One of My Favorite Latin American Stocks is Now a Bargain: ARCO

Over the past few years, I've been imploring investors to boost their exposure to the more dynamic economies and regions of the world. Simply put, Latin America, Asia and even Africa are poised to grow at a stronger pace in the next few decades than the United States and Europe. This view stems from the steady expansion of a middle class in each of these regions. As people move up from the lower-income strata, they spend money on appliances, homes, vehicles, fast food and many other typical consumer items. This creates a virtuous cycle, whereby a range of industries sprout up to support this demand, and they in turn create many more middle-class jobs.

Of course, there's a good time and a bad time to load up on stocks and funds for these dynamic markets. I'm a huge fan of countries like Brazil, Turkey, Colombia and Indonesia -- just to name a few. But these countries' economies and markets haven't fully decoupled from the United States and Europe. It's an ongoing process, and troubles here still affect these emerging markets [2] from time to time.

Instead of focusing on these markets, I'm spending more time looking at specific companies that directly benefit from rising consumer incomes in these regions. I recently focused [3] on home builder Gafisa (NYSE: GFA [4]), which continues to trade poorly but offers the potential for significant upside if the Brazilian housing market [5] firms up. (more)

Euro Fall Would Raise Stakes for China, US

The situation in the euro zone has become so bleak that it is giving rise to the most improbable rumours. The latest to make the rounds of European hedge fund managers suggests that the euro will be tied to the dollar at close to parity, a dramatic fall from its current level of just under $1.30 and one that would involve the printing of hundreds of billions of euros.

However unlikely, the speculation is an indication of Europe’s plight in a world with little growth and every government looking at exports as a way to grow. A cheap currency giving an artificial boost to competitiveness is more palatable than austerity.

The euro [EUR= 1.2845 -0.0038 (-0.29%) ] remains relatively strong for a variety of reasons. Despite domestic tensions, Europeans are not taking their money out of Europe, they are just moving it to safer homes within the region. Moreover, European banks continue to sell off dollar assets and bring the proceeds home. In addition, central banks in emerging countries continue to hold the euro as something of a reserve currency. (more)

Gold & Gold Miners Are Closing in on a Major Bottom

Members of my service as well as long time readers know that I do a lot of analysis based on the past. I am constantly looking at long-term historical price charts and data. As a trader, I am always looking for an edge.

Obviously the keys to long-term success involve proper position sizing, risk management mechanisms, and ultimately leveraging probability. Professional traders are masters of these tenets. These characteristics are what separate successful traders from average traders over the long haul.

Sometimes through my rigorous analysis I come across price charts and oscillators that help put together a picture that helps shape my view of the marketplace. The past few months have been some of the most difficult market conditions that I have seen in some time.

The “wall of worries” permeates the financial landscape as risk at present seems unprecedented. The list of macroeconomic concerns ranges from the European sovereign debt crisis to escalation of military action in the Middle East.

I could probably write an entire article about the various risks that plague global financial markets at present, but I try to focus on the positive in any situation. Right now remaining optimistic is a daily battle amid the constant barrage of depressed economic data. Instead of focusing on all of the various risks, I focus on finding opportunities where probabilities are favorable based primarily on historical price data, cycle analysis, and tape reading. (more)

Rick Rule - This Can Bring Down the Entire Financial System

Today King World News interviewed one of the wealthiest and most street-smart pros in the business, Rick Rule. Rule, told KWN there is a “mismatch of some amount of money in the $100 billion range between credit default swaps.” He also said this is similar to what “brought down Long Term Capital Management (LTCM).” Rule, who is now part of Sprott Asset Management, also discussed gold and the mining shares, but first, here is what he had to say about what is taking place: “Well, I think that frames a big issue. We’ve been asking our clients to consider the macro question, if the institutional risk-off trade is to the US dollar and US Treasuries, that suggests the institutional investors believe that this rally and recovery in the United States is real. That’s big news if it’s true.” (more)

Chart: Total Government Debt as a % of GDP

Value Guys Exclusive Intervew 11 May 12

China Growth Seen at 13-Year Low by Pimco

China’s slowdown may deepen as policy makers unwind the excesses of a record credit boom while only gradually increasing stimulus, leaving 2012 growth at the weakest in 13 years, Pacific Investment Management Co. says.

“The economy is unlikely to bottom until the third quarter,” Ramin Toloui, Pimco’s global co-head of emerging markets portfolio management in Singapore, said in e-mailed comments May 13. “Policy makers will progressively turn the dial toward more stimulus, but not in the aggressive manner of 2009,” restrained by the goal of tempering the credit-fueled property market, he said.

Pimco, which oversees the world’s largest bond fund, sees Chinese growth this year in the “mid-7 percent range,” a pace unseen since 1999. Its call is still lower than that of banks from Citigroup Inc. and JPMorgan Chase & Co. to Bank of America Corp. and UBS AG, which all pared their forecasts after April economic data were released last week. (more)