Six Reasons to Invest Overseas

Six months ago, in the middle of June, oodles of investors were exiting the natural resource markets and running for the hills. But I said, “Right now, after the recent sell-off, you have a grand buffet of choice morsels to choose from, especially in Asia.”

In that Money & Markets issue, I went on to give you 13 companies that looked ready to reap significant gains. You can see the results in the table below — twelve of the stocks are up since then; only Santos is losing out.

In the winning column, the gains range from 3.1% to 58.5%. Heck, someone who purchased 100 shares of each of those stocks on June 15, the day my story ran, would have been up $13,441 on January 16 — a 17.2% return in just seven months.

The reason I’m revisiting those stocks is because they demonstrate that not only is the commodity boom still here, but also that some of your money may be better off invested overseas.

Company	Gain/Loss (6/15/06 through 1/16/07)
Sinopec Shanghai Petrochem. (SHI)	20.1%
CNOOC Ltd. (CEO)	13.4%
Petrochina Co. (PTR)	25.6%
Santos Ltd. (STOSY)	-10.1%
China Petro & Chem Corp. (SNP)	58.5%
Alumina Ltd. ADS (AWC)	3.1%
Aluminum Corp. of China (ACH)	32.8%
Posco ADS (PKX)	32.4%
Amcor Limited ADR (AMCR)	20.8%
Kubota Corp. ADR (KUB)	4.8%
Korea Electric Power ADS (KEP)	20.9%
Huaneng Power Intl. ADS (HNP)	53.9%
Mitsui & Co. ADR (MISTY)	4.7%

I’m not being unpatriotic, just realistic. I can think of plenty of reasons not to buy U.S. stocks right now. Here are just …

Five Reasons to Favor Asian Investments
Over Their U.S. Counterparts

First, most U.S. stocks are overvalued again. They’re trading at the kind of price-to-earnings ratios we saw back in the heyday of the bull market, just before the 2001 collapse.

Second, the U.S. dollar is weak at the knees. The greenback is hovering just above a 14-year low against the British Pound … a multi-year low against the Swiss franc … and a nine-year low against the lowly Thai baht, a country that just had a military coup and overthrew its government.

Third, our central bank is printing money and credit like there’s no tomorrow. That threatens to send the value and purchasing power of the U.S. dollar even lower. And it would also mean higher inflation.

Fourth, credit card and mortgage delinquencies and foreclosures jumped sharply in 2006. Delinquent subprime mortgages jumped almost 17%! And property prices have not yet bottomed. So banks, mortgage lenders, and credit card companies — the financial heart of the economy — could be headed for some deep doo-doo this year.

Fifth, the Democrat-controlled Congress is set to duke it out with President Bush for the remainder of his term. Don’t underestimate this!

Typically, the last half of a second-term President’s administration is termed “lame-duck” because Washington is effectively waiting for the next President. But this is not your usual situation. In fact, the rest of President Bush’s second term is shaping up to be more like “roasted duck.”

Nothing against Bush … this is just the way it’s going to be. It’s the result of the war on terror, Iraq, the Middle East, oil, deficits, and more. I am not siding with either party — I’m just telling you what’s happening.

Effectively, Washington is going to be mired down in muck for the next two years. That’s not good for the U.S. economy.

Plus, Another Reason:
My Forecast of War with
Iran Is Coming to Pass

Almost exactly one year ago, I first alerted you to the potential of war with Iran. And this past summer I said it was likely that “Israel would make a pre-emptive strike against Iran.”

Now, in a clear sign that the situation with Iran is soon going to come to a head, the U.S. has raided an Iranian government office in Irbil, Iraq, arresting six Iranian diplomats.

Bush’s new war plan for Iraq unequivocally includes getting Iranian Shiite insurgents out of the country. That in itself is about to provoke a wider war.

And as I’ve been telling you all along, I wouldn’t be surprised to see the conflict get started through an Israeli strike on Iran’s nuclear facilities. The January 7 edition of the London Sunday Times picked up on this possibility.

According to the Times, the attack would use laser-guided bombs and nuclear “bunker busters” to get at Iran’s deep underground nuclear facilities. The targets would be the centrifuges at Natanz, a uranium conversion plant near Isfahan, and the heavy water reactor at Arak.

Israel denies this, but some of the sources I’ve been following say it could happen as soon as April. That wouldn’t surprise me in the least. Here are some recent statements that support my view …

“The time is approaching when Israel and the international community will have to decide whether to take military action against Iran.” — Israel’s Deputy Minister of Defense Ephraim Sneh

“Only a military strike by the U.S. and its allies will stop Iran obtaining nuclear weapons.” — an Israeli Defense Force (IDF) official, as quoted in the Jerusalem Post

“If the Americans don’t act [against Iran], we’ll do it ourselves.” — Brigadier General Oded Tira, former commander of the IDF’s artillery units

Unfortunately, if a war with Iran erupts, it would wreak further havoc on the U.S. dollar. Investors are already skittish on the greenback so a widening war in the Middle East would send it in a downward spiral.

Reason: Foreign investors, who have already been exiting the dollar, will stampede out of the buck and repatriate their money back into their home currencies.

Once you consider this, along with all of the other forces I just told you about, you can see why I think some of your money should be invested in other markets, especially Asia. After all …

Consider the Pluses to Investing
In Asian Companies Right Now

To begin with, almost all Asian countries are outgrowing the U.S. economy right now. China is in the lead, growing nearly five times faster.

Meanwhile, more and more stock markets in Asia are opening up to foreign investment. That’s increasing the numbers of shares being traded, making these markets more liquid. It’s also encouraging more and more companies to go public.

At the same time, more and more Asian investors are investing in their domestic markets. All this pent-up demand is helping support current market prices.

Speaking of prices, most Asian stock markets are trading at reasonable valuations. And you can find all sorts of companies that are undervalued in terms of traditional measures like price-to-earnings ratios.

And don’t forget about the possibility of a war with Iran! In the event of a widening conflict in the Middle East, Asian investors could switch out of their U.S. investments and into their home markets. That could send most Asian stock markets substantially higher. China is relatively insulated from a widening war in the Middle East … same for other markets like Hong Kong and Singapore.

So, if you purchased any of the Asian stocks I mentioned back in June, consider holding onto them! And if you haven’t purchased them, take another look now.

I can’t tell you how much to buy, what price to pay, or when to sell. That wouldn’t be fair to my Real Wealth Report subscribers. But I can tell you that having all of your money in U.S.-based investments is a risky proposition.

For that reason, I suggest owning not only some Asian investments, but also some gold, oil, and other natural-resource-related investments. For my favorites, see Real Wealth Report.

Best wishes,

Larry

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About MONEY AND MARKETS

MONEY AND MARKETS (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Sean Brodrick, Larry Edelson, Michael Larson, Nilus Mattive, and Tony Sagami. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MaM. Nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MaM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical inasmuch as we do not track the actual prices investors pay or receive. Regular contributors and staff include John Burke, Amber Dakar, Wendy Montes de Oca, Kristen Adams, Jennifer Moran, Red Morgan, and Julie Trudeau.

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