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The Best Place for Your Money If a Recession Hits

By Stansberry Research Interview Series
Wednesday, October 31, 2007

We're entering a recession.
At least that's what Jim Owens, CEO of Caterpillar (CAT), thinks. Caterpillar is the world's largest manufacturer of heavy construction machinery. As such, it's a bellwether for economic growth. Let me explain...
As I'm sure you're aware, housing and development have been the primary drivers in the U.S. economy over the last five years. Builders and developers need large construction equipment to do their jobs, and they order these items from CAT. But once things begin to slow, the orders dry up.
And that's precisely what's happening. Two weeks ago, Jim Owens said:
"The North American machinery industry has decreased month-to-month since early 2006; reduced activity in key industries and tighter credit conditions should continue a downward trend in the fourth quarter."
Months before new home starts fell off a cliff, construction companies stopped calling Caterpillar to order bulldozers and other machinery. Jim just took it in stride, since growth outside of the U.S. has been stellar. But if you ignored Wall Street, and simply listened to Jim's conference calls, the housing bust would have come as no surprise.
Now, Jim's calling for a recession... It's been on the tip of everyone's tongue, but Jim just spat it out. Jim thinks the U.S. economy will be near to – or even in – a recession next year.
So what are we to do? Well, Jim actually had some good news...
"Despite weakness in U.S. markets, our sales and revenues increased 9 percent. We continue to see remarkable growth outside of the United States with particular strength in key industries like mining, oil and gas, electric power and marine engines. The industries we serve are becoming increasingly global, and the investments we are making to achieve our 2010 goals have us well positioned to meet their needs." (Emphasis mine.)
I've said it on these pages before: The biggest economic and investing opportunities today lie outside of the U.S.
Jim Owens – a man with his finger on the pulse of the world's economies – agrees with me. Jim thinks the U.S. will not be a place for serious growth for at least the next 18 months.
If you're interested in moving some money overseas, there are plenty of international mutual funds to choose from, including regional funds like the Global Large Cap 10 Fund we mentioned on these pages earlier this year. And Marty Whitman of Third Avenue has most of his positions outside of the U.S.
Another idea is to look for an exchange-traded fund (ETF) that focuses on the country you're interested in. You might even be able to find a deal in a closed-end fund trading at a discount to its underlying asset value. (Go to and click on "Find a Fund.")
In an upcoming Growth Stock Wire, I'll introduce you to an international fund worth considering. Until then...
Good trading,
Graham Summers

Market Notes
Goldman Sachs hits all-time high.
Foreign banks climbing... ABN Amro, Banco Santander, and Bancolombia at 52-week highs.
China still soaring... CNOOC, SINA Corp, China Fire & Security, Baidu, Sohu, China Medical Technologies, and China Unicom at fresh highs.
Oil drillers at new lows ... Grey Wolf, Patterson-UTI, and Bronco Drilling.
Market Watch
Symbol Price
S&P 500 1221.53 +1.3% +10.1%
Oil 37.77 +1.5% -2.8%
Gold 135.20 -0.1% +13.4%
Silver 27.93 +0.4% +47.9%
US-Dollar 80.67 -0.8% +8.1%
Euro 1.32 +0.6% -12.1%
Volatility 19.39 -9.2% -8.2%
Gold Stocks 564.53 +1.3% +10.6%
10-Year Yield 3.00 +1.4% -9.6%

World ETFs
Symbol Price
USA 122.56 +1.3% +10.2%
Canada 30.44 +1.3% +13.8%
Russia 21.63 +2.3% +16.7%
India 37.73 +1.9% +20.0%
Israel 16.47 +0.9% +9.7%
Japan 10.58 +1.0% +7.4%
Singapore 13.88 +1.0% +19.2%
Taiwan 14.72 +1.6% +17.8%
S. Korea 56.56 +1.7% +22.8%
S. Africa 70.85 +3.9% +22.9%
China 45.06 +1.4% +0.1%
Lat.America 52.82 +1.4% +6.7%

Sector ETFs
Symbol Price
Oil Service 136.18 +1.5% +14.8%
Big Pharma 64.13 +0.6% -3.3%
Internet 72.13 +0.7% +22.3%
Semis 16.03 +2.1% +28.9%
Utilities 31.21 +0.3% +1.6%
Defense 18.51 +1.3% +10.1%
Nanotech 9.99 +1.3% +0.0%
Alt. Energy 9.95 +1.4% -4.4%
Water 18.31 +1.1% +12.2%
Insurance 16.07 +1.2% +18.3%
Biotech 20.58 +1.1% +27.1%
Retail 19.65 +0.1% +28.4%
Software 24.59 +0.9% +24.1%
Big Tech 53.73 +1.0% +21.9%
Construction 12.99 +2.1% +13.3%
Media 13.57 +1.1% +25.0%
Consumer Svcs 67.26 +0.8% +23.3%
Financials 54.87 +2.4% +5.2%
Health Care 64.22 +0.7% +1.3%
Industrials 63.25 +1.6% +19.7%
Basic Mat 73.57 +1.6% +21.6%
Real Estate 55.24 +1.4% +23.8%
Transportation 91.17 +1.4% +25.6%
Telecom 22.48 +1.1% +17.1%

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