It's one of the most confusing markets for investors right now, but if you understand it, it can be one of the most lucrative.
The term "emerging markets" conjures images of far-off lands with uncertain economies and banana-republic leaders. It's easy for investors to shun these types of investments.
But that's not what emerging markets are... The exact list of which countries qualify varies, but generally, we're talking about countries with advanced industries, stable laws, and skilled workforces... Walk through the major cities of Taiwan, Mexico, China, South Korea, or even Brazil, and you'll find modern, robust economies.
Picking which countries will do the best in a given year is difficult. Emerging market countries have volatile periods. Turkey and Qatar are two recent examples of this volatility thanks to tenuous political situations.
But if you know what you're doing, investing in emerging markets can be lucrative. And you don't need to look for highly speculative stocks.
In fact, during its last huge boom a decade ago, emerging market stocks could have shown you gains like...
- 742% on a well-known bank (that's bigger than PNC or Capital One)
- 774% on a famous real estate conglomerate
- 658% on a car manufacturer and
- 601% on a major energy infrastructure firm
These businesses aren't start-ups... or all-or-nothing gambles like small-cap biotech.
They're "meat and potatoes" companies in businesses that are easy to understand, and are things that everybody uses.
Now, according to Stansberry Research's Asia-based analyst, Brian Tycangco, the same kind of boom is starting again.
According to Brian, forces are lining up to create an incredible opportunity in emerging markets. And they're going to propel a bull market that will dwarf the run U.S. stocks had over the last 11 years.
Brian recently put together a presentation that explains why this boom is happening now, where you need to look for the best gains, and how 1,000%-plus gains are possible over the next few years.
Now on to this week's Q&A... Please keep sending your questions, comments, and topic suggestions to [email protected].
Q: I'm with the alliance program. I'm interested in your recommendation for the Real Estate Investment Trust (REIT). However, I'm concerned about complex taxes. I have in the past purchased a Master Limited Partnership (MLP) and it involved a special form (K-1, I believe) at tax time along with a potential requirement to file nonresident income tax forms in every state where the MLP does business. All this would cost much more than I would ever earn from the investment, plus being a major hassle. Does this sort of thing also apply to REITs? – B.N.
A: The tax treatment of MLPs can be cumbersome. As a unitholder, you're entitled to a portion of the MLP's income and you need to pay taxes on it. So at the end of the year, the MLP you hold will send you a tax form to explain the distributions you received. This form is called a K-1.
However, the amount of the distribution you receive, and your share of the income are not always equal. And that's where things can get confusing. A tax advisor can help make sense of K-1s. And most tax software can walk you through the process. But the additional work means a lot of folks choose to steer clear of MLPs.
REITs are much, much easier (despite their reputation). If you own a REIT, you'll get a 1099-DIV form, like you would for a typical dividend-paying stock. When you're doing your taxes, it's as simple as filling in the boxes like you would with any other 1099-DIV. You'll see the REIT income breakdown for dividends, capital gains, and return-of-capital distributions – each with their own corresponding box. Ordinary dividends, for example, are Box 1a. No extra paperwork is required.
Q: Is it worth it to buy only organic? – S.M.
A: When buying foods from the Dirty Dozen list... I do buy organic. It's not a cure-all, but the restrictions reduce some pesticide exposure.
The Environmental Working Group ("EWG") also has a "clean" list. When buying produce on the clean list, I save a few bucks and skip the organic offerings. Check out EWG's Clean 15 list here.
Q: Doc, I was wondering if people who suffer from arthritis have compromised immune systems and are thus more susceptible to the dangers of COVID 19? Thanks. – J.T.
A: There are two types of arthritis. Osteoarthritis ("OA") happens as a "wear and tear" injury. Overuse, injury, or pressure from carrying too much weight wears down the joint and causes the joint pain of OA.
OA itself doesn't increase your risk for COVID-19, but OA does correlate to higher rates of heart disease. In fact, if you have OA, you're three times more likely to have heart trouble. Since you have joint pain, you might not exercise, you're more likely to be overweight, and you're struggling with inflammation – all three of these affect your heart. Since we know COVID-19 affects blood vessels and causes heart damage, if you get it, you could have a more severe reaction.
The other type of arthritis is rheumatoid arthritis ("RA"). This is an autoimmune disorder. That means your immune system attacks your joints. Autoimmune diseases don't necessarily compromise your ability to fight infection. However, most treatments for RA and other autoimmune diseases are immunosuppressants. These weaken the immune system so it stops attacking your cells. But that means you may not be able to fight off COVID-19 (or other illnesses) as well. If you're taking medication for RA, be extra vigilant in keeping your body in anti-inflammatory mode. This means:
- Practice sleep hygiene.
- Eat foods known to be less inflammatory.
- Stay away from kids this time of year as they go back to school and start spreading the usual set of bugs, including COVID-19.
Editor's note: Our offices here at Stansberry Research will be closed on September 7 in observance of Labor Day. Look forward to your next issue of Health & Wealth Bulletin on Tuesday, September 8.
What We're Reading...
- Did you miss it? Forget what the market "experts" on the news are saying... Instead, focus on John.
- Something different: The time rabbits defeated Napoleon.
Here's to our health, wealth, and a great retirement,
Dr. David Eifrig and the Health & Wealth Bulletin Research Team
September 4, 2020