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All markets are reaching critical turning points this month. If my indicators are correct, and I strongly believe they are, we should see …
A major bottom in stocks. And a multi-month rally in the Dow that could bring it back to 10,000
An important top in the U.S. dollar, leading to renewed fears of inflation
A collapse in U.S. Treasury bonds and a wild jump in interest rates
An important bottom in oil and gas prices
And a large rally in natural resources, including gold!
I urge you to watch these markets like a hawk this month. There are enormous profit opportunities ahead. But don’t just jump into them recklessly. The swings will be wild, and risk will be running high.
Asian markets are looking like they will outperform U.S. stocks, yet again. So, there will be many opportunities there as well.
Your best bet: Consider a subscription to my Real Wealth Report for specific recommendations and timing signals. The March issue goes to press tomorrow. Don’t miss it.
Meanwhile, many markets around the world are reaching turning points.
But There’s One Area of the Globe
I Suggest Steering Clear of — Russia
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| Over the past two years, the ruble has lost 33 percent of its value against the dollar. |
Two years back, when companies and investors were stampeding into Russian stocks and bonds, I took the opposite approach. I told everyone I could that Russia “didn’t pass my smell test” … that I sniffed out “rot beneath the surface” … and to “steer clear of Russia” and "not invest a single penny in the country.“
Since then the Russian RTS Index has plunged more than 64 percent, wiping out more than $1 trillion in shareholder equity. The Russian ruble has also fallen off a cliff, shedding 33 percent of its value against the dollar.
So is Russia a bargain now?
I don’t think so. What continues to bother me are five serious flaws in its economic backbone. Fault lines that continue to widen …
#1 — An increasingly
fascist dictatorship …
Over the last few years, even though Vladimir Putin is no longer Russia’s President, we’ve seen increasing tendencies toward a fascist dictatorship. Putin has been assuming more and more power as Prime Minister, creating a powerful regime that continues to control the country.
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| Even though Putin is no longer Russia’s President, he’s been leading the country towards a fascist dictatorship. |
You need look no further than Russia’s sharp price hikes in gas supplied to the Ukraine and Moldova. Or its threats to the EU, including cutting gas supplies by as much as 40 percent.
With oil prices low and Russia now desperate for revenues, it’s a pretty good bet that Russia’s belligerent behaviors will be on the rise. That’s not conducive to investing in Russia. Period.
#2 — Too dependent on
oil and gas revenues …
When oil was booming, so were Russia’s revenues. Windfall profits of up to $650 billion were estimated to have been raked in by both the state and the private sector.
But now that oil has slid back to the $46 level, and having failed miserably at diversifying its revenue bases during the good times, Russia is hurting big time.
Collectively, oil, natural gas, metals and timber had accounted for more than 80 percent of exports and 32 percent of government revenues. Those figures have fallen over the past few years, but they have not been replaced with any other sources.
And even though I expect oil prices to head back up, Russia remains way too dependent on energy revenues for my taste. Until Russia diversifies, its economy will remain woefully dependent and at the mercy of the energy sector. That’s a long-term negative for Russia.
#3 — Still antiquated
infrastructure …
When the Iron Curtain collapsed in 1991, the Soviet infrastructure basically lay in ruins. The country was driven into bankruptcy trying to keep up with the West in the arms and space race.
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The result:
- Dilapidated, inefficient factories …
- Decaying rails, bridges and highways …
- A creaky and sometimes dangerous energy and power system …
- An undependable telecommunications network …
- And an underdeveloped and corrupt banking system.
Even worse, the stockpiles of poorly maintained and guarded nuclear weapons stockpiles have become an international problem.
Yet, despite the few years of a Russian boom from 2002 to mid-2008, not much has changed on any of these fronts.
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| Despite a boom from 2002 to mid-2008, Russia’s railroads fall far short of 20th century standards, let alone the 21st century. |
What’s more, railroads and waterways remain woefully short of 20th century standards, let alone the 21st century. And Russian airlines retain some of the highest accident rates on the planet, almost 13 times the global average!
Things aren’t much better in the construction industry either, where corruption is rife and safety standards almost non-existent. Or in information technology and telecommunications, where Russia remains one of the most poorly developed countries on the planet, just a cut above Africa.
And forget about Russia’s banking system. It reeks of corruption, from money laundering to bribes, kickbacks, payoffs and more.
#4 — Organized crime …
Russia remains one of the most corrupt countries in the world. In addition to the state fleecing the private sector by wholesale confiscation of assets, mobs rule the private sector extracting as much as 20 percent of net profits from small and large businesses alike.
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Unofficial intelligence reports indicate that crime groups control as much as 80 percent of all private business and up to 40 percent of the Federation’s wealth. There is no way a country can thrive with that level of corruption.
#5 — Crippling alcoholism …
Russia’s problem with alcohol is chronic, with the average adult consuming 15 liters (about 4 gallons) of booze a year.
Alcoholism has cut the average lifespan for Russian men to just 58 years and 65 years for the entire population. Over 40,000 Russians each year die of alcohol poisoning, compared to only 400 in the United States.
Moreover, alcohol plays a role in the deaths of nearly one-third of all Russians, according to Alexander Nemtsov, director of the Moscow Psychiatry Institute and one of the country’s leading experts on alcoholism.
My view: Steer clear of Russia. Avoid claims that Russia’s stock market is dirt-cheap right now. It may rally in the short term. But longer term there is very little opportunity in Russia — and loads of risk.
Your best opportunities remain: Natural resource stocks, gold, and the Asian markets.
Best,
Larry
P.S. For more of my thoughts and insights directly from the front lines as I travel the world, sign up for our new free e-zine, Uncommon Wisdom, with daily updates and recommendations to preserve and grow your wealth — no matter what markets are doing, or where the profits are.
The best part? A subscription to Uncommon Wisdom won’t cost you one red cent! Click here to subscribe.
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