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Why You Should Be Long Emerging Markets

By Brian Hunt, Editor in Chief, Stansberry Research
Monday, December 10, 2012

Last week, the market confirmed Steve Sjuggerud's opinion that the Bernanke Asset Bubble has "gone global."
 
Regular Stansberry & Associates readers are familiar with Steve's Bernanke Asset Bubble idea. In short, Fed chief Ben Bernanke will do everything in his power to fire up the lackluster American economy. He'll flood the system with cheap money, which will drive the price of stocks and real estate much higher than most people think is possible.
 
Steve has been dead-on with his call. Helped by the Bernanke stimulus, stocks have climbed. The benchmark S&P 500 Index is up 38% since mid-2010. The real estate market is recovering.
 
And since so much of the world dances to the tune of the U.S. dollar, foreign assets are rising as well... which creates trading opportunities.
 
For example, the iShares Emerging Market Fund (NYSEARCA: EEM) is a diversified basket of foreign stocks. The fund has large weightings in China, Brazil, and Russia.
 
As you can see from the two-year chart below, the EEM suffered badly in mid-2011. This was during the European debt crisis. Like most assets, the EEM rallied off those 2011 lows and corrected in mid-2012.
 
Now note the right hand side of the chart. You'll see how the EEM is recovering from its correction... and just "broke out" to its highest level in more than seven months.
 
EEM 18-Month Correction and Rally
 
This bit of price strength is bullish confirmation that the U.S. central bank and its foreign cousins are succeeding at "goosing" stocks higher.
 
As Steve has highlighted, some emerging markets – like India – are still cheap. They have the global printing presses at their back... and the trend is up. That's why it makes sense to be long emerging markets.
 
Good trading,
 
Brian Hunt




Further Reading:

Last week, Steve Sjuggerud offered one of his favorite "one click" ways to bet on India's stock market. These stocks are dirt-cheap, hated, and showing an inkling of an uptrend. Get the full story here: Better than 2008... 658% Gains are Possible in Five Years.
 
Emerging markets fit into Steve's classic "cheap, hated, uptrend" model. And his True Wealth Systems computers are flashing "buy." Learn more here.

In The Daily Crux
Market Notes
"Smart money" was right about gold in October... prices are down 5% in two months.  
 
Canada's biggest banks are in an uptrend... RBC Royal, Bank of Montreal, and Bank of Nova Scotia are all sitting at six-month highs.
 
Chemical companies are quietly booming... Eastman Chemical and W.R. Grace break out to all-time highs.
 
Another Chinese Internet stock breaks down... Youku plunges to a 52-week low.
Market Watch
Symbol Price
Change
52-Wk
S&P 500 1359.88 +0.5% +9.9%
Oil (USO) 31.93 +1.4% -18.8%
Gold (GLD) 165.88 -0.1% -3.3%
Silver (SLV) 31.21 -1.0% -4.9%
U.S. Dollar 81.18 0.0% +4.0%
Euro 1.27 -0.6% -5.6%
Volatility (^VIX) 16.41 -8.8% -51.0%
Gold Stocks (^HUI) 440.85 +0.9% -24.7%
10-Year Yield 1.57 -1.3% -22.3%

World ETFs
Symbol Price
Change
52-Wk
Singapore (EWS) 12.76 +0.1% +14.5%
Taiwan (EWT) 12.69 +0.1% +5.2%
USA (SPY) 136.37 +0.5% +12.3%
S. Korea (EWY) 56.65 -0.2% +7.0%
S. Africa (EZA) 64.65 +1.9% +7.5%
India (IFN) 21.53 -1.1% -3.7%
China (FXI) 35.77 +0.2% +1.5%
Israel (ISL) 12.45 -1.0% -4.8%
Canada (EWC) 27.10 +0.6% +1.6%
Japan (EWJ) 9.06 +1.8% +1.6%
Lat.America (ILF) 40.87 +0.3% -5.1%
Russia (TRF) 13.68 +1.1% -12.6%

Sector ETFs
Symbol Price
Change
52-Wk
Construction (PKB) 15.81 +1.9% +36.3%
Media (PBS) 15.66 +0.8% +22.7%
Consumer Svcs (IYC) 83.17 +0.6% +20.2%
Health Care (IYH) 81.37 +0.8% +21.3%
Financials (IYF) 57.01 +0.8% +21.6%
Real Estate (IYR) 61.89 +1.1% +16.3%
Water (PHO) 19.09 +1.0% +13.4%
Retail (PMR) 24.59 +1.2% +16.0%
Biotech (PBE) 22.19 +1.7% +16.4%
Insurance (PIC) 16.65 +0.1% +13.0%
Telecom (IYZ) 22.91 +0.1% +13.3%
Defense (PPA) 19.53 +0.6% +10.2%
Industrials (IYJ) 68.59 +0.4% +11.0%
Big Tech (QQQQ) 62.30 +0.4% +10.1%
Software (PSJ) 25.98 +1.1% +4.2%
Utilities (XLU) 34.36 +0.9% +2.5%
Transportation (IYT) 86.80 -0.5% +0.8%
Semis (PSI) 13.12 +0.6% -9.3%
Basic Mat (IYM) 63.96 +0.4% -1.6%
Nanotech (PXN) 5.44 +0.2% -14.0%
Alt. Energy (PBW) 3.53 -0.3% -34.6%

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