Issue #2

Latin Stock Investing | Nov. 10, 2008

The instant traffic jam in international investing is clearing.

The actions of the developed nations to lower interest rates, guarantee bank deposits and capitalize the financial system have improved the short term outlook. But it was the $120 billion US dollar swap facility for Brazil, Mexico, South Korea and Singapore that sent a clear signal about the importance of emerging markets in the recovery. Eventually China has joined in with its own too large to ignore liquidity and stimulus package.

Now international investor money flows are trending
positive. Equity funds that invest primarily in non-U.S.
stocks had a smaller outflow of $140 million, versus an
outflow of $2.2 billion in the previous week, according to
TrimTabs. But during the same period, exchange-traded
funds that invest in non-U.S. stocks had positive inflows of
$2,0 billion, versus a smaller $1.2 billion inflow in the
previous week. It seems investors are finding more
comfort in funds than in individual stocks.

Looking closer at Latin America, stocks in the benchmark
Latin America 40 iShares ETF (NYSE:ILF) recovered half of
their 40% loss to finish with a 20% net decline in October.
Of the three Latin America country ETFs, the one with
best performance rebound was the Chilean ETF (NYSE:
ECH). The Chilean fund has 26% of its portfolio in utilities,
versus a smaller 10% utilities weight for the Mexico ETF
(NYSE:EWW) and 7% utilities weight in the normally
buoyant Brazil ETF (NYSE:EWZ).

Not all investors were big losers last month. Our own LSI
Dividend portfolio that contains ten higher-yielding Latin
American ADRs was down only 1% in the last 30 days -
beating all its benchmark and alternative portfolios by a
wide margin. Obviously the portfolio was helped by a
focus on cash flows and higher yields.

Whether your orientation is cyclical growth or more
defensive income, the changes in credit availability and
currencies are forcing company managements and
investors to focus on cash flows and reallocate
investments to those with shorter, more predictable
returns.

The new stars for 2009 will be those companies with the
ability to generate excess cash and little or no exposure
US dollar-denominated debt or derivatives. The changes in
this month's model portfolios reflect this new reality.

In this newsletter, you will also read comments on:
· How will this credit crunch impact stocks?
· Which companies will benefit from a stronger dollar?
· What options do you have to moderate risks?
· Where can you find better investment yields?
· Which sectors might benefit post-US election?
Go ahead and act now on the investment ideas in this
newsletter.
Best wishes and happy trading!
+ Rudy