Blood In The Streets
Turkey Parts of the Turkish military just attempted a pitiful coup. For next time, they should read Coup d'État: A Practical Handbook which includes this useful guide:
By their failure, anything that they dislike about the current regime will become more so. The market has reacted badly, but this could be an opportunity. Markets often recover quickly from political shocks and they could do so in Turkey. I like the Turkish Investment Fund (NYSE: TKF ) which currently trades at a 13% discount to NAV.
Russia
The prospects of oil in the Russian streets diminish with the oil price recovery. On way to exploit this recovery is via shorting the ProShares UltraShort DJ-UBS Crude Oil (NYSEARCA: SCO ).
The higher the oil price goes, the more stable Putin gets. In Bettin' On Putin's Russia , I advocated shorting the Direxion Daily Russia Bear 3X Shares (NYSEARCA: RUSS ).
That position still makes sense to me today. However, it is not my favorite Russian investment; that is EOS Russia , up 85% since I disclosed the idea last July but still a bargain.
Thailand
So if not Russia, then where will be the next blood in the streets? Maybe Thailand. If there is a big selloff, I would look to the Thai Fund (NYSE: TTF ), which is currently trading at a 14% discount to NAV, as a way to get exposure to a recovery. I also would look to Asia Pacific Wire & Cable (NASDAQ: APWC ).
Both Japan and Thailand are about to have a new head of state. Here is Thailand's, full name: Vajiralongkorn Borommachakkrayadisonsantatiwong Thewetthamrongsuboriban Aphikhunuprakanmahittaladunladet Phumiphonnaretwarangkun Kittisirisombunsawangkhawat Borommakhattiyaratchakuman
When might an opportunity arise? In the next week. There is about to be a royal succession and it could be a rocky one. The outgoing king is beloved. The incoming king is… not. He is a playboy whose pet poodle Foo Foo held the rank of Air Chief Marshal and whose death was celebrated by a lavish four day funeral. The military could use the changeover as an excuse for a crackdown at the end of this month.
Conclusion
The S&P 500 (NYSEARCA: SPY ) just hit a new record high. There is a long way to fall.
The CAPE ratio of 27 is 63% higher than the historical average. From such heights, past returns have been negative. The total market cap costing 124% of GDP has historically led to negative returns, too. The US market is expensive compared to the rest of the world on a number of metrics.
CAPE |
PE |
PB |
PS |
DY |
|
US |
24.7 |
20.4 |
2.8 |
1.8 |
2.1% |
World |
19.1 |
19.1 |
1.8 |
1.2 |
2.7% |
Additionally, the US dollar has been strong over the past few years as can be seen in the performance of the PowerShares DB US Dollar Index Bullish (NYSEARCA: UUP ):
Between the expensive home market and the expensive currency, now could be an optimal time for US investors to diversity into foreign markets. Half of the world's market cap is foreign; you might consider investing half of your assets abroad, too. I favor cheap country markets where temporary uncertainty creates the opportunity to buy bargains.
