Important Global Financial Markets Update - Gold Miners and Japan
Stock-Markets / Investing Mar 31, 2007 - 07:01 PM GMT
Martin Weiss writes : We've just arrived at our beach house in Brazil, where our nephew's two boys also love to spend their vacations.
It's early Saturday morning, and the family is still sleeping. Soon they'll be up and about, ready for a full day of activities.
I'm looking forward to the opportunity to spend some quality time with my family. But I also wanted to send you a quick update while I had the chance.
As you know, I firmly believe that there are tremendous opportunities overseas. That's why we've been talking about so many foreign markets in Money & Markets lately. And that's why our editors have been visiting a range of exotic locales — to see precisely what's happening on the ground .
Today I want to give you a heads up on just some of the discoveries they've made in the past few weeks. First, Sean is going to tell you about …
A Little-Known Gold Miner On the Island of Hispaniola
Last week, I visited the Dominican Republic, located on Hispaniola. Although the Spanish mined here long ago, the island still has plenty of mineral wealth, most of which is hidden away in the interior of the country. For example, the Pueblo Viejo mine, owned by Barrick and Goldcorp, is formerly one of the world's richest producing mines. And it's still sitting on at least 7.3 million ounces of gold and 38 million ounces of silver.
The Pueblo Viejo mine is located on a Cretaceous-age volcanic belt with epithermal mineralization. Simple translation — there are rich deposits of gold, silver, and other metals.
This belt extends through the mountains of the Dominican Republic and into Haiti. However, I'd rather stick to the Dominican Republic because it has a stable government, is friendly to miners, and has excellent infrastructure.
Here's the really interesting part: A slew of junior explorers have staked claims up and down that belt, and they're drilling like crazy to find out if they're the next Pueblo Viejo!
I visited one of these explorers during my trip. The company has already found gold — in fact, the mine is going into production soon . There's gold scattered about in the topsoil. All they have to do is scoop up the topsoil with bucket loaders, pile it up, then dump chemicals on it to leach out the precious metal.
What's more, it seems as though they've only scratched the surface. I'm still crunching the numbers, but so far, this company looks like it'll be going into the new report I'm working on. It's going to be all about junior miners, just the kind of companies that should catapult higher when gold takes off again.
And based on what Larry Edelson saw in Dubai last week, a lot of people sure believe the yellow metal is on its way up …
Loads of Gold Being Bought In Dubai's Open-Air Market!
I just spent four days in Dubai, the largest city in the United Arab Emirates. I was amazed by all the construction going on over there.
But I found something even more amazing: Dubai's Gold Souk, an open-air market that contains some 500 gold shops. It's the largest retail gold market in the world. An estimated 500 metric tonnes of gold, or nearly 18 million ounces, are bought and sold there each year.
I got to the market at three in the afternoon, about an hour before the Islamic afternoon prayer session was to end. It was really exciting to watch the shopkeepers pour out of the local mosques and hustle back to their gold shops for the afternoon and evening trading sessions.
As the shops opened, gold buyers started pouring in by the masses. An hour after opening, almost all the shops I visited were packed with buyers.
Gold in Dubai is either 20k or 22k, and can be found in ingots ranging from roughly 1/10th of an ounce all the way up to incredible hand-crafted pieces of Islamic jewelry weighing a pound and costing tens of thousands of dollars.
But here's the most important point: In the gold souks of Dubai, both the ultra-rich and regular citizens are buying gold. I watched wealthy businessmen, construction workers, and imams all snatching up the yellow metal.
When I spoke with two Muslim women covered head-to-toe in their blue burqas, one of them said, "Gold never goes out of style, whether it's jewelry or bars. It's really money."
I couldn't have said it better myself! And the activity I saw in Dubai's gold market is yet another example of what I've been saying all along — now is a great time to stock up on the precious yellow metal.
And according to Tony Sagami, it's also a great time to take another look at the Japanese stock market …
Japan's Economy Finally Turning Around, Yet Its Stocks Still Look Cheap!
I'll be leaving for Asia in a few weeks, and I can't wait to get there. I'm sure I'll find some great opportunities on the trip. But I don't even need to leave my seat to tell you that there are some juicy bargains in Japan right now. Let me explain …
Sure, other Asian economies are posting faster growth. But Japan's economy is the second largest in the world! And it's finally showing new signs of life.
Japan has transformed itself into a leaner, more efficient, and more profitable economy. It took years of painful restructuring, long-overdue layoffs, the trimming of unprofitable business lines, and debt reduction but it's starting to pay off.
After a 17-year wait, the Japanese economy is ready to roar along with the rest of its neighboring Asian tigers. One sign: Strengthening real estate.
Japan has been one of the very few parts of the world where real estate prices haven't been on fire. Nationwide, commercial and residential prices are still half of what they were in 1991.
But in 2006, Japanese land prices rose for the first time in 16 years. Plus, Tokyo office vacancies fell to 2.87% in January, the lowest monthly level in at least six years. And investors have been bidding up the shares of major real estate companies.
This renewed activity is spilling over into other areas, too. According to just-released statistics from the Bank of Japan, the value of financial assets held by Japanese households at the end of December hit a record 1.541 quadrillion yen (US$13.053 trillion).
It seems as though the Japanese are finally gaining confidence in their country's prospects. They're starting to pull their money out of the bank and from under their mattresses, and invest it in stocks and bonds — the balance of cash and bank deposits held by Japanese households declined by 0.5% from a year earlier.
I can't blame them for showing interest in their domestic stock market. After all, the economy looks like it's waking up, yet Japanese stock prices are still 60% below their 1989 peak.
In fact, with a price-to-cash-earnings ratio of 8.5 and a price-to-book ratio of 1.9, Japan is the least expensive major equity market in the world!
As the other editors have shown you today, there are plenty more juicy bargains overseas. It's truly a great time to be an investor with a global perspective!
Best wishes,
By Martin Weiss
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