Partly Cloudy, with a Chance of Eruptions

04/22/2010 12:01 am EST

Focus: GLOBAL

Igor Greenwald

Chief Investment Strategist, MLP Profits

Europe’s had terrible weather of late. First, a cold and stormy winter brought the economic recovery to a near standstill. Then, just as things were warming up again, came Iceland’s cloud of volcanic ash, severely disrupting air travel.

It was, in many ways, a mercifully abbreviated replay of the financial collapse: an unexpected problem bringing activity to a halt overnight, with the public stuck and governments bumbling. But in the end, with credit or with ash, the clouds lift or drift, and everyone eventually adjusts to the new reality.

So, for instance, Germany adjusts to the Greek bond crisis as a common European problem, and Greece adjusts to paying 8.28% on a ten-year bond, roughly the going rate for US junk, as a result of its profligacy. And meanwhile, in a parallel universe, the comparably profligate US continues to borrow below 4%, as banks play interest rate spreads with house money.

It’s hardly news to anyone except the International Monetary Fund that European growth is lagging. On the other hand, at least there is some, and Europe does have some more dynamic trading partners.

The clouds seem to have lifted quite a bit in the last month for German investors watching “impulses from exports invigorate German business activity.” And as for emerging markets, things are still very much looking up, notwithstanding Beijing’s repeated attempts to cool off the Chinese real estate market.

Such efforts probably had a lot to do with a 20% decline in the share price of Chinese builder Boyuan Construction Group (Toronto: BOY.V) so far this year. But with plenty of publicly financed projects in the pipeline and a price/earnings ratio below seven times, based on this year’s numbers, it would be hard to bet against this Ryan Irvine recommendation.

Another way to play the emerging markets boom is through bets on the export infrastructure in Australia and New Zealand, which are destined to supply Asia with food and minerals for years to come, says fund manager and financial adviser Robert Scharar in this week’s Q&A.

Thailand, too, has long served as China’s rice basket, and its relatively inexpensive stock market was one of the world’s best performers earlier in the year. But that was before anti-government protests by disaffected villagers turned deadly, dropping Bangkok stocks 10% in two weeks. The index recovered half of that loss during Tuesday’s trading session. But more instability looms, Carlton Delfeld suggests.

For those who prefer less political intrigue in their portfolios, Canada’s Yellow Pages Income Fund (Toronto: YLO.UN) continues to yield near 10%, notes Gordon Pape. With the Canadian dollar now just about even with the greenback on expectations of faster rate increases north of the border, such investments should continue to do well.

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