Brazil is certainly in this basket of falling markets. Fortunately for you, it shouldn’t be.

Sure, more than half of Brazil’s exports are commodities like soybeans and iron ore. But there’s a very good reason why Brazil is a safer investment than most — stability. Before you get started, let me explain…

Over the past two decades, Brazil has gone through many crises. Each one taught the country how to handle poor economic situations. But it was the most recent one that puts us in a tremendous advantage.

After so many years of falling on its face, Brazil elected President Luiz Inacio Lula da Silva. Leaving our opinions aside, Lula has done something to put the country in the driver’s seat this time around.

At the beginning of this decade, the world punished Brazil for its high debt levels. Its market crashed, erasing years of growth. Since this pseudo crisis, the Lula administration has stabilized the country’s economy and paid down debt. On top of these moves, it’s also put tough regulations in place across many industries. Most investors thought these regulations limited growth, which they did. But now investors – or, at least, smart ones – see the regulations as necessary evils.

By regulating industries like energy and finance, Brazil kept a steady, stable growth rate of about 4% in recent boom years. The rest of the emerging nations of the world were getting used to a 7% rate. These other “emergers” were funding their growth by leveraging their assets and creating massive debts. Brazil was paying its down, while accruing next to no new debt.

The overall stock market hasn’t noted this major difference, however. Brazil’s major index, the Bovespa, is down 40% over the last 12 months – alongside the rest of the world.

While others struggle with “bad assets” and massive debts, Brazil will be ready to strike.

Energy is our favorite way to play Brazil. Without energy, you can’t expand. Just look at what China is doing these days. As it continues to come online, it burns through more coal and oil than anyone could have imagined. Brazil, while it’s no China, is still demanding an enormous amount of energy.

The largest difference between Brazil and China is the regulations. There are many more aggressive mandates in the Brazilian energy industry than most Chinese, or Americans for that matter, can even fathom.

For instance, there’s been a lot of talk in recent years here in the U.S. about switching regular gasoline for ethanol to power our light vehicles. Brazil has been doing this since 1975. That’s over 30 years of mandates, which require all light vehicles to use at least 25% ethanol blends. The country is the world leader in ethanol efficiency. That came from strategic mandates.

The rest of the Brazil’s energy situation is no different. In recent years, hydroelectricity became the country’s energy solution. Now 80% of Brazil’s electricity comes from hydropower. This energy revolution places Brazil 42nd in CO2 emissions worldwide. It produces less CO2 than countries like Israel and the Philippines, which are just fractions of Brazil’s size and population.

Early investors in Brazil’s booming hydropower industry stand to make massive gains, while the rest of the world’s nations are trying to put their own economies back together. That’s where you need to be looking.

Source: Brazil’s Hydropower Advantage

The first sentence of a Reuters article on Brazil’s Carinval is certainly… attention catching:

The 10 million extra government-provided condoms are poised, final touches being put on huge floats depicting Queen Cleopatra and Can-can dancers, and the Barack Obama masks are flying off the shelves.

Would have liked to have known the name of the company making those condoms, eh? That extra 10 million is on top of the 45 million already provided at Carnival.

But even “bigger” news to investors like yourselves is the fact that one float’s dancers were wearing costumes costing $13,000… A PIECE! And this in a massive global financial crisis that has caused even some of the mining towns in surrounding Brazilian states to cancel their parades.

By all estimates, though, folks are spending less money this year, and Brazil expects about a 10% drop in foreign tourists to Carnival.

You wouldn’t know it by the looks of Rio, though. I like to have fun, as you’ve read in these pages before (underground pubs in Slovakia, or crazy futbol matches in Argentina), but some of the videos from this year’s Carnival seem… whew… a bit excessive even for my tastes!

Currently Brazil is a little out of favor with investment analysts. Last week, I told Taipan Insider readers that Citigroup thinks Brazil’s market is in for a slide, and that investors shouldn’t buy in until the Bovespa hits 35,000.

I also told them that I didn’t necessarily agree with Citigroup (NYSE:C).

Here’s the thing, though, that everybody does seems to agree on: Countries with strong commodity and cash reserves are going to be great markets on the far side of this financial crisis. The problem is, nobody can time when this crisis will end, or which companies will be around to reap the rewards.

For Brazil, there are a lot of choices, like Companhia Vale (RIO:NYSE), which was just downgraded today despite expanding its iron ore customer base in China…

That means RIO has secured more long-term supply contracts, and that’s a sign of longevity. Clearly something that investors should be looking at if they want to buy shares for the long run in this market.

If you are a member of any of Taipan Publishing Group’s publications, you can read my full article online.

Source: Viva Carnival, Viva Brasil

It must now be horribly clear to everybody with an investment portfolio – indeed, to anyone who watches the financial markets – that no country or sector is safe from a bear market of the magnitude of the one we’re suffering through right now. When stocks get marked down en masse, as they have, literally everything drops.

What’s more, there may be very little rationale for which stocks drop — or how much they drop by: When the wave of selling meets very few buyers, good stocks can easily fall more than bad ones.

Does that mean it’s a waste of time to search for a “safe haven?”

Absolutely not. Assuming you have the fortitude to avoid selling during the worst of this mess, the storm will eventually blow itself out. At that point, investors will look around at the wreckage, and start figuring out which stocks represent good value. Good stocks and countries without major economic problems will then bounce – and bounce big.

A few smart cookies that stayed out of the market until it bottomed will buy them and win big. The rest of us – who didn’t see the storm coming, but who invested in “safe haven” stocks – will see the majority of our portfolio value restored fairly quickly, while other investments languish near the bottom, or even drop further, possibly even failing altogether.

It is difficult to assess which sectors will be best able to shrug off the storm (obviously housing and financial services remain highly vulnerable), but we can identify some alluring safe-haven countries by employing several rules. As you analyze markets around the world, look for a country that:

* Hasn’t had a major housing boom during the last few years. Housing-price declines of 30%, 40% or 50% make a huge mess of the country’s mortgage system, and the fallout can reach far beyond the housing sector itself. Apart from the United States, countries like Britain and Spain are to be avoided. In Great Britain, London housing and related real estate became almost as overvalued as 1980s Tokyo property – far outstripping anything that happened here in the United States. And Spain experienced massive overbuilding in resort areas – most of it highly speculative.

* Is competently run from a macroeconomic standpoint, without any great tendency toward huge bailouts or Keynesian deficit-spending projects. Japan qualified on these grounds until recently, but the new Prime Minister Taro Aso wants to increase the already-excessive budget deficit with infrastructure spending (thereby even further increasing Japan’s already-excessive public debt). Deficits are a real problem in a recession: They are difficult to finance, choke off potential private-sector investments, increase interest rates and may require damagingly large tax increases to sort out.

* Does not have a huge balance-of-payments deficit or large international debt – either of which becomes difficult to finance as capital flows decline.

* Has interest rates that are close to – or are above – its rate of inflation. Very low interest rates distort an economy, and generally necessitate unpleasant deflationary action at some point in order to avoid rapidly rising inflation.

Of the major global economies in which a U.S. investor might reasonably buy stocks, the four that really meet these criteria are Canada, Brazil, South Korea and Germany. Let’s take a close look at each one:

* Canada has just re-elected a conservative government, increasing its parliamentary representation. It has low inflation of around 3%, short-term interest rates just above 2%, a modest payments surplus and a modest budget surplus. It had a moderate housing boom, with prices rising about 65% in the 2000-2007 time frame, but its bank bailout was a quarter the size of the U.S. bailout, if measured in terms of gross domestic product (GDP). Canada is a well-balanced economy between commodities and manufactured goods; it will suffer from the U.S. downturn, but represents sound value over the longer term. The TSX Composite Index is down about 42% from its June 2008 peak, about the same as the U.S. market, but the Canadian economic picture appears to be much more sound. One last point: Although this certainly isn’t a make-or-break requirement, it is worth noting that investing icon Warren Buffett has made highly favorable comments about the Canadian economy.

* Brazil has reduced its foreign debt to about 40% of GDP and kept inflation under control at around 6% by running an admirably tight monetary policy, with a short-term rate of 13.75%. Its economy is primarily commodity-based, with a broad range of exports, but it also has a substantial manufacturing sector. The Bovespa stock index is down 62% from its May peak, and Brazilian stocks are distinctly cheap. Provided Brazil avoids a debt default, the bounce here should be a healthy one.

* South Korea elected a pro-business government in February. It is a major exporter of manufacturing goods and importer of commodities, which this year gave it a rare balance-of-payments deficit that should now reverse if commodity prices stay lower. Its banks avoided the U.S. subprime mortgage market, and are generally solid, although domestic lending is rather high. The country has an inflation rate of 5% and short-term interest rates – after an Oct. 27 cut – of 4.25%. Economic growth is around 4%, and the country boasts a budget surplus.  The stock market is down 55% from its October 2007 high, and should bounce significantly if commodity prices stay down.

* Germany is growing slowly – at a slow-but-steady 1% to 2% – but it has a static population, meaning that represents real per-capita growth. It had no recent housing boom (so no major domestic debt problem), and has low inflation, Germany also has improved its cost position considerably relative to its Eurozone neighbors, with a substantial balance-of-payments surplus, and is currently benefiting from the decline in East German restructuring costs, which hampered the economy during the decade and a half between 1990 and 2005.  The DAX stock market index is down 46% from its December 2007 high, meaning many bargains may be available. The main negative: Germany’s banks are quite heavily exposed to Eastern Europe, where several countries appear to have serious debt and balance-of-payment problems. If the problem is as big as some experts are starting to allege, this safe-haven candidate may need to be re-evaluated. But for now, Germany remains on our list.

Source: Four “Safe Haven” Markets For U.S. Investors

Citigroup strategist Geoffrey Dennis forecast the Bovespa stock index may drop to 65,000 by ‘mid-summer’ from the May 30 close of 72,592.50. The index fell 1 percent to 71,897.25. The New York-based strategist kept his end-year forecast for the Bovespa at 74,000.

“Our mid-summer sell-off is 65,000 on the Bovespa, based on a big pullback in domestics, as interest rates and inflation rise,” the strategist wrote in a note to clients. So-called domestic stocks are shares in the consumer, industrial, utility, financial and telecom industries.

Sandy Franks in Taipan Daily, however, says that Brazil is an essential addition to your investment portfolio.

“Not only that, but investing in Brazil is a great way to protect your money against the falling U.S. dollar, the slumping U.S. economy, and the risky U.S. stock markets. And because Brazil’s economy is growing leaps and bounds, a modest investment today could grow fivefold in the coming years.

“Let me put it this way: To ignore investment opportunities in Brazil would be a horrendous mistake that could cost you dearly.”

Read on here to learn how to make maximum profit from a blue chip Brazilian mining conglomerate.

Now things have changed and the country is coming into its own. As the world beats a path to Brazil’s door, for everything from soybeans to sugarcane to base metals — and soon oil and gas — the cash is pouring in.

Better still, a recent event has opened the doors to even more opportunity in Brazil. Taipan’s executive publisher, Sandy Franks, has the details.

Enjoy your weekend,

JL

Brazil Receives S&P Credit Rating, Becomes New Opportunity for Investors

Would you like to grow your “safe money” by 225% over the next three years while collecting 9% annual dividends? Here’s how to do it… by Sandy Franks, Executive Publisher, Taipan

In a shocking move, Standard & Poor’s has upgraded Brazil’s credit rating, lifting the country to “investment grade” for the first time in history.

The upgrade sparked a 6.3% rise in the index of the Sao Paulo stock exchange, or Bovespa, which soared to an all-time high of 67,868 points.

President Luiz Inacio Lula da Silva, basking in the investment upgrade, said it was a “magical moment” for Latin America’s largest country.

While the upgrade is good news for Brazil’s economy, it also presents YOU with a remarkable opportunity.

In fact, if you’d like to grow your “safe money” by 225% over the next three years while collecting 9% annual dividends… then please pay special attention to this “ground floor” investment opportunity.

Let me bring you up to date on the situation. Until Brazil received its recent credit rating, the country was considered a high-risk investment only for the brave and the bold.

The South American nation was strapped with billions in debt, and many investors believed the new leftist president would ramp up already-high government spending.

Consequently, many of the big institutional investors waited on the sidelines. But not anymore…

The ongoing commodity boom has flooded Brazil with cash. The economy is growing leaps and bonds.

An estimated 20 million Brazilians have emerged from poverty on cheap credit, welfare checks and tax breaks, helping to forge a new middle class that in turn is fueling strong consumer demand.

And S&P’s investment upgrade is a signal that Brazil’s stock market is off to the races.

The upgrade will make it possible for a wider universe of international investors, including massive U.S. pension funds, to plunge into the Brazilian stock market.

This means that Brazilian stocks will see an influx of cash. For investors, this is an opportunity to get in on the ground floor of some of the amazing opportunities you’ll see coming from Brazilian companies in the coming months.

It’s really simple: Because of S&P’s upgrade, one of the most lucrative stock markets on the planet is now also one of the safest!

If you’re looking for a safe, simple way to grow your money – and collect great income – Brazil is an essential addition to your investment portfolio.

Not only that, but investing in Brazil is a great way to PROTECT YOUR MONEY against the falling U.S. dollar, the slumping U.S. economy, and the risky U.S. stock markets.

And because Brazil’s economy is growing leaps and bounds, a modest investment today could grow fivefold in the coming years.

Let me put it this way: To ignore investment opportunities in Brazil would be a horrendous mistake that could cost you dearly.

Of course, the best time to invest in Brazil is right now. While the news of Brazil being an attractive investment opportunity is just now making headlines, our team of editors has already alerted readers to the situation.

In fact, Sally Limantour, editor of Taipan, our flagship publication, has isolated the single best stock to own in Brazil. Not only that but it’s just about one of the safest stocks you could own.

The company is Brazil’s largest utility company. It is big, strong, and offers a rock-solid way to grow your money and collect great income.

During the next decade, Brazil will experience massive growth. Its people, businesses and government will need power.

This company is in perfect position to supply most of the country’s power needs. It has returned over 225% over the last three years. Sally expects it to generate similar gains for years to come.

The best part: It pays a whopping 9% annual dividend, and you can buy shares without sending one single dime overseas.

Already, Brazilian stocks have awarded smart American investors.

Over the past decade, inflation has been tamed, with an operationally independent central bank keeping it below 10% for almost all of the past decade, compared with 2,500% in 1993. Growth is running at 4%-5% a year, external debt has declined dramatically, commodity exports are underpinning large trade surpluses, and foreign reserves have ballooned to $200bn. All this makes Brazil far less vulnerable to global crises.

And the country has just received a “strong vote of confidence” from ratings agency Standard & Poor’s (S&P), says Economist.com. S&P awarded Brazil’s foreign-currency-denominated debt investment-grade status. It claims Brazil’s pragmatic policies have created a “sounder foundation for economic growth and fiscal improvement over the past five years that should continue”.

The upgrade, which in due course seems likely to be followed by upgrades from the other major ratings agencies, Moody’s and Fitch, will gradually lower the cost of capital in Brazil – as borrowing costs fall with a better credit rating and money flows into the country – boosting growth prospects.

International funds that are barred from buying sub-investment-grade bonds will now be eyeing up Brazil and interest among global equity investors should mount amid optimism over future growth; with new fixed-income and equity flows and more foreign direct investment on the cards, the move is a “strong long-term positive for Brazil’s financial markets”, says Citigroup’s Geoffrey Dennis. The stockmarket has gained over 8% since the upgrade and the Bovespa index is at a new record of around 70,000; it has risen sevenfold since 2002.

There is ample scope for further gains in the long-term. Brazil is ideally placed to cash in on the secular commodities boom, given its own oil, a thriving ethanol production sector – thanks to its sugar cane – world-beating iron-ore production and “one of the most efficient agricultural sectors in the developing world”, says Stephen Foley in The Independent.

Bulls also point to the fact that exports comprise just 14% of GDP, shielding Brazil from “changes in the export environment”, as Daiwa puts it; growth has been led by domestic demand as job and household income growth has fuelled consumption among the expanding middle class. Retail sales were up by an annual 12.2% in February.

But now short-term interest rates are rising, says Dennis. In April, the central bank hiked rates by 0.5% to 11.75%, and with growth strong, inflation back to 4.7% and inflation expectations rising steadily, rates may have to go higher than the 13% economists are pencilling in. He also points to “notably rich valuations”, with the market’s forward p/e of 12.4 42% above the historical average and the price to book value ratio at a record 3.5.

Moreover, as the past year has shown, Brazil will not be immune to a likely relapse in global markets amid fears over the American and global economies – note that the Bovespa index is highly cyclical, with the energy and materials sectors comprising 60% of the index. There will probably be better long-term buying opportunities in the months ahead.

Source: Brazil Is Well Placed for Triumph, But Wait for a Better Time to Jump In

• The U.S. Treasury Department announced yesterday (Wednesday) that it would bring back the one-year Treasury bill at its next quarterly refunding auction, MarketWatch reported. “The majority of members believe that the addition of the year bill combined with increases to the size and frequency of existing coupon debt over coming quarters will still not be sufficient to satisfy the increased financing needs of the Treasury over the intermediate and longer term,” a panel of experts said in a government report, stating the next option could be to bring back the 3-year note as well.

• United Online Inc. (UNTD), the owner of Internet service providers NetZero and Juno, announced it would acquire online florist FTD Group Inc. (FTD) for about $456 million in cash, stock and notes, The Wall Street Journal reported. “This transaction will meaningfully diversify our revenue base within a large global market experiencing significant migration to the Internet,” said United Online Chief Executive Mark R. Goldston.

• Descendents of oil scion John D. Rockefeller, the founder of Standard Oil from which both Exxon Mobil Corp. (XOM) and Chevron Corp. (CVX) can trace early roots, have called upon Exxon to be more environmentally conscious, despite the company’s record recent profits, Forbes reported. Neva Rockefeller Goodwin, a great-granddaughter of John D. Rockefeller, said yesterday (Wednesday), “The truth is that Exxon Mobil is profiting in the short term from investments and decisions made many years ago, and by focusing on a narrow path that ignores the rapidly shifting energy landscape around the world, including developing nations.”

• Slowing demand and increasing competition are to blame for Garmin Ltd. (GRMN), navigation device maker, to miss market estimates for the first quarter. Garmin’s shares dropped as much as 14.4% on the day to its 52-week low of $39.75 a share as it posted a profit of $147.8 million, or 67 cents a share. Analysts expected the company to earn 74 cents a share, according to Reuters Estimates.

• Soft-drink titans PepsiCo. Inc. (PEP) and The Coca-Cola Co. (KO) continue to push their battle into uncharted waters, as Pepsi announced it acquired V Water, Britain’s vitamin-enhanced bottled water, for an undisclosed amount. V Water is very similar to vitaminwater, which Coca-Cola bought last year for $4.1 billion. Sales of non-carbonated drinks are growing considerable faster than carbonated beverages, and Pepsi already owns SoBe Life Water, Gatorade sports drink and Aquafina bottled water. 

• Brazil’s Bovespa stock index jumped to a record after Standard & Poor’s unexpectedly raised the country’s credit rating to investment grade. The Bovespa Index of the most-traded stocks on the Sao Paul exchange surged 6.38% to 67,896.13 at 3:32 pm EST, its biggest gain in three months.

• Kraft Foods Inc. (KFT) reported first-quarter profit of $608 million, a 13% drop from a year ago, yesterday (Wednesday). Though sales improved 21% despite economic pressures and rising commodities prices, as Kraft raised prices on 90% of its products.

• Kellogg Co. (K) reported yesterday (Wednesday) that first-quarter profit fell 2% despite recent price increases. Net earnings fell to $315 million compared with $321 million a year ago. Earnings per share increased from 80 cents a share to 81 cents a share because of a $650 million share-repurchase program, the Associated Press reported.