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Saturday, July 16, 2011

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.