Frontier Life

When the stock market turns ugly, the quest for “non-correlated assets” intensifies. A non-correlated asset is fancy Wall Street talk for something that doesn’t move lock-step with the overall market. When the market falls, a non-correlated asset might actually rise, or at least hold its own better than the market.

Gold is a classic example. Its price tends to rise during times of stock market distress. But very few investments can rival gold’s long history of non-correlation. Imposters abound. The imposters might move independently of the overall market for months or years at a time, thereby creating the impression that they are non-correlated. But when the markets really turn nasty, investors often learn that their “non-correlated” asset tumbles just as sharply as an S&P 500 Index fund.

~~~~~~~~~~~~~~Special~~~~~~~~~~~~~

The “Shameful Secret” That Could Triple Your Money…

By June 16, One of Wall Street’s Fat Cat Financial Firms Could Be Forced by Law to Reveal Embarrassing Data…

That Could Make You up to Three Times Your Money Before the End of 2008…

Click here to find out the truth…

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

However, some investors think they’ve found a reliable new non-correlated asset: “frontier markets.” Merrill Lynch recently created an index not only to track them, but for investors to buy and sell them.

Frontier markets include Pakistan, Kuwait, the United Arab Emirates (UAE) and other markets throughout Africa and the Middle East. They also include Vietnam, Kazakhstan, Cyprus and others. They are individually too small for institutions to invest in, but cobble them together in a new index that allows you to buy and sell the basket and… well, then you have something.

Merrill Lynch’s new Frontier Index tracks the 50 largest companies in 17 frontier markets. Even so, the market value of all these companies combined is only about $330 billion – or about that of General Electric. Right now, the index heavily tilts toward the Middle East, with 50% of the index in the region. Asia is the second largest component, with 23%, followed by Europe at 14% and Africa at 13%.

As for industry groups, banks usually are among the biggest companies in any emerging market. So banks and financial service companies represent about 65% of the index. Oil and gas is the next largest sector, weighing in at 13%. As far as countries go, the top three are the UAE (23%), Kuwait (18%) and Pakistan (14%).

So far, these frontier markets have lived up to their advance billing of not following the broader markets. Since Sept. 30, for example, the frontier markets actually gained 31% while the broader market lost ground. Merrill Lynch backtested the index several years and found that between February 2000-December 2007, the index return’s correlation with the S&P 500 was only 32%. Basically, that means that about two-thirds of the time, the frontier markets zigged while the S&P 500 zagged.

I love the idea of frontier investing, because I’m an optimist when it comes to global trade and booming overseas markets. Maybe it’s my globe-trotting that’s skewed my view. But when I travel overseas, I see great opportunity. I see people building businesses. I see the impact of global market forces on local energy, food and resource markets. I see the world getting smaller.

I’m long-term bullish on markets such as the UAE, Kuwait, Vietnam and others. But I also realize that the ride in some of these markets will be absolutely gut-wrenching. Just look at Vietnam.

The Vietnamese economy is growing somewhere between 7-9% per year. It is a cheaper place to do business than many other parts of Asia. Hence, Vietnam continues to attract a strong flow of investment.

While I liked what I saw going on there, I found no direct investment ideas for us. The market is just too small and illiquid. Heck, before March 2002, the market traded only on alternate days. Moreover, as with most of these frontier markets, Vietnam suffers from poor disclosures and low transparency. When you invest here, you’re really not sure what you’re getting.

~~~~~~~~~~~~~~Special~~~~~~~~~~~~~

Gasoline: $8 a Gallon!

We’re half way there and the price is rising every day. Of course, if thing stay the way they are, it’ll take some time for gasoline prices to reach this unthinkable level. But what happens when one of the biggest oil hoax’s in history is finally revealed?

The answer could be one of the biggest energy shocks the world has ever seen. Click here to find out first…

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

I remember listening to Carlo Cannell, a very good investor at Cannell Capital, talk about his trip to Vietnam and his investments there. This was back in May 2007. The theme was investing in the dark. In Vietnam, he basically made many blind bets on lots of companies, figuring enough of them would work out.

But the market has tanked since then.

Perspective, though, is everything in markets. That chart looks nasty, with a near 50% drop from the high in less than a year. But as recently as July 2005, the index was only 250. You’d still have more than doubled your money in less than three years. In 2000, it was only 100. Investors are still up sixfold from 2000, which is a lot better than an investment in the S&P 500 Index. And that’s really the key to the whole frontier market idea. As an investor, what’s most important is what happens over the years.

I’m skeptical of the idea of frontier markets as an “non-correlated asset” for all seasons. Links between these small markets and their bigger brothers are probably stronger now than in the past. Vietnam, for example, depends heavily on foreign investment. Vietnam’s currency, the dong, is still linked with the dollar. So we have to be careful in taking the past and saying the future will work the same way.

Did you know there are 1.1 billion barrels of oil waiting to be shipped out of a small corner of Africa? And all of it has to go through one port – that is owned by a hugely undervalued company.

This company knew exactly what it was doing… it got in years ago… way before the Americans and the Chinese had a clue this was going to happen…

Well guess what…

The Americans and the Chinese want this oil – they want it bad. There is just one thing standing in their way… the small company that has the power to release it…

Amazingly… this company is trading for pennies…

How?

Well they’ve been working behind the scenes for years securing many deals such as this one – and now the big boys have come calling for oil…

Well… of course they can have it… but they’re going to have to pay. And this is going to send this company’s share price through the roof.

And what’s more… this is what’s set to be the first of many pay-offs from their long-term strategy in this region. Profit Hunter is predicting you could double your money before the end of 2008 on this deal alone… and that’s just the beginning.

At present we are witnessing a massive transfer of wealth and influence away from the west and into the emerging markets. Profit Hunter… I am happy to say… is ahead of this curve…

But this curve is catching up fast…

We are already deep into subprime problems of our own in the UK… just as Profit Hunter predicted over a year ago.

In fact Profit Hunter’s chief investment strategist Manraaj Singh is getting increasingly alarmed by how heavily this crisis has affected British investors… and you should be too.

The world has changed… the west is in steady decline… and could be for decades… capital is heading to where new growth is emerging.

And the long term re-positioning away from western markets is the only way to avoid the worst of the sub- prime misery that is just around the corner…

The emerging markets are the only feasible way to make life changing profits over the coming years.

In fact – in the last five years – this ethos has made Profit Hunter readers an average 12 month gain of 33.48% on all closed positions.

This is why you should take a look at their latest opportunity. Over $135 billion dollars of oil revenues are waiting to be generated and this one company is the lynchpin to the whole process…

This company’s shares are trading for pennies… something… I still can’t believe – setting you well on course to double your money within 2008.

What have you got to lose by reading more about it?

Click through to find out more:

http://click.fspeletters.com/t/18465/1632470/157161/0/

Regards,

Frank Hemsley
Profit Watch