Beginning his career on Wall Street in 1938, Sir John Templeton pioneered the concept of internation...
Emerging Market with Best Potential
04/26/2012 5:30 pm EST
Dr. Martin Weiss is looking for a sharp correction in the US stock market to provide an excellent buying opportunity in this emerging market, which he thinks has the best long-term potential.
Martin, I know that you have been an advocate of Brazil for many years. I know you grew up part of the time in Brazil.
I did. I moved there when I was 6 years old, and then again when I was 13, and came back for college.
Wow. Yes, so you know very much about the country…and we haven’t heard a lot about Brazil lately. Or, you know, we’re hearing about China and we’re hearing about India a little bit more now, but everything has been more involved with what’s happening in the banking industry and sovereign debt and that kind of thing. But do you think there are some opportunities now for investors in Brazil?
I think there will be at the right time, and there are some opportunities even today. But the bigger opportunities, of course, come when the markets are down and prices are cheap.
We’re witnessing a major long term shift in wealth from West to East, but that takes you to China. It takes you to countries where investing is not as well established for overseas investors. In Brazil, you have democratic institutions have been in place for many years, and market institutions that make it very safe for investors to take some risk.
Â If I can put safety and risk together…and it’s taking full advantage of that major shift in wealth from West to East. In this case, from West to South, from North to South.
So the primary areas are not only the resources, but also in banking and industry. It’s advancing quite rapidly in Brazil.
And telecom also, right?
Isn’t telecommunications a big industry in Brazil?
Oh, absolutely—especially in the south and in the state of Sao Paulo, Parana, Santa Catarina, there are great telecommunications companies that are expanding.
What’s most interesting about Brazil is that it is one of the very first countries in the Western Hemisphere that has become totally energy self-sufficient before it discovered massive reserves of petroleum, and that was with ethanol.
And when you drive in Brazil, your car is going to be a flex engine, which means that when you pull up to a fuel station—not a gas station—you have a choice of both ethanol and gasoline in any mixture.
And that’s in every station in Brazil.
Unlike here, where you have to search for hours to find one.
Correct. So if today, the price of gasoline is lower, you can fill up with gasoline. And if tomorrow, even with a half tank of gas, you want to fill up with ethanol, you can mix in the ethanol and the flex engine would adjust to the octane of your fuel automatically.
Now, Martin, I know it’s not yet time to invest in Brazilian equities, but when it is time, do you think that most investors would benefit more from putting their money into an ETF or a fund rather than trying to chase a Brazilian stock?
I would start with a foundational investment that’s very diversified, such as an ETF, the Global X Brazil Mid-Cap ETF (BRAZ), which represents the broad Brazilian stock market, including resource companies and financials. And then if you want to get into it more deeply, you can start looking at individual stocks.
And is it possible for Americans to buy individual stocks on the Brazilian exchange?
It is, but it’s more practical to buy ADRs on the US exchanges for most investors.
Right. OK, interesting. And in terms of sectors, we obviously have the commodities, the resources, the financial, telecom. So when you look at the ETF, is it pretty widely diversified between all of those industries?
Yes. And agricultural and mining is also a major area.
OK, yes, correct. That’s true. OK, well that was very interesting…and when do you anticipate the Brazilian economy or the stock market would be ready for us?
I think no matter what, no matter how strong Brazil is fundamentally, if the US stock market takes a dip, then the Brazilian stock market would tend to follow. So I would look for a correction in the US market, and then at that time, jump in to start building a portfolio in Brazil.
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