Is there anywhere safe in the world to invest?

Much in the world has changed since I last wrote and most importantly investors are nervous about where to put their money. Are you safe to dump money in U.S. Treasuries? Who knows. Should you think about any European assets? Probably not till Greece at least defaults. So where are investors supposed to turn? Although I think the cat fight between Democrats and Republicans over the debt ceiling will be solved before it's too late, the U.S. in my mind is not the best place to park you hard earned dollars. My top three countries for investing are Brazil, Canada, and India. Before diving into why you should invest in these three countries I will tell you why you should not invest in the obvious choices of America and China. Although earnings are skyrocketing in the U.S., the overwhelming debt problem will be a hinderance on any American company for years to come. To eventually solve this problem there will have to be tax hikes or decreases in spending (depending on who is governing the country), which will slow an already crawling economy. I do have faith in President Obama to eventually restore order to a country with no direction, but for now there are way better options for investing. China on the other hand is a country with booming economic growth, with last quarter's GDP number showing 9.5% growth. A truly staggering growth rate for a country of that size. The only problem is with growth comes inflation. Inflation numbers are steadily climbing in the Peoples' Republic and the there seems to be no end to a seemingly constantly expanding consumer credit market, which seriously underestimates the amount of debt the country now carries. China has great potential, but to invest in the country is a risky endeavour. GDP has rapidly grown lately, but without efficient capital markets that developed nations exhibit you will not see those same returns. For example the Shanghai Stock Exchange, one of the country largest exchanges, has returned only 0.43% for the first half of 2011, which does not even compare to China's GDP growth.
Now that I have convinced you to not invest in America and China, we will turn our heads towards Brazil, Canada, and India.

Brazil - Huge emerging markets with massive natural resource potential and has less exposure to the rest of the world's problems than many countries. There is high inflation in the country, but many political scientists have faith that President Rousseff will help curb government spending to help control inflation.
Canada - Known to many as the U.S.'s boring neighbour, Canada's banking prudence has paid huge dividends as all the countries' major banks are laughing at the new Basel requirements and Europes problems. In addition, the countries backyard is a giant natural resource shopping centre. Not too bad for when Asian countries get rolling again.
India - Despite on going quarrels with Pakistan, India is a country on the rise. With a booming service sector that makes up over 50% of the country's employment and a democratic society, India will not look back. With an average growth rate of 8% expected for the next decade, India is primed to turn its massive nation into an economic superpower.

That's all for now I will speak to you all again soon.

A debate not for the faint hearted - bonds

American bonds have been the hot topic of the news lately: are you bearish or bullish? Is there really a bubble? When will buying stop? I will set out both sides of the argument and then you as the reader can decide.

Bearish:
-US Treasuries have continued to yield less and less, with inflation-adjusted bonds for the next four years even having a negative yield
-Bond funds for the past three years have had massive inflows, while equity funds have been experiencing an exodus, making a bubble resembling the tech disaster 10 years ago
-Capital losses on bonds are looming as every rate increase by the government will devalue bonds and rates can go nowhere but up at this point

Bullish:
-Many people believe that the US will never default making this situation quite different from the tech crash, as capital is nearly guarenteed
-There are also other investors who believe that aging demographics increase the number of risk averse assets demands, therefore bond buying will continue as the baby boomers age
-With the economy at its current pace there is a good chance that rates will not be increasing anytime soon.

Both sides present good points, so now its up to you to decide.

Bacon for Breakfast again

In May of this year, the debt problems of Europe were the front page story of every newspaper you could think of. The PIIGS (Portugal, Italy, Ireland, Germany, Spain) piling debt seemed to be an insurmountable problem looming over Europe, until much of the European Union compromised on a bailout to solve the problems that were on the verge of breaking out of control. Throughout the start of August headlines have avoided the Eurozones debt difficulties, but is it too early to writeoff those problems just yet? Credit Default Swap (CDS) spreads are one of the best ways of measuring the likelihood of a European country's default. When these spreads rise the likelihood of default increases, and vice versa. From July to August CDS spreads for the PIIGS countries had been in decline, but since the start of August CDS spreads have quietly started to climb back up again. Investors beware the PIIGS are back.

Are you eating your Wheaties?

A possible great buy right now would be 1 month call options on wheat, with fires ravaging the crops in Eastern Europe so far this summer. It has been the hottest summer on record in Russia, Kazakhstan, and Ukraine creating a great number of fires in the European region. The extensive fires have caused Russia to ban grain exports because of the need to keep existing wheat in the country. These fires in addition to huge rainfall in Canada, another large wheat producer, has spiked demand for the commodity worldwide and prices are starting to increase. With the hot weather and fires not expected to drop till the end of August, buying a 1 month call option for grain commodities is a no brainer, as demand can only increase from here. Other grain products are also on the rise as well, acting as substitutes for the precious grain at the moment, making rice and corn pretty good bets to appreciate as well. Next time you eat breakfast, don't take that bowl of cereal for granted.

U.S.A.: Uncontrollable Sovereign-debt Actions

If the United States are not careful they will have the largest sovereign debt problem the world has evern seen. Europe's own problems have caused U.S. government debt to hit absurdly low yields, but soon enough investors will lose confidence in the U.S. debt market and realize how dangerous this market has become. In the foreseeable future interest payments on debt will exceed defense spending in the country, which is a feat in itself, and will undoubtably cause investors to realize the problems in this market. If changes are not made to the mounting debt problem in the U.S., Ben Bernanke will be looking more like a chump than the champ he was after the financial meltdown. If you can wait it out. Betting against U.S. Treasuries seems like an unparalleled investment.

Sometimes you just cant make sense of everything

Invsetors have recently been pouring money into bond markets and seeing gold prices soar as a flight to safety. Talks of a double dip recession and financial bailouts have dominated the news lately and at yesterday's close there was a death cross in the S&P 500 where the 50 day average falls below the 200 day average, a typical signal of a market decline...but wait! the S&P 500 was up 3.13% on the day and people will get to go home today feeling a little bullish about their investments. This just goes to show that no matter how much analysis and economic data that is produced, nothing can predict the movements of the market. As an investor, if you cannot come to terms with this you might want to think about a different way to spend your money.

Good ol' boring bonds

There has been huge speculation recently about a potential double dip recession and worries about growth in China, which has led many investors to shy away from the risky stock market. I wouldn't blame worrisome investors either, as markets have shown extreme volatility this year and the Dow Jones Industrial Average now sits below 10000 points. Investors have been reverting to bond investments this year, but if you look back to the past decade, there is evidence to prove that bonds have outperformed stocks not only this year, but for the whole decade. If dividends are included in gains, the S&P 500 lost close to 10% over the past decade, while bonds saw gains of around 4% depending on the coupon and maturity of the bond investments. My advice is unless you have expert skills to exploit the market's volatility, bonds look to be a safer choice in the unchartered waters ahead. Although the markets are failing right now, be prepared for a great buying opportunity to come; at that time you can use the money you safely invested in bonds to enter the stock markets again.