Dear Strategic Investment Reader,

My first car was a Chrysler.

My dad, a mechanic for over 40 years, hated my choice.

He told me “You’re just going to throw good money after bad on that piece of junk! Sell it now, while you have a chance”. Three months later, the transmission was completely shot. My dad looked at it and told me that the engine would be next.

He was right. This $800 car suddenly morphed into a $3,800 proposition.

Why do I bring up this story? Because it speaks volumes for what’s happening all over the world right now.


Governments everywhere are throwing good money after bad by bailing out their very own “Chryslers”. (Hell, the US even bought Chrysler.)

And the EU has a whole slew of “Chryslers” to deal with. Portugal, Italy, Ireland, Greece, and Spain. Iceland didn’t help, either.

If you think Greece’s $146 billion bailout was a lot, consider the following…

  • A similar bailout of Portugal would cost $171 billion
  • A similar bailout of Spain would cost $660 billion
  • A similar bailout of Italy would cost $840 billion

We have to be honest with the situation at hand. The EU is struggling to bailout Greece. Maybe it has enough money to bailout Portugal. But gathering the $1.5 trillion necessary to bailout both Italy and Spain will prove to be too much for the fragile union.

Will the US bailout the EU? Or will the EU simply collapse? Those are big questions we simply don’t know the answer to. I’d be shocked to see the US bailout the EU. But stranger things have happened.

The EU is in quite the predicament. And there’s no easy answer in sight.

My biggest concern about what’s happening overseas is how it will affect our Strategic Investment recommendations.

So far, it’s had little effect. Most of that is due to how we’ve positioned our portfolio.

Throughout the past few months, James and I have done a lot of hard research, trying to determine where the economy will go and how we can best profit from it.
We’ve talked about many outcomes. And we’ve hedged our portfolio perfectly to capitalize on each of them.

First is China. This past August, James wrote the following about China…

Far from contributing a solution, China’s stimulus program is aggravating the underlying problem. It is adding supply to a world plagued by excess capacity and collapsing demand.

At that time, he recommended the “spread of the decade”, shorting China and going long Brazil.

Since then, it has worked nearly perfect. We are down about 3% on our short on the iShares China FTSE/XINHUA 25 ETF (FXI) and up 25% on the iShares MCSI Brazil ETF (EWZ).

Even today, economists raised Brazil’s GDP growth expectation for the year from 6% to 6.06%. This will naturally boost all of our Brazilian positions. So far, these positions have done remarkably well. Itau Unibanco (ITUB) is up 35.5%, Petroleo Brasileiro (PBR) is up 40%, Brasil Foods (BRFS) is up 0.8%, and CCR Rodovias (CCR03.SA) is up 26.9%.

The only company James and I aren’t too happy with in the portfolio is Money4Gold. Despite announcing phenomenal results, the position is down about 50%.
At this point, the company is either a tremendous buying opportunity or a dead end. I’ll be contacting the company this week to try and find out. We’ll keep you updated.

Until next week,

Charles Delvalle
Associate Editor
Strategic Investment

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