Issue #4

Latin Stock Investing | Mar. 3, 2009

The US stock market is for fools! The Dow Industrials Index just broke 7,000 posting a 22% year-to-date loss! Be prepared for Dow 5000 - it could happen. If you had bought all 30 Dow stocks ten years ago and held them like your broker suggested, you actually lost money. Which way is the market headed next?

Unfortunately, taking cheap shots at others will not make you money now. If you watch the international news shows some say, “Blame it on the Yanks”. This morning I heard a reporter say, “Blame the financial mess on the accountants.” Obviously the blame-passing industry is alive and well. Too bad we can't invest in that.

What we can make money on is figuring out the winners and losers before the rest of the investing herd does.

Follow the cash with dividend-paying stocks.

The LSI Dividend Portfolio only lost 2% in the first two months of 2009. That's a whopping 16% difference in performance versus the S&P 500.

Now don't get me wrong - losing money is always a bad sign. The point is that if you are going to be in the equity markets, investing in sustainable dividend-paying Latin American stocks is now more defensive than investing in US and UK stocks.

And positioning is more important than ever. Going forward Brazil and Latin America is the place to invest given the relative improvement in the regional economy.

Nationalizations are not all created equal.

Americans are just now starting to understand how nationalizations function. But anyone who buys oil giant PetroBras (NYSE:PBR) is co-investing with the Brazilian government that owns the lion's share of the company. PetroBras has a massive multi-year capital expenditure program which creates real jobs in new oil, ethanol and chemical projects in Brazil, Argentina, and elsewhere.

In contrast, the money being spent in the US and UK is propping up yesterday's auto industry. While Obama talks about investing in alternative energy, the Brazilians already have plants, pipelines and contracts for delivering tomorrow's alternative renewable energy. So don't fear nationalizations. Instead, fear unproductive use of financial capital and rhetoric from Washington.

Play the China card.

My final comment is about China. Every time the Chinese talk about a growth stimulus plan, the global commodities markets perk up. These media events are short-lived, politically staged rallies.

The reality is that Brazil is an emerging agricultural and energy superpower with strong ties to China and more ultimately a solid economic future. You will see the impact in financial flows not on the financial news shows.

So go ahead and act now on the investment ideas in this newsletter. Best wishes and happy trading!

+ Rudy