Top Picks for Pacific Trade

04/08/2015 10:00 am EST

Focus: GLOBAL

Carlton Delfeld

Editor, The La Jolla Letter and Pacific Gains

Global expert Carl Delfeld, editor of Pacific Gains newsletter, discusses the developing Trans-Pacific trade deal, its potential economic impact, and some favorite investment ideas poised to benefit from the deal's passage.

Steven Halpern:  Our guest today is global investing expert Carl Delfeld, Editor of the Pacific Gains newsletter.  How are you doing today, Carl?

Carl Delfeld:  I’m doing well, Steven.  Thanks for having me.  

Steven Halpern:  First, could you tell our listeners a little about Pacific Gains, your newsletter, as well as your Economic Club?

Carl Delfeld:  Sure, sure.  Well, first, I’ll start with the Blackthread Group, which is a group that provides research for high net worth and family offices and, basically, it’s an intelligence network that I’ve built up over the years all over the world.  

It’s strongest in the Asia-Pacific region, and so, I have over 1200 contacts and they’re constantly feeding me ideas and information and I’m reaching out to them for the same and then I pass those on to members. It has worked quite well. Pacific Gains is an investment newsletter for ordinary investors.  

It’s not expensive and I focus on ideas in the Pacific region and that’s not just on the Asia side.  

You know, when you think about the Pacific Rim, it’s Asia, of course, but it’s also the US, Canada, Mexico, Panama, Chili, and they’re all connected in terms of wealth, in terms of economic trade, in growth.  It has really shifted from the Atlantic to the Pacific.

Steven Halpern:  Now, given your focus on the Pacific region, it’s not surprising that you’ve been interested in the Trans-Pacific trade deal, which has been under development in recent years but, surprisingly, it has not gotten much media attention. Could you explain the background to his field?

Carl Delfeld:   Sure, sure.  Well, there’s trade deals going on all the time and the leader in it, really, has been China.  They’ve done one with the Southeast Asian countries, the ASEAN countries, which are south of China and east of India, it’s a booming region, and trade just took off. They did one in 2013 and they’re doing a lot of bilateral deals.  

Meanwhile, the US has been a little bit stymied because we haven’t had fast track authority and President Obama has been a bit skeptical of these trade deals, you know, the labor unions and so on, so this Trans-Pacific trade deal is a very big deal.  

It affects 12 different countries, including Japan, about 40% of world trade, the bulk of US exports, and so it’s very important, but it has been stalled for the reasons I just listed and the other issue has been Japan.  

Japan has been unwilling to open up some of their markets, particular agricultural markets, so, believe it or not, it started about five years ago and I think just suppressed and the media just got tired of it just sitting there but, again, our Blackthread intelligence told us about two months ago that it was back on track and it was moving quickly.

Steven Halpern:  So, as your intelligence network suggests it possible that an agreement such as this might occur sooner rather than later.  Is that true?

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Carl Delfeld:  Yeah, no question.  I have a friend who I just refer to as Mr. Japan who told me just a few weeks ago that the Japanese were onboard, that Prime Minister Abe was knocking heads, and also, here’s the really key thing. It’s US politics.  

With President Obama in his last years in office without facing re-election and with the Republicans taking over the Senate as well as the House and also with President Obama really wanting a deal—and so do the Congressional Republicans—they want to have some success, right.  

They’re adversaries but they don’t want to be painted as do-nothing people so, yeah, they’re moving.  My sources tell me it could come as soon as June.

Steven Halpern:  Now, could you walk us through some investment ideas that you see as potential beneficiaries of progress on this Trans-Pacific trade deal?

Carl Delfeld:  Sure. Well, Steven, you know an interesting thing about this trade deal, it’s not just about a tariff.  It’s about all sorts of things and that’s why it’s so important, there’s a big symbolic, strategic nature to this deal because Japan and the US are the leaders, of course, of it but it also includes some very so-called emerging market and frontier countries, for example, Indonesia or Vietnam, so it’s a very complex deal.  

That’s one of the reasons it has taken so long and they just met two weeks ago in New York—the delegates—in a secret meeting, and then, the following week, in Hawaii and, now, it’s down to just the final, you know, the horse trading.  

I think the big winner, in my view, is Vietnam and it’s because it’s at probably the bottom edge of the group of the countries in the trade pact and so they will benefit the most.  As you know, Vietnam is already a booming country.  

I just sent off a letter to our members about a fund that we’ve been recommending.  It’s up 38% since the early part of 2014 and foreign investment is just flying into Vietnam.  

Proctor & Gamble just announced $100 million investment in a razor factor there and Vietnam is stealing manufacts, the low-end manufacturing capability of China, believe it or not, so I think Vietnam. The easiest way to play Vietnam is the Market Vectors Vietnam ETF (VNM).

Then, the next area that I would recommend your listeners look at is the pharmaceutical companies, and the reason is, a big part of this trade pact is what we call IPR, intellectual property rights and it would significantly protect big pharma from copycats and so on.  My favorite of the whole group is Bristol-Myers Squibb (BMY).

Steven Halpern:  Well, we appreciate you taking the time today. Thank you for joining us.  

Carl Delfeld:  Thank you.  

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