Big Game Hunting...in the Philippines

The Daily Reckoning U.S. Edition

Home . Archives . Unsubscribe

The Daily Reckoning | Wednesday, August 1, 2012 Bill Bonner talks from the sidelines of our investment symposium, Chris Mayer with another off-the-beaten-path investment idea, Plus, deflation vs. inflation, the muddle-along non-recovery and more...   Mayer's Special Situations Presents... Why Did This Chairman Just Buy $1.3 Million Worth of His Company's Shares... With His Own Cash... at Market Prices? The answer could bring you a chance at a massive fortune starting tomorrow... "There is no better tip-off to the probable success of a stock than that people in the company are putting their own money into it." - Investing legend Peter Lynch Invest alongside the insiders with this little-known secret.     Ed. Note: At last week's Agora Financial Investment Symposium in Vancouver, our Reckoner-in-Chief, Bill Bonner, sat down with the good folk from the Money and Wealth Show for a chat about the state of the world. Just how long can this non-recovery "muddle along"...should we be expecting deflation, inflation...or both...and what's behind Bill's "campaign against numbers"? Money and Wealth Show host, Victor Adair, and Bill talk about where we've been...where we are...and, more importantly, where we're heading. You're invited to watch the interview here: For more of Bill's insights, including how to play "the fattest, juiciest financial bubble that's ever existed," click here.   Hidden Retirement Acc't. "Catch-up" Secrets These secrets can pay you thousands in extra income each year AND help you "catch-up" on what you need for retirement. These secrets are 100% legal. They take just minutes to set up. Start Here Today.   The Daily Reckoning Presents Big Game Hunting...in the Philippines By Chris Mayer People often ask me where I find my off-the-beaten-path ideas. One of the best ways I've found is to travel and meet with fellow investors. They can be your bird dogs to emerging opportunities. So I'll be in Cambodia and an investor there will tell me excitedly about the opportunities in Myanmar (Burma). Or I'll be in Mongolia and someone will talk of similar opportunities in Namibia. Or I'll be in Colombia hearing an investor tell me about his recent trip to Haiti and what he found there. These things have all happened to me. It happened again last night. I was sitting in a Chinese restaurant in Honolulu with new friends. And as often happens, the conversation turned to investing. One of my dinner mates had his own favorite idea: the Philippines. It might sound far-fetched, but the proof is in the eating. The Philippine stock market is among the best performing in the world this year. Its economy is one of the few Asian economies that will grow faster this year than last. The Philippine peso is the best-performing currency against the dollar this year, with a 5% gain. The man putting forth the Philippines idea is an ex-banker, among other things. He has interests and connections in Manila. He has been back in forth dozens of times over the past couple of decades and marvels at the changes. "There are cranes everywhere," he reports. "New buildings, shops, restaurants. It's incredible. I would never have thought to see that happening." The usual ingredients are at work, like yeast in bread dough, making the place rise: a young population, large untapped mineral wealth and a change in government.   As to the young population, the median age is only 22.9 years old. It seems all the booming countries I've visited in Asia, from Cambodia to Mongolia, have young populations. The advantage this brings is that most of population is of working age and thus such countries avoid the demographic challenges of the aging West. Then there is that mineral wealth. There are some 7,000 islands that make up the Philippines. The geological forces creating those islands also brought rich minerals to the surface, where they can be mined. By some estimates, the Philippines' mineral wealth tops $2 trillion and is perhaps as great as Indonesia's. Gold, copper, nickel, iron ore -- it is all here in large, untapped deposits. Billions of dollars in new mining plans are set for approval. The third force at work is change at the government level. Current President Benigno Aquino swept into office in 2010. Among other things, he has been a big booster of much-needed infrastructure investment. The government has approved road projects worth $1.1 billion. The government is also encouraging the build-out of things such as the airport and rail system with public-private partnerships designed to ensure a target return to investors. The country's largest companies are building new office towers and residential communities and shopping malls. Chinese manufacturers, seeking to escape hotly rising costs at home, look at the Philippines as an alternative.   At the sovereign level, Philippine finances are trending well. The country has a rating just below investment grade. It has currency reserves that exceed its external debts. The analogy would be a cash-rich company with more cash than debt. Yet a 10-year government bond pays nearly 6%. Add in the 5% currency gain and, if you are U.S. dollar-based investor, you've got an S&P-beating 11% gain. Still, you'd had done better in Philippine equities. The iShares exchange-traded fund --ticker EPHE, which consists of Philippine stocks -- is up 25% this year. Pretty wild, huh?   Now, who knows whether this holds together or not? In my experience, these frontier markets tend to run for a while. One-year wonders are not the norm. The Philippines hasn't had a boom since before the Asian Crisis of '97. So it's been a long time coming. The whole story just goes to show you once again how this planet of ours is one giant ball of constantly evolving opportunities. New ones emerge and old ones close out. I'm in Hawaii checking out real estate. It seems an unlikely spot for a bargain-hunter like me to be. The housing market in Honolulu, for instance, is the most expensive in the U.S. The median price is nearly nine times the median income. A normal ratio would be something between two-three. But you'd be surprised at what you can find even here. There is a huge demand for housing. And there are only so many places downtown where such housing might go. Those few places are tremendously valuable -- and I've found a company that owns prime real estate in Honolulu trading for a fraction of its worth. In my investing career, I've learned it pays to never stop searching. Never give up the hunt for great ideas. One of my favorite explorers was Roy Chapman Andrews, who led the Central Asiatic Expeditions in Mongolia in the 1920s. (I recently read an excellent biography of Andrews called Dragon Hunter while I was traveling through the country myself.) Andrews had a great quote that I like a lot. He said: “Always there has been an adventure just around the corner... and the world is still full of corners!" Insert the word "opportunity" for adventure and I think you have an investment mantra to live by. Regards, Chris Mayer, for The Daily Reckoning   And now over to Joel Bowman, with some extracurricular scribbles from Paris, France... Joel Bowman There's nothing quite like first hand, boots-on-ground experience. Of course, not everyone can go on fact-finding missions across South East Asia, or to Mongolia (one of Chris' most recent trips)...or to the half-dozen or so other exotic locales he visits year-in, year-out. Still, that doesn't mean you can't benefit from his hard-traveled insights and the investment opportunities he uncovers along the way. For less than $40, you can follow Chris' travels (and the hot tips he discovers around the globe) with a 12-month subscription to his Capital & Crisis newsletter. And, right now, you'll also get a free copy of his must-read book, World Right Side Up. Check out the offer here. Joel Bowman, for The Daily Reckoning Here at The Daily Reckoning, we value your questions and comments. If you would like to send us a few thoughts of your own, please address them to your managing editor at joel@dailyreckoning.com The Daily Reckoning: Now in its 11th year, The Daily Reckoning is the flagship e-letter of Baltimore-based financial research firm and publishing group Agora Financial, a subsidiary of Agora Inc. The Daily Reckoning provides over half a million subscribers with literary economic perspective, global market analysis, and contrarian investment ideas. Published daily in six countries and three languages, each issue delivers a feature-length article by a senior member of our team and a guest essay from one of many leading thinkers and nationally acclaimed columnists. Cast of Characters: Bill Bonner Founder Addison Wiggin Publisher Eric Fry Editorial Director Joel Bowman Managing Editor The Mogambo Guru Editor Rocky Vega Editor Additional articles and commentary from The Daily Reckoning on: Twitter Facebook DR iPhone APP To end your Daily Reckoning e-mail subscription and associated external offers sent from Daily Reckoning, cancel your free subscription. If you are you having trouble receiving your Daily Reckoning subscription, you can ensure its arrival in your mailbox by whitelisting the Daily Reckoning. © 2010-2011 Agora Financial, LLC. All Rights Reserved. Protected by copyright laws of the United States and international treaties. This newsletter may only be used pursuant to the subscription agreement and any reproduction, copying, or redistribution (electronic or otherwise, including on the World Wide Web), in whole or in part, is strictly prohibited without the express written permission of Agora Financial, LLC. 808 Saint Paul Street, Baltimore MD 21202. Nothing in this e-mail should be considered personalized investment advice. A lthough our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice.We expressly forbid our writers from having a financial int erest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of a printed-only publication prior to following an initial recommendation.Any investments recommended in this letter should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.