IN THIS ISSUE:Dear reader,

L ast month, I covered the latest changes to reporting requirements for US persons that hold foreign assets. One asset singled-out

was physical bullion held in a foreign bank safe box. At the time, the language used by the IRS to determine whether or not bullion held this

way was reportable was vague and open to interpretation.

However, on June 7, the IRS released an updated set of Q&As where it stated unequivocally that a foreign bank safe box is not a foreign financial account and therefore not reportable. But the question remains as to whether holding bullion in the box was reportable or not.

I suspect that further clarification will arrive at some point and will bring you an update as changes occur. Stay tuned.

What’s with all the reporting, anyway?In April, I attended an investment conference and co-hosted

three sessions of a roundtable discussion on FBAR and Form 8938 reporting. At each session, one theme surfaced that really rankled those in attendance: why does the US government want to know the whereabouts of its citizen’s assets? What’s the point?

I speculated that it comes down to tax revenue; US tax authorities want to ensure when foreign held assets are sold that capital gains taxes are paid. I further speculated that a wealth tax may be coming to the US, and that asset reporting will facilitate its collection. A recent decision in Italy foreshadows just such a tax.

Last December, Italian Tax Authorities announced a new tax on foreign property owned by Italians; a stealth wealth tax that extends beyond the country’s border. One thing we know for certain is that governments are herd animals. Note to Americans and Europeans: prepare thyself.

Kevin Brekke

WORLD MONEY ANALYSTINTERNATIONALIZE YOUR MONEY. YOUR LIFE.

A MAULDIN ECONOMICS PUBLICATION ISSUE 5 • June 2012

International Overview

The persistence of deflation and big-number fatigue syndrome....... Page 3

•

•Exhibit A: off-the-radar and thriving in a niche industry ................. Page 7

Singapore & Asia

• Latin AmericanA beverage powerhouse serving growth and a dividend ...........Page 9

•Solid profits and strong fundamentals are on sale for the country’s largest bank .........Page 14

Russia & CIS

• China

Can China rescue the world economy? . ...........................Page 12

• International Investors Toolkit

What investors and expats need to know on buying Australian real estate ....................................Page 22

• Quarterly Review

A select review of our analysts coverage ..............................Page 26

• CommoditiesPrice patterns and a global slowdown point to this option strategy ............................... Page 17

WORLD MONEY ANALYST ISSUE 5 • June 20122

Now for something a little more positiveTo lead off this month’s issue, I am really pleased to welcome John Mauldin — member of our

editorial board, prolific writer, and one of the sharpest economic thinkers around.

Many of you are no doubt familiar with John’s work — and the high caliber of his analysis. He has enthusiastically agreed to share some of his recent thoughts and insight on one of the overarching questions that confronts today’s investors: will it be deflation or inflation? John takes us through his reasoning and lays out his forecast that includes some bold calls on where interest rates are headed.

Weather forecast: cooling aheadAs the evidence mounts, it’s pretty clear that the global economy is cooling, and the strains of

excess debt have many countries flirting with or in recession. It is through this “slowdown lense” that I asked each contributor to scrutinize the investment landscape and share how we might capitalize on the situation. They came through in spades.

We tour a company plying its trade in a niche industry in Asia, before covering a strategy to leverage a special commodity situation.

Then, as few things rebuff a recession as well as alcohol, our Latin American analyst shows us a way to get in on this trend with a regional powerhouse that just got put on the sale rack.

And we are reminded that healthy banks still exist, and one Russian bank offers leverage to the country’s economy for the long-term investor.

Finally, we shift our focus to lifestyle choices for those seeking to internationalize themselves as well as their money: a new guest contributor here at World Money Analyst spills the beans on how investors and expatriates alike can navigate the Australian real estate market.

With that teaser introduction, I will sign off by thanking you for subscribing to the

World Money Analyst!

Kevin Brekke

Managing Editor

Fribourg, Switzerland

WORLD MONEY ANALYST ISSUE 5 • June 20123

I am frequently asked in meetings or after a speech whether I think we will have inflation or deflation. “Yes,” I readily reply, trying hard not to smirk, as the questioner tries to digest the answer. And while my answer is flippant, it’s also the truth, as I do expect both outcomes.

Following the obligatory chuckle from the rest of the group comes a follow-up request for a few more specifics. And they are that I expect we will first see deflation and then inflation, but the key is the timing.

Recessions are by definition deflationary. Deleveraging events are also deflationary. A recession accompanied by deleveraging is deflationary in spades. That is why central banks worldwide have been able to print money in amounts that in prior periods would have sent inflation spiraling out of control. This drives gold bugs nuts, but they are not factoring in the velocity of money. If velocity were flat, inflation would be quite significant by now. But velocity has been falling and is going to fall further. The US Fed and the ECB are going to be able to print more money than we can imagine without stoking inflation … at least for a while.

One of the longtime champions of the deflationary outlook has been my friend David Rosenberg (formerly chief economist at Merrill and now with Gluskin Sheff in Toronto). He has been talking for years about a target of 1.5% for the 10-year US bond. Today, as I’m writing this, we got down to 1.5% and did not even pause, ending the day at 1.47%. I will also note that I spoke with Rich Yamarone, the chief economist at Bloomberg, and he said he believes we will scare 50 basis points (the 10-year T-bill hits 0.50%) before we are through. To which Rosenberg replied in a later conversation, “He’s nuts!”

Look at this table of 10-year bond yields:

Deflation or Inflation? Yes.By John Mauldin

International Overview

(courtesy of Barry Ritholtz at The Big Picture)

WORLD MONEY ANALYST ISSUE 5 • June 20124

Since I was thinking about bond yields, I called Dr. Lacy Hunt (one of the more brilliant economists in the country, and not just in my opinion). He has been forecasting interest rates for a long time and been the guiding light at Hoisington Asset Management, which has established perhaps the best track record I know of on bond returns. They have been long bonds for quite some time, which has been the correct position, if a difficult and lonely one. Most bond managers think rates are set to rise.

Not Lacy. He thinks we will get close to 2% on the 30-year bond and has said so for decades.

Dr. Gary Shilling wrote his first book in 1998, called simply Deflation, and followed it up recently with another great work, titled The Age of Deleveraging. He first went long bonds in 1982, which has been one of the great trades of the last 30 years. He lists a whole host of reasons for a deflationary period over the next few years.

The “Muddle-Through” economy is deflationaryThe argument for deflation is rather straightforward. The boom in the US and much of the

world from 1982 until 2008 was partially the result of financial innovations and massive leveraging. That process has come to an end, and the private sector is deleveraging and will do so even further as the economy softens and we slip into the next recession.

Governments are approaching the end of their ability to borrow money at reasonable rates in Europe, and soon in Japan, and eventually in the US (and that time is not as far off as we would like). I described the whole process in my book Endgame. Assuming the US government deals with its coming deficit crisis in a realistic manner, the results will be deflationary – a big assumption, I grant you!

The next big deflationary force is the slowing of the velocity of money. Very simply, money velocity is the rate at which money moves through the economy from one transaction to another and is a good barometer of economic vitality. It has been falling for five years, pretty much as I wrote it would back in 2006. We are now close to the historical average velocity of money; but, since velocity is mean-reverting, it will continue to fall until it bottoms well below the historical average. This cycle takes years, not months, by the way.

A slow-growth, muddle-through economy is deflationary. High and persistent unemployment is deflationary.

Absent some new piece of data that I just don’t see right now, rates in the US are going lower and are going to stay low for longer than any of us can afford to bet against them.

I think the Fed will respond if the government does finally act in a fiscally responsible manner (which would be inherently deflationary), by fighting that deflation with the only tool it has left: the outright monetization of debt. They will call it something else, of course, but that will not alter the bottom line: the money presses will run day and night.

They will be able to monetize more debt than you can shake a stick at, and do so without causing a repeat of the 1970s Great Inflation. Yes, it will eventually catch up with us – there is no free lunch – but they are betting on keeping the lid on actual price inflation by raising rates and cutting back on the money supply. We are some years away from that, but we had better listen when The Inflationator says, “I’ll be back.”

WORLD MONEY ANALYST ISSUE 5 • June 20125

Anybody who says they know the timing is a lot more confident in their crystal ball than I am. But I think I can see out a year or so, and it looks like continued low rates and deflation. By the way, just to appease the gold bugs out there, given my deflationary call, I will note that quality gold stocks were up hugely during the deflationary Great Depression of the 1930s. Even with the dollar on the gold standard. Just saying.

A Quadrillion Here, A Quadrillion There And speaking of more money than we can imagine, and the wholesale monetization of

government debt, I’d like to close with an instructive vignette from the Land of the Rising Yen.

You may remember Everett Dirksen, the Republican Senator from Illinois who, back in the 1960s, was credited with saying, “A billion here, a billion there, and pretty soon you are talking about real money.” Thorough research fails to confirm that he actually used that line, although one reporter claims he asked Dirksen about it and received the reply, “Oh, I never said that. A newspaper fella misquoted me once, and I thought it sounded so good that I never bothered to deny it.”

But that quote has lodged in our collective memory; whether or not he said it, it does make a salient point.

Today we have become rather casual in our use of the word trillion. “A trillion dollars” slips so easily from the tongue, but it’s just too big a number for most of us to even fathom. Estimates of the total stars in our galaxy run between 100 and 400 billion. A trillion barrels of oil would fuel the world for over 30 years. One trillion seconds is almost 32,000 years. The mind boggles.

Yet today we think almost nothing of adding a trillion dollars every year to the already bloated US debt! In fact, economists like Paul Krugman fume that we are not adding more trillions to the debt each year, as if debt carried no consequences. By this thinking, Greece should not be forced to suffer any austerity because it has taken on too much debt. Rather, other nations should be taxed to give Greece the money that will enable them to go even deeper into debt — debt that it cannot and most likely will not repay!

So, I must admit that when I came across this next item, it gave me pause. We turn now to a report published by Bloomberg and authored by my friend Dr. Gary Shilling, talking about the massive debt that has been accumulated by Japan. Gary argues that Japan is reaching a critical point where its debt cannot be financed except by extreme monetization by its central bank, because turning to world markets to sell the debt will drive up interest rates to unsustainable levels. I have made similar arguments. Says Gary:

“As Japan’s government debt of 1,085 trillion yen matures over time, it will be subject to … higher refinancing rates. The average maturity of Japanese government debt is six years and 11 months. Yet 17 percent of that debt matures this year, 52 percent in the next five years and 76 percent in the next decade. Markets anticipate, so Japanese bonds throughout the spectrum will probably plummet in price and leap in yield at the first sign of a current-account deficit, maybe even before.”

WORLD MONEY ANALYST ISSUE 5 • June 20126

One thousand trillion yen. That’s 32,000,000 years’ worth of seconds. Yes, I know the yen has two extra zeros in relation to the dollar, but we are talking about one quadrillion yen.

Are we really ready for the word quadrillion to enter the lexicon in what is supposed to be the developed world? In the case of Japan, we are apparently already there. A hundred years ago, a deficit of US$1 billion would have been unthinkable.

We actually had balanced budgets during most of our first 200 years, except during wars and economic crashes. And now we talk trillions, albeit in the wake of inflation that has made the word trillion less than it was 100 years ago.

Will our grandchildren in the latter half of this century talk quadrillions? Or quintillions? Is that even thinkable? Let’s just hope the word quadrillion doesn’t come into common parlance any time soon. •

John Mauldin is Chairman of Mauldin Economics, LLC, a publishing company offering both free and paid publications aimed at helping investors do better in today’s challenging economy. He is the author of the recently released The Little Book of Bull’s Eye Investing and co-author of the best-selling book Endgame. John is the president of Millennium Wave Advisors, an investment advisory firm registered with multiple states. He is also a registered representative of Millennium Wave Securities, a FINRA-registered broker-dealer. He is a sought-after contributor to financial publications including The Financial Times, The Daily Reckoning, as well as a regular guest on CNBC, Yahoo Tech Ticker, and Bloomberg TV. Contact: www.MauldinEconomics.com

WORLD MONEY ANALYST ISSUE 5 • June 20127

Sometimes an investment fits a theme, sometimes not. Many value investors would say that the macro does not matter; all that matters is finding a good company selling for less than it is worth. Indeed, the more extreme would say it doesn’t even have to be a good company,

only undervalued!

The macro environment of course matters and affects companies. But often one can find a hidden gem, a great little company that does not depend on some grand macro theme, but has exhibited growth in earnings and dividends over time and will likely continue to do so. However bad the global financial situation, whatever the outcome of the Euro debt crisis or the price of oil, these companies will do well. This is not because they are beneficiaries of economic weakness but because they are simply great companies, with a clean business focus, solid balance sheet, strong management, and providing a great service.

A niche businessKingsmen Creative (Singapore: 5MZ; S$0.66) is such a gem. The company designs and

manufactures exhibits of various types. Its main divisions are:

• Retail, the interiors of usually high-end stores.

• Exhibitions and museums, including theme park exhibits.

In addition, there are special events, which frequently feed off retail business, such as product launches (for example, the recent Audi launch in Singapore), and shows (like the regional Formula 1), which tend to be high margin contracts, and add prestige.

The retail business designs and builds interiors for stores such as Burberry and Coach. In the new Marina Bay Sands shopping complex in Singapore, Kingsmen was responsible for 40 flagship boutiques, including Fendi and Chanel. Because such stores are always striving to stay up-to-date, they tend to renew their interiors every three years, providing constant repeat business.

Projects in the second division can be larger. Kingsmen has completed several exhibits at the new Universal theme park in Singapore, and will be responsible for some at the Disney Hong Kong expansion. It has also bid on several projects in the new Shanghai Disney Theme Park.

Each of the two main divisions represents nearly 50% of the business. It has also recently started a new division focused on brand activation and marketing, as yet a much smaller but high-margin unit.

Keeping it simpleKingsmen is asset light. Of the company’s 1,200 employees, some 400 are designers and

comprise its key asset and cost center; manufacturing is conducted under Kingsmen’s direction by contract labour, keeping fixed costs relatively low. Even though margins tend to be low, because it is asset light and has negligible debt, the profits are consistent and the margins essentially all free cash flow.

Finding Gems In a Rough Global Environment

Singapore & Asia

By Adrian Day

WORLD MONEY ANALYST ISSUE 5 • June 20128

The long-term track record is strong, with an ROE of 24%. Over the last four years, earnings have grown steadily from 7.5 cents per share to 9 cents this year, and are forecast at 9.8 cents for 2013. Recent results have been very strong, with sales up 30% and profits up over 50% in the first quarter, with a very robust order book.

“Best of the best”It is a conservative operation as evidenced by its low debt (debt-to-assets just 3%). Similarly, it

does not take more business than it can handle. Because of this ethos, it adds people slowly and is justly proud of the fact that in 36 years it has never had to lay-off a single employee.

It has an edge over many competitors by being a fully integrated operation, offering both speed and value, as well as quality. Group General Manager Andre Cheng, with no hint of bragging but as a matter of fact, told me “we are the best of the best.”

Most of their business is in Singapore (nearly half their total). Malaysia and other areas in Asia represent nearly a quarter, as does China and Hong Kong. (The balance is in North America.) China itself, however, while the fastest growing geographical area (at 65% three-year growth) is small; currently, it accounts for only 3% of the company’s total revenues. So while there is definitely a risk to a regional economic downturn, China holds little risk, and instead offers huge potential as the business there grows.

Main risk to businessThe other major risk to the company is from increased competition, particularly U.S. and

European firms making inroads into Asia. To date, that has not been much of a threat because of Kingsmen’s competitive advantages in the region. But long term, the company sees that as its main risk.

Despite this sterling record and potential, Kingsmen is undervalued, trading at just over 7 times earnings with a yield over 6%. The dividend has grown five-fold over the past six years, with occasional special dividends on top. This is a company to buy, and put away in a little corner of your portfolio as the profits and dividends grow over the long term.

The problem is that it’s a small company with the stock relatively thinly traded. The two main shareholders each own almost 20%, while average daily volume on the 66 cent stock is just over 100,000 shares. Buy Kingsmen on the Singapore exchange with a limit of S$0.66. If you are patient, you will likely get filled, and you will likely hold this little gem a long time. •

[Ed. Note: we always recommended that a stock be bought on its home exchange. Although Kingsmen Creative is traded on the US pink sheets, tiny trade volume presents significant liquidity risk.]

Adrian Day is a British-born money manager and pioneer in promoting the benefits of global investing with two books on the subject: the ground-breaking Investing Without Borders and his latest Investing in Resources: How to gain the Outsized Potential and Avoid the Risks. A graduate of the London School of Economics, he is a frequent speaker at investment seminars, and has been interviewed by numerous world media, including CNBC, BBC, Bloomberg, Wall Street Journal radio, The Cape Town Argus, La Vie Francais, and The Straits Times. www.AdrianDayAssetmanagement.com

WORLD MONEY ANALYST ISSUE 5 • June 20129

I nvestors look rightfully skeptical about the world’s ability to resume a healthy growth path any time soon. The same could be said of Central Banks, which have launched what so far has been a fruitless series of monetary stimulus schemes aimed at reviving the world economy. Indeed,

this monetary stimulus has raised the risk of future inflation.

In the short-term, however, the pressures are predominantly deflationary. This explains why the assets that the mainstream assumes to be risk-free are so heavily in demand — so much so, that they seem scarce even as some of them are being printed faster than ever before. This is more so as the woes among European issuers make the universe of risk-free assets shrink on a daily basis. The “AAA” ratings of the past are evaporating and keep investors looking for the remains.

However, it may not be necessary to run after quasi-zero-yielding assets to be safe. In fact, certain portions of the equity market could provide a similar degree of comfort in the long run. Of course, an equity investment supposedly means assuming more short-term volatility than traditional “risk-free” assets. Nonetheless, US Treasuries and gold, part of the conventional notion of a safe haven, have also suffered periodic bouts of high volatility as of late.

Not your typical out-of-favor stock

Solid, unleveraged companies in stable businesses could provide a similar taste for safety while at the same time providing some desirable toppings: 1) a decent dividend yield; 2) inflation-protection that comes along from the real assets that sustain the operations; 3) growth – not negligible in emerging markets.

Beer giant Ambev (NYSE: ABV) comes to mind. This is not the typical out-of-favor, overlooked stock that we at Copernico are usually looking for. After all, its market cap is north of US$100bn. However, Ambev shares recently took a 17% plunge – a move that brought the stock onto our radar screen.

The opportunity

Companhia de Bebidas das Américas (Ambev) is part of the world’s largest platform for the production and distribution of beer: Anheuser-Busch InBev. Ambev’s ordinary shares trade on the São Paulo Stock Exchange and its ADRs trade on the New York Stock Exchange.

Latin America

A Solid Brewer In Latin AmericaBy Claudio Maulhardt

WORLD MONEY ANALYST ISSUE 5 • June 201210

Ambev is the largest beer brewer in Latin America, and the fourth largest in the world. Its operations are spread across 14 countries, in which it has commanding market shares. Its share of the beer market is 70% in Brazil, more than 75% in Argentina and almost 41% in Canada. Its brand portfolio includes Antarctica, Brahma, Skol, Labatt and Quilmes. In addition to its brewing business, Ambev is an active player in the Latin American soft drinks market and owns the largest PepsiCo bottler outside of the U.S.

In our opinion, ABV is a stock that offers investors an attractive combination of growth, currency and geographic diversification, a solid financial position and a reputable management. Now, after the 17% stock retracement, ABV offers an attractive entry point.

Growth. Ambev is not just a good dividend stock. It is that, but at the same time it provides an interesting twist: the company is still growing rapidly, both organically and through acquisitions. Its revenues have increased at a CAGR of 15% in Reais over the last decade. In USD terms, revenues have grown at a CAGR of 17% thanks to the Brazilian currency appreciation throughout the period. Cash generation has grown even faster, as the company’s EBITDA margin surged from 31% in 2001 to 48% in 2011.

Revenue growth is underpinned both by volumes and by pricing power. Although Brazil is one of the largest beer markets in the world in terms of volumes, its per capita consumption is 25% smaller than that of most developed markets and even some Latin American peers.

Per capita consumption has been growing fast in recent years helped by the newfound prosperity in Brazil. Almost 30 million people came out of poverty in the last decade. Moreover, the government is currently pushing to raise nominal wages at a faster pace than inflation in 2012. This could lend extra purchasing power and eventually enhance beer consumption. Ambev will certainly rise to the occasion: in terms of pricing, Ambev has been able to raise beer prices in Brazil in line or above inflation (which averaged 6%) over the last decade.

WORLD MONEY ANALYST ISSUE 5 • June 201211

What makes this growth story even more compelling is the fact that the beer market has been resilient even in the stressful days of 2008 and 2009, when volumes surged 5% on average.

Currency and geographic diversification. Through a NYSE-listed stock, ABV gives access to Latin American growth opportunities and to a primarily non-USD denominated operation. Roughly 60% of sales and EBITDA are generated in Brazil, another 26% from the rest of Latin America, and the balance from Canada. The Brazilian Real has depreciated by 10% against the US dollar this year and might also indicate an attractive entry point. Brazil does not have a lax monetary policy as developed markets do, its public sector runs a primary surplus and national debt is trending down as a % of GDP – which bodes well for the currency, as no fiat money printing is done to buy government debt.

Solid financial position. As of the end of 1Q12, Ambev had a net cash position (i.e., negative net debt) amounting to R$4.3bn (approximately US$2.1bn). The company has a solid track record of making sensible acquisitions with its cash and of not retaining more cash than is necessary – paying dividends or buying back shares with the balance.

Attractive entry point. After the stock’s 17% decline, its prospective free cash flow yield is north of 6%. The company has historically distributed all the cash it does not need internally via dividends or share buybacks. At the US$36.89 closing price on June 14, ABV’s dividend yield equaled 3.3% - a figure that, in our opinion, has room to grow. Dividends have grown at an 18% CAGR over the last five years.

Conclusion

We continue to search for alternatives to the zero-interest rate that “risk-free” assets currently grant investors. ABV shares present an attractive combination of features that include growth, currency and geographic diversification and a good entry point following recent share price weakness.

Beverages tend to be a stable and sustainable business. Ambev combines that with a good track record for growth. We have ABV in our portfolio, simply because somehow we can foresee ourselves 10 years out still sipping a Quilmes and ABV being a good holding in our books. We are not sure the same can be said about many of today’s deemed-to-be “risk-free” assets. •

Claudio Maulhardt is a partner and portfolio manager at Copernico Capital Partners, a hedge fund manager headquartered in Buenos Aires, Argentina, with a Latin America geographic focus. Claudio joined Copernico in 2003 following ten years as a senior equity research analyst for Latin America at ABN AMRO in Buenos Aires and New York, and at Banco Republica in Buenos Aires. Claudio graduated from the Universidad de Buenos Aires in economics. Contact: infocopernico@copernico.com.uy

WORLD MONEY ANALYST ISSUE 5 • June 201212

Will China Rescue the Global Economy?By Gordon G. Chang

China

Europe is collapsing, and the Chinese are there, wallets open. Can China, now considered the planet’s dominant economic power, save Europe?

The Europeans sure hope so. And Beijing is off to a fast start. Last year, China’s direct investment into Europe tripled to $10 billion, and the Chinese are just getting started. By 2020, they may invest up to $500 billion there. That’s a quarter of the amount that Rhodium Group estimates China could invest globally.

If Europe is relying on Beijing for a hand, however, they’re lost. Rhodium is essentially extrapolating, assuming the Chinese economy can grow like it has over the past three decades to create the funds to be invested internationally.

That expansion is unlikely. China has hit an inflection point, and it is beginning to swoon, falling from double-digit growth in 2010 to zero growth—and possibly contraction—in April. In May, the economy did not improve much—if it improved at all. China’s economy is decelerating.

And the prospects look uncertain. Domestic consumption cannot carry the economy, so the only hopes for growth are exports and government stimulus. This year, Beijing cannot count on the world’s consumers to bail out China, so the Chinese government will have to rely on stimulus.

The stimulus “sugar bowl”Beijing’s past stimulative efforts have produced results. In November 2008, for instance,

Premier Wen Jiabao unveiled a $586 billion stimulus program that was slated to last until the end of 2010.

China’s economic chief outdid himself, ordering the banks to go on an unprecedented lending spree. In 2009 alone, Beijing dumped something like $1.1 trillion of stimulus into an economy that was $4.6 trillion at the beginning of that year, with most of the funds extended through the larger state banks. Moreover, Wen continued to pour stimulus into the economy in 2010 and last year, both directly and indirectly.

The extraordinary amount of cash created growth, but it also resulted in severe dislocations, such as asset bubbles, inflation, and debt. The dramatic slowdown, first evident last year, is the inevitable aftermath of the sugar high.

This time, Chinese officials believe they should avoid excessive intervention in the economy. Instead, the thinking in Beijing goes, the central government should channel money by lowering interest rates and decreasing the reserve ratio requirement.

Unfortunately, these two measures are unlikely to result in much growth because enterprises are generally reluctant to increase borrowing. Most of them are bearish on the economy, and in private, few enterprises forecast increases in either revenue or profits this year. Only local governments, which are especially apt in destroying value, will substantially ramp up their borrowings. Moreover, China is now burdened by debt—perhaps approaching 200% of GDP—and does not have the capacity to go on another sustained lending spree.

WORLD MONEY ANALYST ISSUE 5 • June 201213

Beijing’s declining ability to stimulate the economy leaves China hostage to events in Europe. In fact, it was the troubles there that triggered the problems in China, first evident late summer of last year. Then, European customers began to scale back orders to Chinese coastal factories and even defaulting on contracts. Moreover, European companies reduced their direct investment into the Chinese economy. China, in short, looks like it will be Europe’s first—and biggest—victim.

A return to mercantilismIn these circumstances, the Chinese have every incentive to rescue Europe. Yet that is a tall

undertaking for Beijing. To save the continent, China would have to restructure the 17-nation euro zone, change the welfare-state mentality of the 27-member European Union, and buy hundreds of billions of never-to-be-repaid debt.

Beijing, for all its power, obviously cannot succeed at the first two tasks, and it can accomplish the third only if it wants to destroy its own finances. China’s central bank, the holder of the nation’s $3.3 trillion in foreign currency reserves, can buy up European debt, but then it would become even more insolvent and risk defaulting on its own obligations (the central bank’s foreign reserves are mostly matched by renminbi-denominated obligations issued to raise the funds used to purchase foreign currency).

China could go a long way to relieving the crisis if it would make a concerted effort to purchase goods from the continent, but its response has been just the opposite. Beijing in the last several months has been weakening the renminbi to help beleaguered exporters sell to the world, a mercantilist tactic that will hurt producers in Europe and elsewhere.

Beijing, of course, has every right to influence, fix, or manipulate the value of its currency to gain a trade advantage, but its resort to mercantilism means it will not be helping other nations.

So a selfish Beijing will not rescue the global economy or even Europe’s. And from the look of things, it will not even rescue itself. •

Gordon G. Chang is the author of Nuclear Showdown: North Korea Takes On the World, and The Coming Collapse of China. He is a columnist at Forbes.com and The Daily whose writings have also appeared in The New York Times, Wall Street Journal, Far Eastern Economic Review, International Herald Tribune, Commentary, The Weekly Standard, National Review, and Barron’s. More information: www.gordonchang.com.

WORLD MONEY ANALYST ISSUE 5 • June 201214

Russian Market Declines on Risk-off SentimentBy Alexei Medved

Russia

As usual, I will start my column with an old Russian joke.

The math teacher calls Petya up to the blackboard.

"Imagine that your father has borrowed a hundred roubles from a neighbour," says the teacher, "and has promised to give the money back in two weeks. The first week he gives back forty roubles. How much would he give back the second week?"

"None at all," replies Petya.

"What do you mean, none at all?" the teacher asks, surprised. "You weren't listening properly."

"Let me repeat: imagine that your father has borrowed a hundred roubles and promised to repay the money in two weeks. The first week he gives back forty roubles. How much would he give back the second week?"

"None at all!" repeats Petya. "Oh, Petya," the teacher is annoyed. "You don't know the simplest arithmetic!" "And you don't know my father …"

It could be very useful to remember this joke when considering buying Russian (and not only Russian) bonds.

Since my May column, the Russian market got hit badly. The popular US$ denominated RTS index fell 10.2% from 1489 to 1337. The developing financial crisis in Europe led to a trend where investors were in the “risk-off” mode, hence all risky assets got sold. This led to strong selling pressure on the Russian market as it is seen as high beta.

A significant decline in the crude oil price also helped investors to justify selling Russian assets. As investors rushed into the perceived (perhaps wrongly so) safety of the US dollar, the USD/Rouble exchange rate declined by about 6%, further magnifying the decline in the US$ prices for Russian assets.

WORLD MONEY ANALYST ISSUE 5 • June 201215

However, unless one believes that the oil price is headed lower and will stay low for a long time (a very unlikely scenario in our view), this correction could represent a good buying opportunity. We don't know if the global market correction has bottomed or if continued weakness lay ahead. The Russian market could continue its descent should the global financial crisis persist.

Also, don't overlook the fact that Russian macro economic fundamentals remain strong. Inflation is down to a range of 6%, and GDP growth is projected at 4.9% in 2012. Foreign currency reserves are over US$500 billion, the world's third largest after China and Japan. And the government debt-to-GDP ratio is under 10%, a welcome difference from highly indebted Western European countries and the USA.

The Central Bank of Russia has enough flexibility to react to potential external shocks to the Russian economy and to support its banking system in a stress scenario.

Leveraged play on growth of the Russian economyToday, I want to focus on the shares of Sberbank (London Exchange: SBER; ADR), the

biggest bank in Russia by a wide margin. Over the last 20 years, it has been transformed from the only savings bank in a country with a centrally planned economy, into a profit oriented institution with a greatly reduced headcount and significantly improved management.

The bank remains majority government owned, but 40% of its equity trades on the Russian exchange and as an ADR in London. There are concrete plans for the government to sell a part of its stake, possibly this year.

The ADRs closed on June 15 at US$10.38, a 20% drop from US$13 in early May, and shows that the market is not focused on the company's underlying strength. This is a significant and unjustified sell-off, in our view, and represents a good buying opportunity.

The bank’s fundamentals are very strong. Its market capitalisation is US$57 billion. It has by far the largest branch network in Russia and is funded primarily by customers’ deposits, rather than relying on wholesale funding (borrowing on the interbank market or issuing bonds) which led to problems for some Western banks.

The bank is also very profitable. Based on recently published results for the first 5 months of 2012, the bank’s earnings were RUB155 billion (about US$4.77 billion), its Return on Equity was 26.7%, Return on Assets was 3.3%, and its Net Operating Margin was 6%, far superior to major Western banks.

Sberbank also has a very strong capital position, with Tier 1 capital at 11.8%, a figure that compares favourably with major Western banks. The bank continues its profitable operations, with lending growth in May up 37% YoY and deposit growth up 23.6% YoY.

Earlier in June, Sberbank agreed to acquire Turkish DenizBank from Dexia bank for US$3.5 billion. Dexia is in the process of selling many of its assets after being broken up by the French and Belgian governments – a condition of it receiving several government bailouts.

This deal is one of the largest bank acquisitions in Europe this year and gives Sberbank a footprint in a fast growing and profitable Turkish market.

WORLD MONEY ANALYST ISSUE 5 • June 201216

Alexei Medved was born and raised in Russia and later moved to the West. He received an MBA from Wharton Business School and worked for a major global investment bank, where, from 1989, he developed the East European investment banking business. Since 1992, he has been running an independent business which concentrates on investments in Russia and the CIS. Contact:: amvic@mail.com

Despite these strong fundamentals, the shares are trading at a 2012 P/E of 5.5 and P/BV of 1.19. These valuations represent a 34% discount to its Global Emerging Market peers and a 30% discount to the shares’ historical average valuations.

In summary, Sberbank is a leveraged play on the Russian economy. If the economy does well, the shares are likely to appreciate significantly.

At the same time, being the largest and majority government controlled bank in Russia, should the global crisis deteriorate, and the Russian economy starts having difficulties, Sberbank is highly likely to be supported by the government and Russia's Central Bank. •

WORLD MONEY ANALYST ISSUE 5 • June 201217

Spain and Greece are in recessions. Italy and France are headed in that direction. China’s growth is slowing, and inflation is collapsing, now 3.3% -- significantly less than the government’s target rate of 4%. The US appears to be decelerating as well; May retail sales were a disappointment, and hiring remains sluggish. Talk of a new global recession is dominating the business blogosphere as one nation after another tries to cure problems caused by too much debt with even more debt.

We’ve always subscribed to the notion that there are only two ways to deal with debt that is too big to pay off:

1) write it off through default (which can lead to recession and/or depression) or

2) pay it back in cheaper currency through central bank-manufactured inflation.

We’ve assumed that politicians would choose the latter because it is more politically palatable. And they have …

… The trouble is it’s not working. The trillions pumped into the market by the Fed, the ECB and the Peoples Bank of China (PBOC) have not had the desired inflationary effect – at least not yet. If option “2” doesn’t work despite the best effort of the world’s central banks, then option “1” becomes a near-certainty.

Since Monetary Policy works under a significant time lag, it is probably too soon to write inflation’s obituary. It is not too soon, in our opinion, to make a small speculation that could benefit from a continuation of the current global slowdown.

The US bond market has already priced in a significant slowdown, so we don’t see a lot of opportunity there. Similarly, many key commodities have fallen substantially, including crude oil (and the rest of the energy complex), corn, wheat and most soft commodities like sugar, coffee and cotton. The soybean market is one of the few that has yet to price in a significant global slowdown.

Two Key Factors: Exports and Weather There is a reason for this… Drought in South America during the 2011/2012 growing

season reduced global stockpiles. Countries typically dependent on the South American crop turned to the US to make up the deficit. The biggest importer is China. As the Chinese diet grows more affluent and incorporates greater meat consumption, the need for grain to feed livestock has exploded. You can see the effects of China’s rapid growth in the “US Soybean Exports” chart below.

Worried About a Global Slowdown? You May Want to Get Short Soybeans…

Commodities

By Stephen Belmont

WORLD MONEY ANALYST ISSUE 5 • June 201218

This year’s American soy crop is expected to be 5% larger than last year’s. A slowing global economy could dampen both Chinese demand and US exports. Combine this with expectations for higher US crop yields and a North American market (see charts below) that remains well-supplied, and you have the potential for a rather significant decline from today’s inflated price levels.

WORLD MONEY ANALYST ISSUE 5 • June 201219

Barring any big weather surprises, the USDA expects 2012/2013 global soybean production to increase 15 percent to 271.4 million metric tons. Dry conditions across the American Midwest caused traders to build in a weather premium.

If the dry spell continues, this premium could grow. However, the genetically engineered, modern-day soybean plant is pretty hardy. Years of tinkering have made it resistant to dry conditions – especially this early in the season.

Soybean Prices Tend To Decline Into Harvest Big weather unknowns tend to support all grain prices early in the growing season. Once

conditions are solid and the crop is “made,” prices often decline, reaching their seasonal lows during the fall/early-winter time frame.

The chart below illustrates this phenomenon. The “Ls” indicate major seasonal price lows occurring September through December going back to 1992. While this pattern does not occur every year, it is well-established. In normal years, harvest tends to increase supply, driving down price.

WORLD MONEY ANALYST ISSUE 5 • June 201220

Will the same thing happen this year? It is too early to tell. Nevertheless, when we combine the potential for a big global slowdown with a seasonal tendency of soybean prices to decline into harvest, we see the makings of a reasonable speculation. On the next chart, notice how the January futures contract violated its 5-month uptrend in early May. June’s rally has retraced a nearly Fibonacci-perfect 62% of that down move, providing us with a nice opportunity to get short.

Our target is a return to last December’s harvest lows just above $11 per bushel. The December 21, 2012 expiration of the January put options suggested below keeps us short through the entire North American harvest.

WORLD MONEY ANALYST ISSUE 5 • June 201221

Suggested Action – consider placing an order to buy January $12.00 soybean puts while simultaneously selling an equal number of January $11.00 soybean puts for a net cost of 20 cents ($1,000) or less, looking for the market to decline to 2011 North American harvest lows just above $11.00 per bushel prior to option expiration on December 21, 2012.

If filled at 20 cents, your maximum risk is $1,000 per spread plus transaction cost. You can make as much as $4,000 on the trade.

When we buy the $12.00 put, we pay money for the right but not the obligation to be short a 5,000-bushel, January soybean futures contract at $12.00. When we sell the $11.00 put we receive money for the obligation to buy a 5,000-bushel January soybean futures contract for $11.00.

We can use the money we receive for selling the $11.00 put to offset part of the cost of buying the $12.00 put.

What we are doing is pairing the right (but not the obligation) to be short at $12.00 with an offsetting obligation to be long at $11.00. That means we can make the $1.00 difference between the two strike prices but no more. $1.00 times the 5,000 bushel contract size equals $5,000. Subtract the $1,000 cost of the trade to get a net potential gain of $4,000 per spread. •

The risk of loss in trading futures and/or options is substantial. Each investor must consider whether this is a suitable investment. When trading futures and/or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital. Past performance is not necessarily indicative of future results.

Stephen Belmont is chief market strategist and senior partner with the Rutsen Meier Belmont Group (RMB), a futures and futures options brokerage firm in Chicago specializing in commodities, currencies and interest rates since 1984. For more info, call 800-345-7026 (toll free) 312-373-4970 (direct) or visit www.rmbgroup.com.

WORLD MONEY ANALYST ISSUE 5 • June 201222

Buying Property in AustraliaBy Colleen Murphy

International Investors Toolkit

Ah, Australia: sun and fun, desert expanse, crocs and spiders, exquisite wines, and… unprecedented new wealth created by booms in housing and commodities.

Australia attracts a great deal of foreign investment across the sectors, most notably (and not surprisingly) in mineral resources and real estate. It also closely manages its levels of foreign investment, particularly in residential property, and imposes strict rules on what foreigners can access. Before embarking on any serious hunt, prospective investors should know the rules of engagement.

But first, some context on the Australian property market – carefully balanced to present both sides of the coin, of course.

What follows is a high-level overview, and any prospective investor should do his or her own research and seek independent advice.

The Aussie Housing Boom: A Quick & Dirty OverviewIn the 1970s and ‘80s, Australian home prices appreciated by a steady 3% per annum. That

jumped to 6% in the 1990s, and by the late 2000s, housing prices relative to average income were among the highest in the world. Cut to 2011, and amidst the din of much grandstanding and self-congratulating at exiting the turmoil of 2008-09 relatively unscathed, home prices began to fall.

WORLD MONEY ANALYST ISSUE 5 • June 201223

These giant leaps and subsequent retracements have prompted much speculation and commentary that the country is in the throes of a real estate bubble that is ripe for bursting. A US real estate analyst incited much furor in January when he predicted a 60% crash in Australian property prices starting in 2013 and continuing for five years thereafter.

Of course, it all depends on whom you listen to. Australia has a great love affair with property, and rightly so: it’s helped to create enormous wealth for a country that has historically been an economic underdog.

Many local experts disagree with the property bears, citing strong home prices throughout 2008 and beyond, low interest rates, and a nationwide demand for new dwellings that’s far higher than supply.

This camp predicts near-term price growth in each of the major cities bar Melbourne. Quite simply, according to the chest-thumpers, there won’t be a burst because there isn’t a bubble.

The Wildcard: Western AustraliaNeither the property bears nor the bulls can predict what will happen in Western Australia

(WA). Unlike the rest of the country, the WA property market has been weak for years, falling since 2006. At the same time, thanks to the country’s mining boom – for which WA is the heart and lungs – the state is under enormous pressure to create new and affordable housing.

Perth, the state’s capital, is predicted to be thousands of dwellings short within five years. Karratha, a remote mining town that currently looks a lot like a red dust bowl, is targeted for a A$1.5 billion makeover that will include a new suburb, 1500 new dwellings, and a 150-bed hotel possibly built by the Hilton hotel chain. And if that isn’t exciting enough, rents in Perth have actually risen 16% in the last year and home prices appear to be stabilizing.

All signs point to opportunity for both yield and capital gains, except for one major unknown: China.

China is Australia’s largest trading partner, its largest export market and its biggest source of imports. Australia has literally staked its future on a scramble to feed its northern neighbor’s voracious appetite for raw materials. But new figures show that China’s growth is slowing, and other resource-rich countries are emerging as alternatives for Chinese investment.

“If it’s in the ground, it’s China bound,” as the local saying goes – until it’s not.

I’m still interested. What can I invest in?For prospective investors and speculators, or for those simply contemplating a lifestyle change,

it’s important to know the rules that govern foreign investment in property.

Australia both encourages and closely monitors outside investment, ever mindful of the balance between promoting capital growth and quelling concern that locals will be priced out of the market.

The rules have changed considerably in recent years: Australia relaxed the approvals required for foreign ownership to help buoy home prices during the turmoil of 2008-09, and then reintroduced stricter controls in 2010.

WORLD MONEY ANALYST ISSUE 5 • June 201224

As they now stand, the rules encourage foreign investment in new dwellings, thereby increasing the supply of new homes; and they make it more difficult for foreigners to acquire established properties – to prevent foreign investment from simply driving up prices of existing housing stock.

I’ll explain what this means in practice.

What You Can DoForeigners that are not residents of Australia can:

• Purchase residential properties under development (called “buying off the plan”), or new construction that has not yet been sold. There’s no limit on the number of properties an investor can acquire, provided the developer has pre-approval to sell to overseas investors.

• Purchase vacant land for development, provided construction commences within 2 years.

• Purchase an established home for redevelopment purposes. (You can’t rent out the existing home, but you can rent out new construction after the previous dwelling has been demolished.)

• Purchase already developed, non-residential, commercial real estate – though restrictions apply to rural land.

In addition, foreigners who are temporary residents in Australia can:

• Purchase an established (previously occupied) residential property, but only if you live in it. You can’t purchase an established home with the intention of renting it out, and the property must be sold when you leave Australia. (This restriction disappears if you become a Permanent Resident.)

Lastly, a foreign company with business in Australia can:

• Purchase a home for its temporary resident employees, provided the property is sold or rented if it remains vacant for 6 months or more.

ApprovalsAs I hinted earlier, most property acquisitions require pre-approval by Australia’s Foreign

Investment Review Board (FIRB). Broadly, this applies to the purchase of:

• Established homes (which, remember, can’t be used for investment purposes).

• Commercial property above certain thresholds.

• Residential real estate or vacant land for redevelopment purposes.

WORLD MONEY ANALYST ISSUE 5 • June 201225

In considering applications, FIRB applies a “national interest” test. Most applications that meet the criteria are readily approved within 30 days, unless the applicant is government-owned or controlled or the site is considered high profile. Investors must apply for a specific property – FIRB does not grant general or "in principle" approval. Any contracts for sale must state “subject to FIRB approval.”

Hungry for more?The following sites can give context, color and data on Australia’s property market:

• PropertyDATA.com.au

• Property Observer (not unbiased, but the Tools and Trends sections are useful)

• Domain

• Realestate.com.au

• Reserve Bank of Australia for up-to-date information on interest rates and comparisons to yields in other countries

• FIRB, to ensure you’ll be compliant with the latest rules and approvals •

Colleen Murphy is an American expatriate living in Australia. She has worked for a leading global investment bank in New York, Asia, and Australasia, and now consults to financial institutions and other clients. Colleen graduated with honors from Wellesley College in the USA.

WORLD MONEY ANALYST ISSUE 5 • June 201226

For our quarterly review, we check-in with our analysts for a quick look-back and comments on the companies they covered. There are no changes to the analysts’ reports on the companies mentioned in the May issue: Marine Harvest (Oslo Exchange: MHG) and Singapore

Telecom (SingTel; Singapore Exchange: Z74).

iShares France

The market did not like the election of Hollande, but if his accommodative view wins the debate, French stocks could rally. Meanwhile, they remain inexpensive at a P/E of 9, 4.7% yield, and below book. Hold.

iShares Germany

Germany remains the strongest economy in Europe, and could win even if Europe struggles. The market (one of only three global winners this year) remains undervalued at 9 times P/E, 4.3% yield, and just over book. Buy on dips.

Investor “A”

This Scandinavian holding company is a low-risk play on one of the strongest areas in Europe offering a nearly 5% yield and trading at a 40% discount.

Pargesa

Value-oriented investment company with holdings in European companies not overly sensitive to the European economy (such as Total and Suez). Some holdings have cut distributions, forcing a dividend cut by Pargesa, but it still yields 4.7% and is trading at a wide discount to NAV.

Select Quarterly Analyst Review

Price range during 2nd quarter thru June 15: Low US$18.05 – High US$22.30NYSEArca: EWQ Original write-up: February 2012

Analyst: Adrian Day Price first mentioned: US$22.18

Price range during 2nd quarter thru June 15: Low US$19.15 – High US$23.63NYSEArca: EWG Original write-up: February 2012

Analyst: Adrian Day Price first mentioned: US$22.93

Price range during 2nd quarter thru June 15: Low SEK121.10 – High SEK145.70OMX Stockholm: INVE “A” Original write-up: February 2012

Analyst: Adrian Day Price first mentioned: SEK141.10

Price range during 2nd quarter thru June 15: Low CHF51.20 – High CHF64.60Swiss SIX: PARG Original write-up: February 2012

Analyst: Adrian Day Price first mentioned: CHF66.30

WORLD MONEY ANALYST ISSUE 5 • June 201227

Italmobiliare

We are selling ITM, given the increased concern for Italy following Spain’s rapid decline; and because of new political attacks on Italian conglomerates.  We have a loss, but better to take the loss now than risk a wider loss later.

Gazprom

Lukoil

Surgutneftegas

The Russian market has been hit hard since early May. Oil and gas shares were particularly hard hit as the crude oil price declined in tandem with the markets. However, we think the oil price is not likely to stay low for very long and eventually investors will re-focus on the strong fundamentals of these three companies. We suggest continue holding their shares.

As mentioned previously, we are not looking at the Russian market for short-term trading ideas. Investing in Russia requires an investor with a longer-term (several years) time frame. Meanwhile, all these companies recently announced their annual dividends, so their investors are being paid for holding the shares.

Price range during 2nd quarter thru June 15: Low EUR10.99 – High EUR16.59Borsa Italiana: ITM Original write-up: February 2012

Analyst: Adrian Day Price first mentioned: EUR17.95

Price range during 2nd quarter thru June 15: Low EUR6.91 – High EUR9.35Frankfurt Exchange: GAZ Original write-up: February 2012

Analyst: Alexei Medved Price first mentioned: EUR9.67

Price range during 2nd quarter thru June 15: Low EUR40.12 – High EUR46.84Frankfurt Exchange: LUK Original write-up: February 2012

Analyst: Alexei Medved Price first mentioned: EUR45.75

Price range during 2nd quarter thru June 15: Low US$7.45 – High US$10.05LSE: SGGD Original write-up: February 2012

Analyst: Alexei Medved Price first mentioned: US$9.86

WORLD MONEY ANALYST ISSUE 5 • June 201228

VimpelCom

We believe that VIP declined in May due to continued conflict between its major shareholders, Norwegian company Telenor and Russian controlled Altimo. The shares might show weakness between now and October, yet the fundamental case is still intact. We are looking for a suitable opportunity to increase the position in these shares. Buying Russian shares in two or more blocks will help to establish a reasonable position at an attractive entry price, and to minimize the impact of short-term price fluctuations.

Tinkoff Credit System

The TCS Eurobond is still trading around 100.50, the price at our first review, so investors continue to earn a very attractive rate of interest for holding this bond. In today’s environment of financial crisis and very low bond yields in developed markets, select high-yield, short-term Russian bonds denominated in US dollars look very attractive. They significantly reduce investors’ portfolio risk while providing high current income. Since the crisis of 2008, we have kept our client’s portfolios overweight in such bonds.

US$ denominated Eurobond ISIN: XS0619845349

Analyst: Alexei Medved Original write-up: May 2012

Maturity: April 2014 Coupon: 11.5%

Price range during 2nd quarter thru June 15: Low US$7.13 – High US$11.36NYSE: VIP Original write-up: March 2012

Analyst: Alexei Medved Price first mentioned: US$11.23

WMA Recap - June 2012

• Singapore-based Kingsmen Creative (SGX: 5MZ) is the dominant Asian player in the niche exhibition,

event, and retail interior industry trading at just over 7 times earnings and yields 6%. Sales were up

30% and profits up over 50% in 1Q12. Page 7.

• A recent 17% sell-off in Ambev (NYSE: ABV) has put the world’s fourth largest beer brewer on the

sale rack. For the patient investor, Ambev offers solid growth, currency diversification, free cash flow

yield above 6% and a 3.3% dividend yield. Page 9.

• Sberbank (LSE: SBER) was the victim of the latest “risk-off” trade, putting its shares on the discount

rack. The highly profitable company continues to show strong growth and made a recent

acquisition, extending its presence into the fast growing and profitable Turkish market. This year’s

Net Operating Margin is 6%, and shares trade at a 2012 P/E of just 5.5. Page 14.

• Seasonal price patterns, export demand threatened by a slowing global economy, and forecasts for a

robust fall harvest look set to converge and set-up a reasonable speculation on a decline in soybean

prices. This options spread strategy has a maximum risk of $1,000 for a potential pay-off of $4,000.

Page 17.

WORLD MONEY ANALYST ISSUE 5 • June 201229

Stock listed on the Over-the-counter (OTC) market (the “pink sheets”) use a five-letter symbol ending in “F” that designates them as a foreign stock (may also include the suffix “.PK”). These stocks are not required to list with the SEC or submit quarterly reports. Liquidity can be limited and will make trading difficult during periods of low share volume. Unpredictable liquidity mandates the use of limit orders when buying and selling on the OTC market - no market orders should be attempted. The shares of pink sheet stocks also trade separately from the company shares traded on its home exchange, and can trade at a vastly different price. Quotes are only updated once a day and that can hinder the buying and selling of shares. For these reasons, we recommend that foreign stocks, when possible, be traded on their native exchange. Trading on the OTC market carries added risk, and each investor must determine their level of acceptable risk.

The securities mentioned in World Money Analyst should be considered as positions held for the medium- to long-term. World Money Analyst is not a trading or “alert” service. The material offered in World Money Analyst is intended to inform subscribers about possible investment opportunities. The analysis presented in World Money Analyst should be considered as a starting point from which each subscriber should conduct their own diligent research to determine if an investment meets their individual objectives and risk tolerance. World Money Analyst subscribers should monitor their investments to determine acceptable entry and exit prices. Market conditions, sector specific developments, company specific news, price volatility, government action, and myriad other factors can cause a change to an analyst’s outlook at any time.

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Copyright © 2012 Mauldin Economics

WORLD MONEY ANALYST, A MAULDIN ECONOMICS PUBLICATIONPublisher: Mauldin Economics

Managing Editor: Kevin Brekke

Editorial Board: Doug Casey, Casey Research; John Mauldin, Chairman of Mauldin Economics; Adrian Day, Adrian Day Asset Manager; Terry Coxon, Passport Financial; and, Gregory McNally, Toronto-based legal expert and member of the Turks and Caicos Bar Association.

Contributing Editors: Grant Williams, global macro; Alexei Medved, Russia and former CIS; Gordon Chang, China; Steve Belmont, commodities; Chuck Butler, currencies; Claudio Maulhardt, Latin America; Dirk Steinhoff, Europe & Scandinavia; Ankur Shah, SE Asia & Singapore.