Why wait for the next crisis to hit the major markets when you can move on to the best-performing markets of the future now?
by Neil George
The past month has seen major markets do yet another round of the slip and slide. In the US, the Dow Jones has given up another 1 percent – while in Europe, the latest rounds of credit disasters have driven the leading stocks from London to Paris and Frankfurt down more than 8 percent. And in Japan – the home of the multi-decade long recession – the markets are barely (at least for the moment) in the black.
And yet, the usual talking heads of Wall Street – the wannabe brain trust of the nation’s retired investors – keeps spooling out the same tired advice: Stick with the major markets. But they have an ulterior motive: To keep their own paychecks coming, they need your dollars to keep flowing to the big markets.
Then there are the doom-and-gloomers seeking their 15-minutes of fame with predictions of US dollar demise.
These guys keep selling the concept of getting out of the US and the dollar. But look what’s happened to their favorite places for your retirement cash: The euro is down against the dollar by nearly 12 percent; the British pound is down nearly 9 percent and that stalwart of the doom and gloom set – the Swiss Franc – has done nothing against the US dollar.
None of this fazes the dollar-haters – as they just keep pointing out the troubles of the US while ignoring the same exact woes of the rest of the world’s major economies and markets.
But what if you could get beyond both the usual suspects of Wall Street and the alternative doom and gloomers? You might just then actually manage to make and keep a few more bucks for your own retirement.
Emerging Wisdom
The key to making your own portfolio pay for your retirement is to focus on stocks that not only pay you to own them – but stocks in markets that aren’t facing the next round of credit or other crises. And if you can get those stocks in markets with currencies that are rising against the dollar, euro, pound and yen – it will make those dividends and gains even richer.
To do this you need to embrace what Wall Street keeps telling you is risky – emerging markets.
They’re called emerging for one reason – they’re making the right moves to grow their economies – and their stock markets and currencies reflect the progress.
Look at it this way – how many so-called AAA-rated economies have been slammed over the past few years? In Europe there are a collection of former AAA countries such as Ireland – which is now A and who knows how low it could go without its next bailout? And even in Japan, the debt of ages is now sending its ratings down into the lower end of AA – who knows where it might end up?
Think about it – AAA-rated markets can only fall from grace. So why not invest in up-and-coming markets whose ratings are on the rise?
In Asia, countries such as Thailand are climbing – with ratings going from BA to the high-end of BAA.
Or how about Singapore? It took years and years of hard work – but it pays to watch how you tax, borrow and spend. Singapore went from AA to AAA in just a few years.
In the Americas, there are several countries that continue to be keenly focused on the goal of becoming the next major market. Brazil is the poster child for the cause, and with the recent elections rewarding the right leadership – the nation has gone from a basketcase with a single-B rating to BAA – with the next step in the A-ratings.
In Europe and just beyond to the east – while their peers inside the European Union look down their noses – markets such as Turkey and Israel are picking up their ratings. Turkey has been moving from the lowest of B-ratings into the BA range and Israel keeps moving up the A range – while the leaders of the EU are heading south, crushed by their loss of focus.
Profits Not Panderings
Markets reveal what is real rather than just assumed. And this is why the emerging markets are delivering – while the majors do their slip and slide.
In Asia, the up and comers of Thailand and Singapore are performing – with local market stock indexes up so far this year alone by over 16 percent for Singapore stocks and nearly 50 percent for the Thai stocks.
In the Americas – Brazil is up a bit, while in the fringe of Europe – Israel is up over 16 percent and the Turks are up over 25 percent.
Then there’s the currency factor. If you can get the right stocks in the right markets – you can make even more. For markets that are on the upswing – the currencies track their progress.
Way back when I was a currency trader – I used to work with corporations and investors to try to go beyond guessing and get a true handle on currency directions.
I came up with a fundamental model for valuing a currency just as if it was the “stock” of the country. The better the fundamentals of a market – the higher the value of the currency denominating all of the market.
Better fundamentals result in better currencies. So while the US dollar, European Union euro, British pound and other majors reflect the underlying woes of their markets – the currencies of the up and comers are moving higher.
In Asia just this year alone, Thailand’s baht is up almost 10 percent while Singapore’s dollar is up a bit less at a 5 percent gain.
Down in South America – Brazil’s real continues its rally against the majors despite some efforts to stem its long-term upward run.
And on the outskirts of Europe – the Turkish lira and Israeli shekel are both climbers so far this year with gains against the dollar of 3 percent each and nearly 17 percent or more against the euro.
Better Markets, Better Returns
In my Pay Me Strategy – I focus on stocks that will grow your retirement wealth during good times and bad. And one of the crucial means of making this happen is to adhere to a few major tenets when it comes to picking stocks for your own retirement portfolio.
This includes focusing on stocks offering solid, high-paying dividends. And if they can be found in rising markets with rising currencies – so much the better for the long haul.
There are plenty of quality, high-paying dividend stocks in the world’s best up and coming emerging markets. The key is not to just throw a dart at a good market – you can get if your dart picked the wrong stock.
Nor should you allow yourself to get stuck with a broad index play in an ETF (exchange traded fund) – as you might wind up taking losses if the ETF doesn’t track the right collection of the right stocks.
The answer is to pick stocks that are in sustainable industries and then put them through our Pay Me Strategy stress tests. Stress test number one is to focus on a company’s income statement and look at what happens when the worst hits its market. If the cash keeps coming to service its dividends – then it’s passed the first test.
Second, focus on the balance sheet. This is where you look at the debt and what needs to happen to keep that debt serviced and rolled over. The interesting thing about many stocks in emerging markets is that they tend to have less debt than their peers in the so-called major markets.
You’ll find a wide variety of stress-tested stocks in my Pay Me Strategy – including a whole new series in some of my favorite emerging markets such as Thailand, Singapore, Brazil, Turkey, Israel and others. And what links each of the newest of my vetted stocks is that they’re not only appreciating in price – but they’re high-paying as well.
And they’re not hard to buy. In fact, each and every one of them can be bought and owned in any US brokerage account – including retirement accounts from IRA’s to SEP and even many 401k and other qualified retirement accounts. And some even trade right on the New York Stock Exchange (NYSE).
Want an example? How about in Brazil – where one of the nation’s major power utilities keeps pumping out the cash.
CPFL Energia is based in the financial capital city of San Paulo and trades on the NYSE under the symbol CPL. It pays a dividend of over 8 percent – which has been climbing by over 27 percent over the past five years alone.
And for those same past five years – just as markets in the US, Europe and Japan have imploded – CPFL Energia has delivered returns each and every year averaging over 27 percent.
Rising cashflows, fat and rising margins and low debt to assets all work to make this company’s stock make the cut. And why this is yet another in The Pay Me Strategy’s collection of stocks that foregoes Wall Street hype – and instead keeps working to pay for plenty of investors’ retirements.
To get the names of my other high-paying, stress-tested emerging market stocks – along with the rest of The Pay Me Strategy’s recommended list – click here to get a 30-day free trial subscription.
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