The New Switzerland?

Addison Wiggin – May 24, 2011

  • Pre-emerging market: First-person insights from "The Switzerland of Southeast Asia"
  • The breakthrough that could make Lipitor's $5 billion in sales look like chump change
  • Gold sets record in another major currency… Silver Eagle sales on pace for third-best month
  • Parthenon not for sale, but these other Greek assets are…
  • Passport questionnaires… a mind pretzel's aftertaste… and "Wiggin" as a mistake… all in a motley mailbag

   At this time last week, we climbed out of our packed minibus to look at a floating restaurant and fish farm on a tributary of the Mekong River:

Your sweaty 5 Min. correspondent removed from view to protect the innocent

It was somewhere in the vicinity of 90 degrees Fahrenheit with 90% humidity. We were heading south toward Vientiane, Laos, after having visited one of the country's newest hydroelectric plants, the Nam Mang 3.

   "This is the beginning of a process that could end up with 10 or 15 companies listed on the market in the next few years," says our friend Doug Clayton, the founder of Leopard Capital, whose raison d'etre is unearthing opportunities in "frontier markets" like this one.

Doug was ruminating over the firm's pre-IPO investment in the first of two companies listed on the newly minted Lao stock exchange. One is a bank, Banque Pour le Commerce Exterieur Lao. The other is a power company, EDL-Generation Co.

   Leopard plowed $2.6 million into EDL, good for a 2.32% stake. Laos stands to become "a major exporter of hydropower in an energy-hungry neighborhood," according to The Wall Street Journal.

"Thailand, Vietnam and China are ravenous for new sources of power to fuel their economies, and Laos, with its network of fast-flowing rivers, is viewed by some economists as having the capacity to become a 'hydropower battery' for this chunk of Southeast Asia."

As a landlocked country, hosting a sizeable upstream portion of the Mekong River, we heard many locals refer to Laos with the hopeful moniker "the Switzerland of Southeast Asia": neutral, exporters of energy and big dreams of a strong financial sector. With hydro alone, they're looking to increase megawatt production from 1,000 today to what they believe is a potential 23,000 down the road.

Thailand especially is banking on Laos for hydropower now that environmental activists have made it nearly impossible to open new coal-fired plants. A private Thai power firm bought the biggest single stake in EDL, 9.35% — just to ensure a steady supply. A single foreign buyer can own no more than 10% of the firm's shares at any one time.

"This company," Doug says of EDL, "is one of the government's crown jewels and should deliver solid returns."

   "Laos has attractive hydropower," Mr. Clayton continues, but there are also untapped "mining, forestry, agricultural and tourism resources." Stepping back a bit further, he suggests the seeds they're helping to sow will bear strong fruit. "Laos has the youngest population in Southeast Asia; the average age is just 20, so this society can evolve rapidly."

Indeed, starting from such a position, and with virtually no competition for investment pricing, umn, the sky's the limit. The risks run out of in front of you while you're trundling down the road in a minibus. Subsistence farming still accounts for about half Lao GDP.

And while the government is still "nominally" communist — vestiges of the defunct Soviet era abound — "foreign investment rules have been streamlined and liberalized. For example, they now let foreigners lease land for 99 years, and offer faster investment approvals and better tax breaks.
"Foreign investors can now own 100% of an 'approved' business."

   It's likely to be a long row to hoe. The Lao exchange is down 27 points today, following its 7-point burner yesterday. This is clearly a market where first-mover advantage is a plus.

   In the U.S., the stock market is recovering a modicum of yesterday's losses. As we write, the Dow has inched its way back above 12,400.

But nearly every sector took a beating yesterday.

Abbott Labs dodged a bullet when an FDA panel decided to let Abbott continue marketing its blockbuster Trilipix for use with other cholesterol-lowering drugs.
Even so, the Amex Pharmaceutical Index, which has defied the past month's sell-off, moved in tandem with the broad market.

   "Measured by sales, Lipitor is the most successful drug in history," says Patrick Cox, examining that enormously lucrative frontier.

"Last year, Pfizer sold over $5 billion of Lipitor." The patents expire this year — not good for Pfizer, since Lipitor accounts for 15% of its total revenues.

As always, Patrick is on the hunt for the next big thing… the kind discovered by the tiny companies that don't make headlines until the early investors make the big money. When Patrick encountered one possibility recently, he was skeptical. "The company was saying, essentially, that it had found a compound that is far more effective than Lipitor or the other statins while being safer and cheaper.

"That, my friends, is the holy grail of modern medicine so many scientists are seeking."

And it has the potential to treat all the diseases of aging, not just cardiovascular disease. "This will not only make you healthier and wealthier," says Patrick, "it will have an impact on the U.S. and world economies. I don't know how soon the biggest impacts will arrive, but it's going to happen unless something completely unexpected prevents it."

As always, the biggest rewards go to those who get in earliest. To help you get started, we're giving you a significant break on membership in Patrick's premium advisory, Breakthrough Technology Alertbut only now though Memorial Day.

   Gold is adding to yesterday's modest gains. At last check, the spot price was $1,525. Silver has moved up more than 3%, to $36.34.

"Many are thinking this is going to be another typical summer where precious metals prices are weak," says GoldMoney's James Turk, "but it doesn't always happen that way."

With a Greek default on the horizon, James says we might be in for a replay of 1982, when Mexico defaulted. "The extraordinary rally in the summer of 1982," he tells radio host Eric King, "began in the second week of June, and by the first week of September, gold had risen 50%. That's a 50% move in less than three months!"

No guarantees of an exact repeat, of course. But that's one more brick in our wall of supporting evidence that it's not too late to load up and take a ride with gold.

In the short term, however, expect some volatility. Options expiration is tomorrow.

   After reaching a record in euros yesterday, gold is reaching a record in sterling today — 944 pounds.

   With a week remaining in May, sales of U.S. Silver Eagles this month have already surpassed the totals for April and March. The total as of this morning — 2,896,500.

Should that pace keep up the rest of the month, May would bring the U.S. Mint its third-highest month of Silver Eagle sales in the 25-year history of the program — exceeded only by January 2011 and November 2010.

Special note for collectors: Our friends at First Federal have secured a supply of "Early Release" MS70 Silver Eagles. Previous issues of these coins sell for as much as $5,690. Grab some of this year's edition now. Full disclosure: We may be compensated if you buy. And keep an eye on your inbox today for a special notice about a new issue of Chinese Silver Pandas, reserved exclusively for Agora Financial readers.

   Oil and copper are both rallying more than 1.5% today after Goldman Sachs reversed its "sell commodities" call.

On April 11, Goldman announced the "CCCP trade" was off — recommending the sale of crude, copper, cotton and platinum.

The CRB commodity index fell 8% between then and now… and Goldman is calling an end to the correction, recommending crude, copper and zinc.

At last check, a barrel of West Texas Intermediate was only 35 cents away from $100… while a pound of copper fetches $4.04. We marvel at the fees Goldman must rake in from making these calls…

   Greece's government has signed off on a plan to sell state-owned assets to try to shore up its balance sheet. Contrary to our snarky speculation yesterday, the Parthenon is not included, but these are…

  • A stake in Hellenic Telecommunications Organization
  • A stake in Public Power Corp.
  • A stake in Hellenic Postbank
  • 75% stakes in two ports, Piraeus and Thessaloniki.

Total value: Just under $3 billion. On top of $8.4 billion in budget cuts approved yesterday, that covers 7.26% of the $157 billion bailout Greece got last year.

Heh… in the credit default swap market, traders upped Greece's five-year probability of default from 68% yesterday to over 70% today.

The Oracle continues to send her prophecy. Mssrs. Geithner and Bernanke heed her call.

   Still, all the Greece-related fears that made currency traders pile into dollars yesterday have faded for now. The dollar index has retreated below 76, and the euro has firmed to $1.408.

   New home sales perked up in April, according to the Commerce Department. They're up 7.3% from the previous month… but they're down 23% from figures a year ago, which were already dismal.

   So what happens when you gather a bunch of do-gooders with no business experience… and assign them a major project?

You get a public monument covering eight acres… with no restrooms.

Fountains at the Sept. 11 memorial: A place for quiet reflection, or one more reminder you need to go?

The memorial at Ground Zero in New York is set to open less than four months from now, on the 10th anniversary of the Sept. 11 attacks.

However… the designers omitted, and the overseers of the project overlooked, the notion that actual people might visit the site and might need "public accommodations."

The nearest restrooms are located at a nearby department store, which anticipates hiring extra staff to help manage the crowd of noncustomers. Seriously.

"Visitors will be provided with information to help plan their visit, including being advised that bathrooms will not be accessible on the site," according to a flunky for Mayor Michael Bloomberg — who does have business experience, but apparently was too busy regulating New Yorkers' intake of sugar and salt to notice this problem.

The museum accompanying the memorial will have restrooms… but that building won't open for another year. "It was absolutely critical that we open the Sept. 11 memorial for the 10-year anniversary," says memorial foundation board member Julie Menin "and that commitment is being met."

Even at the cost of a few bladders…

   "Just a quick note for your heads-up on pending passport requirements," a reader writes. "Mine had expired three years earlier and I was able to renew it.

"Glenn Beck must read The 5. A few days after you first mentioned the new form, Beck did a one-hour show on it and how it would be impossible to fill it in at all… let alone in a week or two. And they say 45 minutes.

"The new form has not taken affect. I went to a company, Visa Express, which for $49 walks it through and watches it — the best money I have ever spent. One week and I have my new 10-year passport in hand.

"So tell all your readers to stop what they are doing and get it before the new law and other capital restraints take over our lives. It is better to have it and not need it than to need it and not have it."

The 5: After the torrent of bad publicity that came on the final day of the public comment period, the State Department is mulling over its next step. We like to think you had a hand in their pause.

Now, according to the trade publication Travel Weekly, "the bureau will review the comments, make any necessary revisions to the questionnaire and resubmit any changes to the OMB for further review, triggering another solicitation for public comments."

If true, that would buy applicants a bit more time. And give you another chance to let 'em have it.

En garde.

   "Reading your newsletter is like a breath of fresh air and some sunshine every morning," a reader writes. "Keep up the great work.

"And oh, by the way, pass me another mind pretzel please, and put some spicy mustard on it. I'll wash it down with 0.5L of my favorite beer."

   "According to what the confused reader said Monday," writes a reader still chewing on yesterday's pretzel, "a policy of libertarianism is anti-growth! Actually, I think the only thing that will not grow in a libertarian society is government.

"Did this reader graduate from a government school, or is s/he still trying? I haven't seen or heard of a thought so bizarre since the loony preacher that was calling for the Rapture last Saturday."

The 5: Did you even get that much out of it? Do libertarians have policies? I thought that was part of the point… not to…

   "Unrelated to libertarianism," another reader adds, "the writer may have a point about investing out and beyond, in light of your item about the increasing abilities of robots.

"While it makes no sense in terms of time, weight and the gravity needed to send humans into outer space, it might make sense to send robots out there, particularly if they have a von Neumann-type replicating feature. Why? How about mining asteroids for rare earths?

"Of course, it all changes if we can build an earth-to-orbit elevator out of graphene. So keep me informed about companies that may be trending in this direction."

   "I wouldn't dream of going to bed without first reading your 5 Min. Forecast," writes a reader in the U.K. "It's by far the most useful poop sheet available, and although it may make me sound a bit of an idiot, I am bound to admit that I am entirely hooked on it.

"So much so, in fact, that a good friend has suggested, in all seriousness, that I submit to a blood test to determine if I have very long-chain fatty acids, because he suspects that I might have idiopathic Addison's disease. I'll let you know.

"Meanwhile, permit me to point out one minor error, which seems to repeat itself relentlessly. The word 'Wiggin' is spelled not W-I-G-G-I-N, but rather W-I-G-A-N. You might want to get your publisher to correct it. Apart from that, you are ALWAYS on the ball."

The 5: Family lore suggests Thomas Wiggin, who founded Stratham, N.H. (the town in which I was raised), in 1630, was a captain in Her Majesty's Royal Navy and hailed from Wigan. I don't know much about the place myself, other than they are reputed to make good pies, have a kick-ass union side in rugby… and on Saturday, they narrowly missed being relegated this year from Barclays Premier League.

And, yes, please let us know how your blood tests turn out. Maybe there's a genetic testing kit we can backend to our newsletter business.

   "Now I have to pay all those parking tickets," says a reader disappointed the world did not end last Saturday. "End of the world? Bah — HUMBUG. Now I have to wait for December 2012 — maybe the Mayans will get it right."

The 5: Well, we see the guy who was convinced the end would come last Saturday has recalibrated and concluded the end is actually coming Oct. 21. So if you're confident you can stretch out those tickets for five more months…

Regards,

Addison Wiggin
The 5 Min. Forecast

P.S. Bruce Robertson, who works tirelessly to make a success of every year's Agora Financial Investment Symposium, informs us only 15 seats remain available for this year's event, July 26-29, in Vancouver.

Once those seats are spoken for, we'll put people on a wait list. In a typical year, we can accommodate most of those people, thanks to the odd cancellation. But this year, we're selling out a month earlier than usual. That means try as we might, there simply may not be enough room for everyone. Best to assure your spot right now.

rspertzel

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