under way but caution about the recovery eased selling pressure. Investors worried whether new U.S. debt issuance this week would be welcomed by buyers.

U.S. crude rose 51 cents to $74.40 a barrel.

Aug 24 (Reuters)

The market was also supported by China’s optimism that its domestic economy was recovering and official promises of more swift stimulus action when required. China is the world’s second-largest oil consumer.

U.S. crude was up 98 cents at $44.57 a barrel by 1205 GMT after rising as high as $44.76, while London Brent crude advanced 56 cents to $44.20 a barrel.

Brent has lost its rare premium to U.S. crude because of a decline in U.S. inventories. High U.S. stocks, particularly at the Cushing oil hub, had been keeping the American marker at a discount to Brent.

Markets will be watching for the February U.S. non-farm payrolls data due later in the session, which will probably show unemployment surging to a 25-year high in the world’s top oil consumer.

“Today, traders will turn their attention to the non-farm payroll report which in case of a negative surprise may pose an obstacle to further gains,” said Marius Paun, commodities analyst at ODL Securities.

UNEMPLOYMENT

Friday’s key non-farm payrolls report is expected to show the economy shed 648,000 jobs in February, while the unemployment rate is expected to rise to a 25-year high of 7.9 percent, according to a Reuters poll.

The U.S. dollar weakened before the Labor Department’s release of the payrolls report at 1330 GMT. Weakness in the U.S. currency can boost investor demand for oil and other commodities.

Asian stocks slid following losses on Wall Street due to a warning from General Motors it could go bankrupt and uncertainty about the fate of the banking sector. European stocks made early losses.

Top Chinese officials said on Friday substantial fiscal and monetary stimulus was breathing life back into the world’s third-biggest economy hit by crumbling exports, suggesting Beijing saw no need to boost the existing investment plan of nearly $600 billion.

Oil has traded in a band from around $33 to $50 since mid-December, pressured by slumping demand due to the economic downturn. Expectations OPEC might cut production again when it meets on March 15 have added support.

OPEC has agreed to cut production by 4.2 million barrels per day since September, and a Reuters survey found that members have met 81 percent of their output reductions as of last month.

Angola, which holds the presidency of the 12-member group, will not advocate further production cuts when the group meets, oil sources said, but Venezuela, Algeria and Libya have raised the possibility of a further cut.

“We expect the cartel to put through a modest cut when it gets together and judging by how well the market is holding up, participants seem to be expecting the same,” said MF Global.

March 6 (Reuters)

We find the report on the front page of the International Herald Tribune:

“More capital injections and guarantees may become necessary to ensure stability and the normalization of credit markets,” said the main man at the Fed, speaking to an audience at the London School of Economics.

He went on to say that he didn’t necessarily like bailing out Wall Street, but it “appears unavoidable.”

Nothing particularly exciting about that. But then we turn to page 12:

“Bernanke warns that bigger bailouts needed around the world,” is the money headline.

And then, the report gets down to business. The world economy is dangerously ill, says Dr. Bernanke, or words to that effect. We’re going to have to try some experimental drugs to rescue it.

“Beyond buying troubled assets from banks, Bernanke said, another option was to provide asset guarantees under which the government would absorb part of the banks’ losses in exchange for warrants and other forms of compensation. [Of course, if the banks had any means of compensating investors they wouldn’t be in this fix.]…

“Bernanke also expressed support for the idea of creating a so-called bad bank that would allow the government to buy financial assets in exchange for cash or equity.”

Here is where we laughed so hard we thought we might damage our midriff.

Create a ‘bad bank?’ Is he kidding? The world’s full of bad banks already – banks that did just what Bernanke is proposing to do; they bought financial assets, notably mortgage market derivatives, for cash. Now, they turn to the taxpayer, desperate for a handout to keep them from going under.

And the baddest bank of all? Next to the Central Bank of Zimbabwe it’s the US Fed. What’s it doing? It’s buying trash and paying cash. In this way, the mistakes of rich bankers are transferred to the people… via the people’s bank – the Fed. Of course, the people don’t know what’s going on. And they won’t notice either when the Fed eventually unloads these toxic assets – in the dark of night.

We have not checked the gold market this morning. Yesterday, gold held steady at $820 and appeared ready to drop into the $700 range. If gold doesn’t go up this morning, investors are not paying attention.

Let’s go back over the fundamentals. The world economy is correcting. The feds are trying to stop it. They tried their Friedmanite monetary stimulation – cutting rates to zero. And they’re sweating like Sisyphus, trying to make Keynes’ fiscal stimulus work too.

Both will fail – for the reasons we explained in these Daily Reckonings. You can’t help an alcoholic by giving him free hooch. And you don’t do a fat man any good by offering him another dessert.

“I woke up this morning and everything was green – not the trees but the gains on my emerging market portfolio.”

Up, up, up, with the exception of the iShares MSCI Turkey Invest Mkt Index (NYSE:TUR), which was down 5.67%.

Some of the highlights include the HANG SENG INDEX (^HSI) up 12.82%. The RTSI INDEX (RTS.RS) jumped 18.2% after Putin approved nearly $10 billion in bailout loans – most of them going to his billionaire pals who made extremely bad bets on the markets.

The JAKARTA COMPOSITE INDEX (^JKSE) increased 5.41%. The TSEC weighted index (^TWII) was up 6.21%. And the IBOVESPA SAO PAULO (^BVSP) market gained 5.94% after taking a tremendous beating.

Does this mean it’s time to get back into emerging markets?

Probably not.

But it does indicate some rationalization between the skyrocketing prices during the so-called commodities supercycle and the new everyday reality of emerging nations facing a raw reality head-on.

Maybe you can call it sort of a fiscal post-pubescent coming of age, where enormous subsidies and reserves from natural resources will give away to the promise of responsible stewardship by business and government.

Of course, no one really enjoys being responsible for very long, and the whole stupendous spectacle will cycle up all over again.

That said, we should really be looking to China as the bellwether for a sustained emerging market rally. The country is now dealing with the backlash to a global credit crunch, post-Olympic slump and credit and currency problems.

Inevitably, China will pull itself up by the bootstraps and continue the march toward its own economic Manifest Destiny.

Naturally, an upswing in oil, natural gas and metals will also help determine an emerging-market recovery.

In the meantime, though, we have to follow the credit, because that’s what these countries need to normalize their economic progress.

The International Monetary Fund (IMF) will make available as much as $100 billion to countries battered by the financial crisis.

During the past few years, emerging markets have avoided the IMF because of restrictions that are imposed with the loans. These often include budget cuts and interest-rate increases. When these countries get in bed with the IMF, fiscal responsibility is the first order of business.

Countries such as Brazil, Mexico and countries of the former Soviet Union would be likely candidates for IMF infusions.

In the end, don’t get your hopes up high for any emerging market bubbles in the near term. On the other hand, if you’re looking for a return to long-term fiscal responsibility (and the inevitable bubble) keep on your eye on these up-and-comers.

“What’s different?” asked colleague Manraaj Singh at this morning’s conference.

Early every morning, while most Americans are still in their beds, your editor joins a group of analysts and financial journalists to discuss the day’s news.

“What happened to the price of copper? Why are Asian stocks going down? Are they really going to cut rates today?” The answers are not always satisfying, but the questions keep coming.

And the question this morning was: what has really changed?

U.S. stocks held steady yesterday, but they’re down 5% so far this year. The dollar held steady yesterday too, but it is down for the year too – about 6% against the euro and the yen. The Europe- or Japan-based stock market investor has lost more than 10% of his money.

Meanwhile, the fall of the dollar has increased prices for imports. While the United States used to “import deflation” from Asia and elsewhere, now it imports inflation. Prices are rising all over the world.

Yesterday, European producer prices were reported rising at 6.1% per year. High prices have caused the biggest drop in retail sales on record. And yesterday, they had to call out the riot squad in Brussels, to battle fishermen who were kvetching about high fuel costs.

In China, retail prices are rising at an 8.5% rate – the fastest in 12 years.

In Russia, prices are going up at a 14.39% rate.

In Vietnam, the consumer price inflation rate is running at 25%.

In Venezuela, the inflation rate is 29%.

And in Zimbabwe…well, Zimbabwe is another story altogether, with inflation going up so fast they can’t even measure it. Prices are said to be increasing at 160,000% to 200,000% per year. But who can tell? There’s nothing to buy.

Back in Asia…the region’s central banks had hoped that Milton Friedman was wrong. They had hoped that a worldwide economic slowdown would reduce domestic inflation rates. So, they left their lending rates low – considerably lower than the CPI – in order to keep their economies turning over. In Thailand, for example, the central bank lends at 3.25%, while consumer prices rise at more than 6%.

Sound familiar? The United States also keeps its key-lending rate well below the inflation rate – and for the same reason. The Fed lends at 2%. Inflation was last clocked running twice as fast.

We pause here in honest admiration for our fellow investors – the kind of admiration we feel for members of a bomb disposal unit, or a knife-thrower’s assistant. What are we to think? They are lending money to world’s biggest debtor – the U.S. government – for 10 years at 3.94%. That’s yesterday’s yield on the 10-year T-note. If nothing changes, they will get nothing for their trouble. If inflation rates rise (or just happen to be understated), or the dollar falls, the speculation will blow up in their faces.

But along comes Ben Bernanke, with an apparent change of brain. Now, says the captain of the Fed’s rapid response recession-fighting team, further inflation is unwelcome in the United States of America. Supposedly, these words alone took $5 off the global oil price.

But what really has changed? Can the U.S. central bank really begin fighting inflation in a serious way?

The feds have discovered the same two things that their Asian central banker colleagues have found out: that the globalization street goes both ways…and that Milton Friedman was right. Inflation is a monetary phenomenon, observed Friedman. When you increase the amount of money in circulation, ceteris paribus, prices are going to go up. That they didn’t go up much in the last 15 years is merely because there were important other trends going on – notably, globalization, which was driving down prices. But now, traffic on the Avenida de Globalization is going in the other direction. And just as it was very difficult to cause inflation while globalized markets were cutting prices, so is it very difficult to stop inflation when globalized markets are increasing them.

*** Can the Fed really begin fighting inflation? Ah, dear reader…do you see the cruel twist to the story?

While the Fed couldn’t seem to create inflation in those wonderful years of the Great Moderation…now, it probably can’t do much to stop it. The U.S. imports an Everest of stuff from overseas. And stuff made overseas is becoming more expensive. The Fed can raise rates to try to cool the U.S. economy and reduce the amount of stuff Americans buy. But those darned Asians and Europeans can still buy more, and prices can still go up.

Besides, any further ‘cooling’ of the U.S. economy is risky. It could freeze up.

The crisis is said to be over on Wall Street. But the Financial Times says new IPOs are being taken off the schedule…short action on Lehman Bros. is at a record level (speculators are betting that the company is going down) and Moody’s says it might downgrade credit ratings for MBIA and Ambac.

The money just isn’t flowing as fluidly in Manhattan as it used to. An AP story tells us that apartment sales were off 21% in the first quarter. And over on Long Island, where the Wall Streeters have their weekend homes, lenders are said to cutting off home equity lines.

In the center of the country, bankruptcy filings are up 27% in Illinois. And out in Las Vegas, the mortgage fraud capital of the world, a $5 billion casino project has just been cancelled.

And this just in – California is officially suffering a drought.

Under these conditions, we’d expect Ben Bernanke to make some gestures toward protecting the dollar and reducing inflation. But we’d also expect that most of the air coming from the Fed will be hot, not cold.

“The Fed seems to be trying to create a situation whereby they are seen to be fighting inflation, simply by not lowering rates any further,” says MoneyMorning. “This is because, while the Fed may have no interest in fighting inflation, they have a big interest in fighting what they call ‘inflationary expectations’. In other words, they are more interested in fighting people’s perception of the problem, rather than the problem itself.

Does mean the end of the great emerging markets trend?

On the contrary, here at Profit Hunter we believe it presents you with an even better chance to buy.

As short-term traders pile out of Vietnam, we seriously recommend canny long-term investors PILE IN.

And we’ve uncovered the perfect way to play…

Like a slingshot, Vietnam is pulling back. Be ready when it goes off

See, we regard Vietnam as the “sling shot” economy of the next 20 years.

“Slingshot” is the term we use to describe a hitherto ignored market.

A market that takes off suddenly and rapidly after attracting a raft of state, domestic and international investment…

True to form, Vietnam pulled-in $15 billion in foreign funds last year alone.

“Slingshot” markets tend to emerge in developing countries where there has been major economic reform, a relaxing of market controls and a year-on-year increase in GDP…

Vietnam is experiencing all these in abundance.

We saw exactly the same global economic shifts in China and Russia 5 years ago.

That’s why the recent volatility in Vietnam’s performance only strengthens our view that the “slingshot” is being pulled back even more. When it comes off, we see carefully positioned investors making a packet!

But before I reveal this exciting opportunity, let me explain why the Asian markets are taking a breather, and crucially, why it won’t last forever…

Vietnam is a victim of its own success

As we’ve seen, its dazzling economic performance has attracted an unprecedented level of foreign money.

But that tide of money has had some unintended side effects: It has led to too much liquidity in the financial system, and that’s fuelled inflation.

Right now, inflation in Vietnam is running at 25.2%. And it’s spooked a lot of short-term foreign investors.

With Western markets reeling in the wake of the credit crunch, Asian markets suffer as international profit seekers lose their appetite for riskier investments.

Now there isn’t much Vietnam’s government can do about that – but what it IS doing is taking real measures to tackle inflation.

Last week, it raised interest rates from 8.75% to 12%. And I believe they will have to go higher before they have a positive impact. But it’s an important first step.

Not only that, it backs-up an important point we made when we first recommended investing in Vietnam on 3 July last year: This is a country where the government is willing to sacrifice short-term growth to ensure the long-term development strategy remains on-track.

And that’s precisely what you need to look for when you’re investing in a macro growth story like this one.

Buckle-up and hold on for the ride

Short-term speculators may be tempted to bolt for the door. But long-term investors’ interest in the country has actually been rising…

The country received foreign investment pledges of $15.3bn between January and May this year. That’s more than double what it received in the same period last year.

And it underlines our optimism for the country’s growth prospects.

Right now, Vietnam is the most oversold market in the world.

After the recent falls, its market is trading on a price-to-earnings ratio of just 11, which makes this market dirt cheap.

In other words: It’s a screaming buy.

If you aren’t already in it, you ought to be.

Our advice is to get in now, buckle-up and hold on for the ride!

Regards,

Manraaj Singh
Editor
Profit Hunter

Source: Asian Markets Oversold! Buy Vietnam ‘Now’