The Investment U e-Letter: Issue #1627
Monday, October 24, 2011
Is America the next Greece?
Top analyst warns:
"The United States is now in WORSE shape than Greece, Ireland, Spain, Italy or Portugal!"
Is he right? View his free video and judge for yourself.
Warning: Content may be too disturbing for some viewers.
Click here to watch the new uncensored video.
A Major New Threat to Your Stock Portfolio
by Alexander Green, Investment U's Chief Investment Strategist
A number of readers have asked me to weigh in on the Occupy Wall Street movement and what it means for the financial markets.
Let me begin by saying I sympathize with the anger and frustration of these protesters.
It's maddening when you can't find a job, pay your bills, or plan for your retirement. It's aggravating when your savings pay nothing. And I have no sympathy for the big wire houses. As I wrote in The Gone Fishin' Portfolio, most Wall Street firms service their retail clients the way Bonnie and Clyde serviced banks.
Yet these demonstrators' heads are leading them astray. If you want to examine who bears responsibility for the state of the economy, take a look at the facts, starting with the financial crisis of 2007 to 2009. Consider:
The problem wasn't corporate greed. It was government incompetence.
Sure, there's plenty of blame to go around. For example, CEOs Jimmy Cayne of Bear Stearns, Dick Fuld of Lehman Brothers and Hank Greenberg of AIG all failed to understand the huge risk their own institutions were taking. Shareholders and employees of these firms suffered mightily as a result. There was plenty of collateral damage, too.
And let's not forget the enemy in the mirror. After all, mortgage brokers don't generally hogtie clients and force them to take out home loans at gunpoint. Plenty of Americans got caught up in the hoopla during the housing bubble and figured they could get rich in a hurry by flipping a house. That didn't work out too well.
If there's intense demand for home loans, however, the free market will provide them.
Understand that businesses compete for profits the way NFL teams compete for championships. If you attended a game where the referees let the players step out of bounds, spear, face mask, or commit personal fouls without blowing the whistle, all hell would break loose.
That's what happened in the recent financial crisis. Politicians and bank regulators knew that financial institutions weren't requiring down payments from borrowers. They knew they weren't verifying income or assets or borrowers' ability to repay the loans.
They were supposed to officiate the game. But they didn't.
As Berkshire Hathaway Vice-Chairman Charlie Munger pointed out, when a lion escapes from the zoo and injures someone, you don't blame the lion. You blame the lion keeper. Federal regulators had all the tools they needed to protect us - and failed to use them. Now they're blaming it on investment banks and "millionaires and billionaires." And the Occupy Wall Street crowd is buying it.
Aside from aiding and abetting the recent the financial crisis, Congressmen in both political parties have grossly mismanaged the nation's finances, running up trillions in debt and tens of trillions more in unfunded liabilities. (The debt now amounts to more than $1 million per taxpayer.) For a better picture of this fiasco, click here to see the National Debt Clock.
In short, rich people and Wall Street firms aren't responsible for this state of affairs. Free-spending Congressmen are. Someone should tell the Wall Street occupiers to pick up camp and move over to 1st St and East Capitol, the address of the Capitol Building.
Between protests they might also pick up a book by Adam Smith, Friedrich Hayek, or Milton Friedman. According to Douglas Shoen, a former pollster for Bill Clinton, surveys of the Occupy Wall Street protesters show they overwhelmingly favor "opposition to free market capitalism and support for radical redistribution of wealth, intense regulation of the private sector and protectionist policies to keep American jobs from going overseas."
This didn't work in the 1930s. And it won't work today.
If voters, out of misguided populist anger, elect representatives who endorse these policies... well, at the very least it won't be good for your stock portfolio.
Next year's elections may well be the most important of your lifetime. Some Americans believe business is responsible for the country's economic woes. Others believe it's government.
I say, "Let's vote."
The Big 'Obama Surprise' of 2012
A prominent financial journalist says a single event (which is likely to take place in the next year), could spell the end of the Obama administration.
If it's accurate, this controversial story will make a few people rich, and a lot of people poor.
Get all the important details here...
Global Wealth Will Skyrocket in the Next Five Years
by Jason Jenkins, Investment U Research
Earlier this week in Hong Kong, the Credit Suisse Research Institute released its second annual Global Wealth Report, which finds that the Asia-Pacific region emerges as the key contributor of global wealth growth, accounting for 36 percent of all global wealth creation since 2000, and 54 percent since January 2010.
Here are the major bullet points:
Emerging Markets Will Drive the Wealth Boom
More specifically, wealth in China is forecast to increase by more than 90 percent to $39 trillion in the next five years. That will overtake Japan, which will have $31 trillion. India and Brazil's wealth will more than double to $8.9 trillion and $9.2 trillion respectively.
The Global Wealth Report also finds that emerging markets have quite a sizeable capacity to increase personal wealth given their much lower ratio of net financial assets to income and a much lower debt-income ratio than found in mature economies such as Europe and the United States. An aging population is also expected to increase the demand for financial assets relative to real assets - for example, housing.
I believe what we should take from this is what's been hinted at for some time. Globally, we're in a period of economic evolution where a radical reconfiguration of the world's economic order is taking shape. Emerging markets are now becoming the driving forces towards global recovery and are the true growth vehicles of global wealth.
How to Take Advantage of This New Fast Emerging Wealth
Multinational corporations are primed to take advantage of the next five years. Those companies who aren't globally diversified are in for a rough road. Remember what multinationals have going for them in this present uncertain climate:
PepsiCo (NYSE: PEP) is racking up annual revenue growth of about 24 percent in emerging markets along with raising dividends 39 years in a row and a stock yield of about 3.4 percent. Its third-quarter profit rose four percent because of higher prices and rising sales of its snacks and beverages, especially overseas.
McDonald's Corp. (NYSE: MCD) said this week its third-quarter net income rose by nine percent to $1.51 billion, its ninth straight quarter of earnings gains.
Yum! Brands (NYSE: YUM), Colgate Palmolive (NYSE: CL), Coca-Cola (NYSE: KO) and Nu-Skin Enterprises (NYSE: NUS) are also multinationals with large cash positions that they use to invest heavily in high growth areas like China and India.
Plays That Won't Just Survive in a Bear Market... They'll Thrive
This March, over two dozen of the world's top investment experts will unveil a collection of picks set to soar despite today's volatile markets. Including a "better-than-gold" investment that could soon skyrocket as the dollar takes a nosedive... an opportunity to profit from America's growing hatred of big banks... and many more.
To learn more - and discover how you can be part of the small group that hears this information firsthand - click here.
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Chart: Intel's (Nasdaq: INTC) Growth in Emerging Markets