Jim Powell, editor of Global Changes and Opportunities Report, makes the case for emerging markets, including Mexico and Chile; for those with a very long-term outlook, he sees opportunity in lesser known markets in the Middle East and Africa.
Steve Halpern: We're here today with Jim Powell, editor of Global Changes and Opportunities Report. How are you doing today Jim?
Jim Powell: I am fine. How are you Steve?
Steve Halpern: Very good. From a longer-term perspective, you've been particularly bullish on emerging markets. In fact, in your recent research, you said, "I think buying emerging nations, at today's beaten down prices, is a lay-up for long-term profits." Could you expand on that?
Jim Powell: Yes, I'm quite certain that I'm going to be proven correct in that pronouncement. The emerging markets are certainly not going to go back to being rice paddies and rubber plantation workers and so forth.
They have emerged. They are developing. They have large manufacturing bases. They've developed their natural resource assets. They have young, energetic workforces. They've just got a whole lot going for them and they're oversold right now.
To some extent, the emerging markets took on the role tech stocks had 20 years or so ago. A lot of people piled onto the emerging markets when they kind of became the in thing and their growth was very high and it became almost a fad.
Then, when growth cooled a bit, everybody started to bail out, and as we usually see in such situations, you have oversold prices, so I just think that when you put it all together, you realize these countries are going to come bouncing back when conditions are a little better.
I might add that their growth rates almost exclusively are at least twice—and sometimes three times—what the growth rate is in the United States, so it isn't as if they fell on their noses.
Steve Halpern: You consider Latin America to be among the most attractive in the emerging market world and you've recommended positions in both Chile and in Mexico. Could you tell us some of your reasoning behind picking those specific markets?
Jim Powell: Well, Mexico is a very compelling story, in particular, because it is most overlooked by US investors. It's the familiarity of being right next door sort of problem. Profit in its own land situation. Mexico's transformation has gone largely unnoticed in this country.
They lost a lot of business ten or 15 years ago to China, and what isn't being noticed is how much of that business is now coming back, as expenses in China keep going up, and the manufacturing expertise in Mexico is rising.
Mexico also has the advantage of having a 2000-mile border with the United States; they're right next door.
Most of Mexico is in the same time zone as many parts of America, so your customers can pick up the phone and talk to someone, and frequently, with some of the manufacturers, get delivery of a product a day or so later.
It's truly amazing. Mexico also has a very young workforce and quite a good education system for technical fields, and the new President is very energetic and is attacking a lot of problems.
Steve Halpern: So, exposure to that market...would you be looking at individual structure or would you recommend that investors look at exchange traded funds?
Jim Powell: I like the exchange-traded funds. I really think the iShares Mexico Fund (EWW)—EWW is a way for most Americans to go. If you have specialized knowledge of Mexico, and you know companies that you wish to invest in, you certainly can. There are plenty of them, but I recommend a fund.