Stansberry Radio Network Blog

In yesterday’s Digest Premium, I (Porter) shared some of my recent interview with Asian-investment guru Peter Churchouse from a recent episode of Stansberry Radio Premium.

 

I asked Peter to join the show to discuss what makes Asia such an intriguing investment opportunity... and how he knows when to sell. Today, I wanted to offer some details he gave about how he values a property market.

 

When I look around the world at equities – when I do a top-down analysis – I’m looking for high real interest rates... low price-to-earnings multiples... and high dividend yields.

 

So I asked Peter what metrics he uses when he’s analyzing the property market...

 

Peter pointed out that in the U.S., real estate investment trusts (or REITs) make up an overwhelming majority of real estate stocks. That’s not the case in Asia, where Peter estimates it’s closer to 15% of the real estate market.

 

The REITs are similar to what you would look at in the U.S. You’re looking at dividend yields. The legal situation is very similar to the U.S. Asia’s kind of copied the U.S. model. And so, they trade in a similar way.

 

Peter and his son (and business partner) Tama also focus on leverage...

 

You find in mainland China a wide variation in the amount of leverage that these developers will take on. That is something you want to be compensated for. We err toward the conservative side, so we are typically looking at companies with lower degrees of leverage.

 

And a market like Hong Kong, for example is very lowly leveraged. They’ve learned from the mistakes they’ve made in previous cycles. Real-estate stocks in Hong Kong are probably the least leveraged of any major market in the world by a significant margin.

 

Average net-debt-to-equity ratios are probably in the range of 12%-17%. So they are very much lower than they are in the U.S. and most of the markets. That means they have a lot less financial risk when you’re looking at them as investments. So that to us is very important in this part of the world where the volatility tends to be high.

 

Every week, I host well-known guests like Jim Rogers, Peter Churchouse, and Doug Casey on my Stansberry Radio program. S&A editors, like Retirement Trader’s Dr. David Eifrig and Extreme Value’s Dan Ferris, are also frequent guests.

 

And as I mentioned yesterday, Peter appeared on the subscriber-only version – Stansberry Radio Premium, where I ask guests to share their top current investing ideas. To learn more about a subscription – and how to gain access to these episodes – click here.

 

– Porter Stansberry with Sean Goldsmith

 

 

From Porter Stansberry in The S&A Digest:

Friday, June 07, 2013

 

Bear with me...

 

Today’s Digest addresses what I believe is the core financial issue of our generation. These concerns are so important, they dwarf all other financial considerations.

 

Unfortunately, few journalists have any idea what these things mean. That means you likely haven’t heard of most of these things. So please... allow me a bit of basic reporting.

 

Last April... in a little-noticed move... Australia announced it was transferring 5% of its currency reserves from the U.S. dollar to the Chinese yuan. The deal was part of a broader currency agreement between the two countries that allows Australia’s leading banks to handle trade settlements between the two countries without the use of the U.S. dollar as a reserve currency.

 

As CBS Marketwatch explained, “The agreement does away with the need for companies and currency traders to first convert their Australian dollars or yuan into U.S. dollars.”

 

Similar direct-exchange agreements, swap lines, and bilateral trade agreements have now been established between China and virtually every major economy in the world: Japan, Brazil, Russia, India, Britain, and France – not to mention every economy in Asia. These agreements will allow China, the world’s dominant consumer of commodities, to completely avoid using the U.S. dollar in virtually all of its raw-material sourcing.

 

Similar “dollar exclusion” agreements have been formed by Russia with its major trading partners. London-based HSBC, one of the world’s largest banks, now predicts that by 2015, the Chinese yuan will equal the U.S. dollar and the euro in cross-border transaction volume.

 

In December 2008, I began warning about the risk that the U.S. could lose its “world reserve currency status,” something I termed the “End of America.” It’s worth looking at what I wrote almost five years ago because so much of what I feared would happen has come true...

 

To continue reading Porter’s entire essay, click here.

 

 

 

 

It’s impossible to time exact market tops and bottoms. And even though it’s apparent to us that things are getting crazy, these price inflations can continue for a long time... sometimes months or even years longer than you would expect.

 

Back in 2006, we started warning of a market top through our frequent “signs of the top” ideas. These were current events, extreme stock valuations, or takeover deals that seemed absurd. But as we just said, it’s impossible to pinpoint market tops and bottoms... So these warnings weren’t a call to sell everything or short the market. They were simply a reminder that prices were no longer trading on fundamentals... Greed had taken hold of the markets. And today, that’s the position we’re in again.

 

Right now, one man controls the fate of the markets – Federal Reserve Chairman Ben Bernanke. He’s injected trillions of dollars into the market. And he continues to bolster markets with $85 billion a month in asset purchases.

 

If the market believes Bernanke will taper off his money-printing efforts (aka quantitative easing) early, it falls... The next day, if investors believe Bernanke will keep up the printing, the market rises. It’s pure speculation...

 

-Porter Stansberry with Sean Goldsmith - May 29, 2013

 

 

In April of 2009 I read a fantastic essay by one of our editors. After reading it I wrote him this note.

 

 

 

 

 

 

 

Click here to read that essay and I hope it’s as important to you as it was to me.

 

 

 

 

It's a carnival game. Everybody knows you're not supposed to win. Right? Well, no. Not everybody...

 

Enter 30-year-old Henry Gribbohm, a tough-looking, tattooed young man with a toddler to care for and $2,600 in cash burning holes in the pockets of his dusty work pants.

 

Don't miss an episode of the best investment advice and financial news available anywhere.

 

Click here to join Stansberry Radio Premium.

 

 

If you’ve never seen this interview it’s worth the 3 minutes. This is from late 2009 but some things just never change.