Editor’s note: We’ll be rebranding to Stansberry Pacific Research on November 26. This won’t impact you as a subscriber… but look for our new website branding on that date. If you have any questions about the upcoming rebrand, please don’t hesitate to send them via email at: feedback@stansberrychurchouse.com.

Investing ahead of transformational events – in companies or countries – can be enormously profitable.

If you had bought shares of Apple as it launched the iPhone in June 2007, you’d have made five times your money in five years.

Or… if in the autumn of 1995, you’d bought a basket of shares in the newly launched Russian stock index – not long after the end of the Soviet Union – you’d have been up nearly 470 percent in less than two years.

If you had bought Amazon shares as the company moved into the cloud in August 2006, you’d be up more than 7,000 percent since then.

And if you had bought China’s Geely Automobile in November 2015 as it started to focus on electric vehicles, you’d have been up 600 percent over the next three years.

Of course, a flashing green “BUY NOW” light didn’t accompany these transformational events. “Transformational” is easy to define in hindsight. It’s never obvious at the time.

Where I was last week

I spent last week in a country that could be at the cusp of a similar kind of transformation. It’s far off the radar of most investors… but so was the iPhone in 2007.

Uzbekistan is a California-sized country in Central Asia with 33 million people and a gross domestic product (GDP) that’s 2 percent that of California. Few people outside the region have ever heard of it. Those who have would tend to refer to it as one of the “Stans” that used to be part of the Soviet Union.

Until recently, Uzbekistan – or rather, the authoritarian strongman who ran it until two years ago, Islam Karimov – liked it that way. The country wasn’t North Korea, but it was an aggressive loner, by choice, on the global stage.

For years it flirted with pariah status for being the government that was one of the worst human rights abusers in the world (joined by, among others, North Korea and Somalia). Until recently, it forced children to work in its cotton fields, a practice denounced as slavery by the UN.

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The Financial Times called his regime “one of the world’s most repressive dictatorships, with… a gruesome record of torturing its opponents.”

Contact with the outside world was minimal – and foreign investment was virtually nonexistent. Uzbekistan got a free pass from much of the west, though, because it helped the U.S. and its allies with the war in Afghanistan.

(I first visited Uzbekistan in 1996. It was grey and felt like a big Intourist hotel – Soviet-style service and hospitality that was designed to make you feel unwelcome).

In September 2016, after 27 years as the country’s first (and only) post-Soviet leader, Karimov passed away (I wrote about it here).

Karimov’s prime minister, Shavkat Mirziyoyev, took over. It seemed likely that Mirziyoyev, who’d grown up under the Soviet Union and spent his career advancing Karimov’s agenda, would serve up more of the same: aggressive xenophobia, brutality, retrograde policies and ideas focused on keeping Uzbekistan as isolated as possible.

The iPhone moment?

Instead, Mirziyoyev has taken Uzbekistan in a completely different direction. He’s launched a comprehensive program to reform the economy, increase transparency in government, be friendlier with the neighbours, improve the business environment, reduce corruption and promote investment. He’s also improved labour regulations in the cotton fields.

One of the biggest changes so far has been currency regulation liberalisation. A bit more than a year ago, the government removed the official peg to the dollar – which meant that overnight the currency devalued by about 50 percent against the U.S. dollar.

That got rid of one of the biggest inefficiencies in the economy. It also removed a system of privileges that benefited some industries and businesses, at the expense of the rest of the population.

Every person I spoke with last week in Uzbekistan – from company directors to government ministers to businessmen to taxi drivers – was enthusiastic about the changes that Mirziyoyev has brought, and were hopeful that they’ll continue.

For example, the government implemented a web portal where citizens can lodge complaints about government services or other community issues that’s very popular. (The bar is so low in Uzbekistan that making it OK to criticise the government is a big deal.)

So maybe it’s not so surprising that the people I spoke with are upbeat about what’s going on. And the changes going on there are attracting attention. U.S. Commerce Secretary Wilbur Ross visited last month, to promote business and investment between the two countries.

The American Chamber of Commerce in Tashkent told me that they’ve had a steady flow of multinationals come through to explore what they can do in Uzbekistan. One of the bigger traded companies I visited said they’ve been receiving visits from a few investors and potential partners every week – up from a few every quarter just a year or so ago.

And literally the day after I posted a video to my International Capitalist subscribers from Registan Square – the extraordinary heart of the ancient city of Samarkand, two hours in a fast train from Tashkent – the Financial Times released a story touting the town.

A long way to go

Uzbekistan is at the far end of the adventuresome spectrum of frontier markets. And pre-frontier and frontier markets are littered with well-intentioned reformers that start strong… but give up in the face of pressure from entrenched interests, oligarchs, bureaucracy, inertia and their own personal interests.

Change is difficult in the best of times. It’s even more difficult when it entails a tectonic shift in mentality that will take at least a generation to work through the system.

What’s more, the impetus for change is from the top. If the president decides that he’s had enough, reform will stop. (In the first few years of his first term as Russian president in the early 2000s, Vladimir Putin was a blazing reformer. Then the spark went out… and Russia has muddled through 15 years of stagnation.)

But there is a momentum in Uzbekistan that is hard to ignore. And there are a lot of easy things the government can do to dramatically improve things.

If we waited for the reform process to really get underway… if we waited for the iPhone to prove itself… then the opportunity would be a lot less interesting because it would have already played itself out. Uzbekistan is like a time warp into 25 years ago – and a lot of its assets are priced accordingly.

So if the country isn’t on your radar, it should be.

Good investing,

Kim Iskyan
Publisher, Stansberry Churchouse Research

P.S. One of the biggest mistakes you can make as an investor today is to ignore the potential of frontier markets.

Investing in opportunities like this, when done right, can be highly profitable. In Strategic Wealth Confidential, we uncover opportunities in some of the most-disliked, unloved and ignored markets in the world… and with them, the chance for life-changing gains. Find out more here.

Economic crisis is in the air… whether it’s Italy or Turkey or Argentina (again).

Crisis creates opportunity. But the first part of that aphorism – the “crisis” part – is what you want to avoid as an investor.

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In a book published last year, The Rise and Fall of Nations: Forces of Change in the Post-Crisis World, Ruchir Sharma – head of emerging markets for global bank and funds manager Morgan Stanley’s asset management business – talks about a number of indicators to assess the health of an economy.

These aren’t “tipping into crisis” indicators… but signposts of the long-term trajectory of an economy.

These are some of the indicators that Sharma looks at…

1. Demographics

Two things drive economic growth – population growth (whether it’s natural or through immigration), and higher productivity (that is, how much a person, business or country produces within a certain period).

If a country’s population isn’t growing, its economy will have difficulties growing. By this measure, Africa is in a great place, and parts of Asia are poised to benefit from growing populations. Japan, on the other hand, is the poster child of terrible demographics. And for much of the developed world – with the important exception (for now) of the U.S. – the demographic destiny isn’t a happy one.

2. Billionaire lists

Over the long term, Sharma says, socioeconomic inequality tends to result in political revolt. To gauge this, he looks at billionaire wealth (for example, from those lists in Forbes magazine) as a percentage of GDP; the share of billionaire wealth that’s inherited; and wealth that comes from corrupt industries. If too many people hold too much of an economy’s wealth, there will eventually be a redistribution – and the rich people won’t like it.

A more common way to look at this is using the Gini coefficient, which measures the level of income inequality within a country. By this measure, South Africa and Namibia are the most unequal economies in the world… and Finland and Romania are among the most equal.

3. Cover story curse

The mythology of cover curses – for sports stars, the price of oil, stock markets and much else – is a reflection of the mainstream lagging reality.

As soon as the hot stock, market or country hits the cover of Forbes magazine, it’s already crested – and is on its way down. (Or with the image below, it’s on its way back up.) As my former colleague Peter Churchouse says, “if it’s in the press, it’s in the price”. If you see that hot stock or market on the cover – that’s the time to sell.

4. Inflation

In recent years, the fear of deflation – that is, prices going down – has haunted central bank policy makers around the world (Japan, again, is a trend leader). Sharma advises keeping a close watch on asset price inflation because of the tight link between asset bubbles and recession.

If asset prices – like stocks or real estate – move up too much too fast, a bust may be on its way.

5. Debt

You might think that the 2008-2009 global economic crisis delivered a crowbar-to-the-head message about debt: Too much debt is bad. But since then, overall levels of debt haven’t declined. Total lending is up by more than 40 percent since then.

Markets where private debt rises a lot faster than the economy as a whole are particularly worth keeping a close eye on. And in particular (see: Argentina, now) beware of markets that have borrowed a lot in hard currency, only to see the local currency depreciate to the heavens are especially dangerous.

6. The “second city” rule

If the population of the capital of a country is far bigger than the second-largest city (for example, more than three times bigger), Sharma looks for a high risk of rural rebellion.

For example: Bangkok, Thailand’s capital, has 8.3 million people. The country’s second-biggest city, Samut Prakan, has just under 400,000. And… Thailand has a long and rich history of city-vs-country divisions.

But it’s not always the case. The Philippines, for instance, has 24 million people living it its capital of Metro Manila. Its second largest city, Cebu, has 2.8 million inhabitants. Both are growing fast and have a booming middle class.

7. Domestic capital flows

If local capital leaves the country, it’s bad news. After all, who knows better than people at home whether their currency is in trouble, and whether they can earn a reasonable return that reflects the risk of holding the currency.

Foreign capital – “hot money” – is often pointed to as the cause of currency crises, but frequently it’s local money that is the first down the spillway.

I’ve seen this in a number of markets… most memorably in 1998, when Russian investors were selling everything that wasn’t nailed down to ditch the ruble. Meanwhile, foreigners were gleefully lining up to buy ruble-denominated sovereign bonds, drawn in by sky-high yields. Then the ruble collapsed and the Russian government defaulted on its debt. Local investors may have missed out on a bit of yield. But they weren’t blown up when everything went to pieces

We recently wrote about corollary to this rule: Where are rich people moving from… and to? Maybe they’re leaving their home in search of a better lifestyle… or lower taxes… or more opportunity. Whatever the reason, it’s not a good sign when a country is hemorrhaging millionaires. (Last year, China, India and Turkey saw the largest number of high net-worth individuals leaving for good.)

8. Stale leaders

Sharma shows that economic reform – for many emerging markets, a critical building block of growth – usually happens during a leader’s first term. After that, it probably won’t happen at all. Leaders lose the impetus to change, and grow content with the status quo. That’s especially true (in more corrupt countries in particular) if the status quo entails state-sponsored stealing by the head of government to enrich himself.

For example… during the first few years of his first term, Russian President Vladimir Putin was hailed as a reformist hero. He brought about big and important changes in regulations and policies regarding land, fiscal issues, the judiciary, and pensions. And then, after a few years, his interest in changing things ended, as Sharma suggests.

9. Good spending vs bad spending

An investment bubble that results in acres of empty office buildings – which don’t produce anything or help anyone – is an example of “bad” spending. But if investors, or the government, go overboard on spending on assets that will eventually boost productivity (like technology, research or manufacturing), it will be a lot better for the long-term health of the economy.

No country is going to fail on all these measures – just like no economy is going to sail through. But they are important to keep in mind as you look at market opportunities around the world. If a country fails more measures than it passes, chances are that it’s going to face problems soon.

Good investing,

Kim Iskyan
Publisher, Stansberry Churchouse Research

P.S. Later this week I’m going to be visiting Turkey, which is in the eye of the storm of an economic crisis right now. I’ve seen a lot of financial crises in my professional life… and I also know that you can’t get a real sense of what’s happening – and where opportunities are – unless you see it in person. I’m excited to go, and to tell you what I find.

If you have only a nodding acquaintance with the headlines out of the Caspian region, and you fancy yourself as a true contrarian, you might be tempted by Turkey.

First: There’s the blazing headline (top story on the Financial Times app): “ECB concerns grow over EU banks’ Turkey exposure as lira slides”. For contrarians, that’s like honey for a bee: “People think things are about to collapse? Great! How quickly can I invest?”

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What’s been going on

Thanks to its location straddling eastern Europe and western Asia, Turkey has long been known as the “gateway to the Middle East”. Turkey is a member of NATO and has long been an ally of the U.S. and Israel. As a result, it’s suffered heavy criticism from neighbouring Muslim countries (Turkey itself is 98 percent Muslim). But Turkey’s relationship with the West has been deteriorating.

The country’s president, Recep Tayyip Erdogan, has been in power since 2002. His party, the Justice and Development Party (AKP) was initially viewed as a bridge between Islam and democracy.

But Erdogan has since focused on obtaining more and more power. In June, he was re-elected (in an election that was tightly controlled so he was sure to win) president for another five years and with expanded powers. Now Erdogan has the right to dissolve the parliament, rule by decree and have greater control over the judiciary.

Erdogan hasn’t had an easy time – due in part to his own policies. “Turkey is in the midst of a currency crisis largely of its own making,” Bloomberg said (back in May), stemming in part from policies resulting from Erdogan’s “long-held, very unorthodox belief that high interest rates cause rather than curb inflation”. Last month, he installed in son-in-law as the new finance minister, a post he’s wholly unqualified for. Erdogan blames external forces rather than his own bad policies.

Meanwhile, the country’s relationship with Europe and the U.S. has turned sour. In the latest chapter, Turkey detained a U.S. pastor for alleged espionage… and the U.S. has imposed financial sanctions against Turkey’s minister of justice and the minister of interior for participating in the detention of the pastor. And the U.S. is weighing imposing more sanctions against Turkey.

Markets vote “no”

That all sounds bad. So it’s not a surprise that the stock market is hitting 10-year lows… the biggest New York listed ETF (ticker: TUR) is down 39 percent over the past three years, and 42 percent in 2018 so far. Turkey’s stock market trades at a CAPE (or Cyclically Adjust Price to Earnings ratio, which measures stock prices over a ten year period, adjusted for inflation) of 9.4… low enough to make it one of the world’s cheapest markets (the S&P 500 is at a CAPE of 30.2… Singapore is at 13.4… and Hong Kong is at 16.6, by comparison).

If a currency is the closest thing that markets have to a real-time vote about the prospects of a country, Turkey is a landslide loser right now. The lira has fallen 60 percent against the U.S. dollar in 2018 so far. And Turkey’s 10-year bond recently fell to a record low.

Buy when things are bad, bad, bad – right?

Things are bad in Turkey. And, from the surface, it’s a contrarian’s dream. All that bad news… all that selling… it can’t be that bad. And… the law of mean reversion means that Turkey is going to bounce back soon. Anything that’s down that much is going to come back, right?

At its core, defying the conventional wisdom – the know-it-all on CNBC, the taxi driver who passes on his hot stock tip – is what contrarian investing is all about. It’s defying everyone else and conquering your gut instinct, which is telling you to run in the opposite direction.

And in particular, it’s the belief that when everything seems pitch-black, when there’s “blood on the streets,” and when everyone else is selling… that’s the time to buy, because things can’t get any worse. And then they get just a bit better, and the brave investor makes a killing.

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But sometimes, bad is just… bad

But some investors take contrarian investing to an extreme. They interpret any bad news, or market correction, or stock decline, or literal blood on the streets, as good news in disguise.

That kind of attitude – knee-jerk contrarianism – is a great way to lose a lot of money, because sometimes – and maybe even most of the time – the boring, plain, they’re-all-saying-it conventional wisdom is, in fact, correct.

And I think that that’s the case with Turkey right now.

Yes, there may be a bounce. Erdogan might do something that isn’t openly antagonistic. Beaten-down Turkcell (New York ticker TKC) might catch a bid. But at best, six months from now things are going to be as bad, if not worse.

Erdogan isn’t going to be president of Turkey forever. But for investors, a presidential term may feel like forever. And Erdogan’s macroeconomic policies, and geopolitical positioning, suggest that will be like purse-snatcher mace to investors tempted to invest in Turkey. Chances are that Turkey is on the way to being a value trap like Russia… if it isn’t already.

Will Turkey get worse in the short term? I don’t know. But I do know that as soon as politicians or regulators suggest that the market is “wrong” and that everything is all right (I call this the “Yeltsin rule”… I wrote about it here), things will only get worse.

And the Turkish finance ministry did just this when they said yesterday (according to the Financial Times), “Contrary to the speculative statements being made in the market about our banks and our companies, our regulatory institutions do not see a problem posed by the exchange rate or liquidity risks.”

Sometimes contrarian investing is a great idea. Other times… it’s a terrible one.

Good investing,

Kim Iskyan
Publisher, Stansberry Churchouse Research

P.S. Contrarian investing, when done right with the help of deep familiarity with the markets and thoughtful research, can be profitable despite the risks. But investing in expanding economies, well-established market trends, and profitable companies that don’t have to worry what the government is going to do tomorrow is an even better formula for earning meaningful – sometimes life-changing – returns from stocks.

My colleague, Brian, who’s been analysing the fastest-growing markets in the world for the last 19 years, just put the finishing touches on a special report on three companies he says are riding the crest of the world’s hottest industries… and on track to deliver deliver triple digit returns in the next 12 to 18 months. See more here.

As an investor, it’s reassuring to know that there’s always – somewhere – a bull market going on.

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For example, when the Asian financial crisis slammed Southeast Asia’s economies in 1997 – with some markets losing 80 percent of their value in 12 months – the Dow Jones Industrial Average soared 24 percent over the next year.

And when the S&P 500 dropped 21 percent and the Nasdaq collapsed 71 during the dot-com bust, China’s Shanghai Composite Index was a safe haven, delivering a 6 percent gain.

More recently, with major Asian markets down between 5 percent and 14 percent since the start of the year on growing trade war tensions, the Russian stock index is up a respectable 11 percent (maybe even partly thanks to the “World Cup Host Effect,” which we wrote about here.

Given perfect capital mobility, you could hop from one market to the next, avoiding bear markets and finding bull markets all across the world.

For the smart money, being able to do this is an enormous advantage.

And thanks to the growing popularity and increasing variety of exchange-traded funds (ETFs), country-specific asset reallocation is at the fingertips of everyday investors.

An ETF for every country

ETFs are financial products that offer the benefits of pooled investing. ETFs are great tools to diversify your portfolio in a financial instrument that is professionally managed and regulated.

ETFs, by nature, are traded on a stock exchange and can be bought or sold just like any regular listed-company share.

As for their stock holdings, an ETF often tracks a benchmark – an existing index like the S&P 500 Index or the MSCI China Index – and is designed to track its performance as closely as possible.

The first ETF that was ever offered was the SPDR S&P 500 ETF (NYSE; ticker: SPY), which was launched in January 1993. It’s designed to provide investment results that, before expenses, generally correspond to the price and yield performance of the S&P 500 Index.

Because of the convenience it offered to ordinary investors and fund managers, SPY became enormously popular. Today, it holds more than US$250 billion in assets under management.

Since then, hundreds of ETFs have been created on exchanges all around the world. As of the end of 2017, the total assets held by ETFs was an astonishing US$5 trillion. You can invest in almost any asset with an ETF. And moreover, of the 60 stock exchanges around the world, there are now 44 countries with ETFs.

These markets have ETFs that are traded in New York, which makes them accessible to investors who can buy U.S.-listed shares. Other markets across the world have listed country ETFs as well.

But if you’re looking to mimic the actual stock market movement in countries through ETFs, buyer beware.

This is why country ETFs underperform

One common misconception about country ETFs is that they perform largely in line with their respective stock exchange indices. For example, the SPY should perform similarly to the S&P 500 Index.

But a closer look at many of the largest country ETFs tells a different story.

The table above shows the one-year and five-year performance of major listed country ETFs relative to the stock exchange index of the country they look to replicate.

Out of the 10 country ETFs shown above, only one of them has outperformed its underlying stock market. That’s the iShares China Large-Cap ETF (NYSE; ticker: FXI).

The other nine ETFs underperformed their underlying markets, with many of them grossly underperforming in the long term.

The iShares MSCI Japan ETF (NYSE; ticker: EWJ), for instance, underperformed the Nikkei 225 Index by an enormous 18.4 percentage points over the last five years.

Looking at India, one of the world’s best-performing markets in recent years, the Invesco India ETF (NYSE; ticker: PIN) underperformed the Nifty 50 Index by 16.3 percentage points.

There are many reasons why country ETFs underperform their underlying stock markets.

One of the biggest is that country ETFs often follow benchmarks that differ in composition and weighting from the stock market indices themselves.

For example, the Invesco India ETF tracks the Indus India Index as its benchmark instead of the Nifty 50 Index. And while the Indus India Index is designed to represent the Indian equity markets as a whole, with 50 Indian stocks spread among various sectors, they aren’t the same as those that make up the Nifty 50 Index.

The two largest holdings of the Invesco India ETF are conglomerate Reliance Industries (10 percent) and technology giant Infosys Limited (10 percent). But the two largest holdings in the Nifty 50 Index are banking stocks, HDFC Bank (9.4 percent) and HDFC Limited (7.5 percent).

Another reason country ETFs underperform is expenses. Investors have to pay fees regardless of whether the value of the ETF rises or falls. This has the effect of hurting the ETF’s performance relative to the underlying benchmark index (which carries no fees).

Most country ETFs have annual expense ratios ranging between 0.5 percent to 0.7 percent. That means even if the fund matched the index perfectly,, the performance of the fund would lag that of the index.

But as long as you’re able to identify countries that are about to experience above-average growth for a sustained period (such as Bangladesh, which we’ve written about previously here and here), the potential gains should more than offset the ongoing expenses.

Country ETFs are still safe and reliable ways to diversify from you home market and into markets experiencing significantly better growth and potential. But it’s important to consider that they can still underperform their underlying country indices over the long term. And they do have ongoing fees that will start to eat away at your capital the longer you hold them.

Good investing,

Brian Tycangco
Editor, Stansberry Churchouse Research

On June 14, the FIFA World Cup will kick off.

The World Cup is the world’s biggest single sporting event… by far.

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To get an idea of just how huge it is, consider this: The Super Bowl, which is the largest sporting event in the U.S., attracted around 114 million viewers in its record-setting year of 2015.

The 2014 FIFA World Cup Final, which saw Argentina face Germany, drew about 1 billion viewers from around the world. And that was for just one game of 64.

Given the huge masses of humanity that are focused on the World Cup – it’s enticing to examine the market implications of the tournament.

In the past we’ve looked at the relationship between big events like the Super Bowl and Olympics on stock markets. And sometimes there are correlations… but it’s important to remember that correlations between the outcomes of (say) sporting events, and markets, don’t imply causality. Just because two things happen doesn’t mean that one thing causes the other. This is particularly true because the sample size of most events is relatively small.

So today, let’s take a look at the performance of the markets of World Cup hosts – and what it could mean for this year’s host, Russia…

Host country markets before the whistle

Before one of these events, there’s a lot of excitement and anticipation. There’s also an impact on the local economy, as the country prepares to host floods of tourists – after investing potentially huge sums of money in infrastructure like stadiums and transportation. So how does that country’s stock market usually fare?

The table below shows the market returns for the host of the World Cup the year of the tournament (starting in January and up until kickoff) going back 25 years, compared to the returns of the MSCI All Country World Index (ACWI), a global stock market index.

(Of course, 25 years isn’t a lot of data… and there are lots of factors that can affect stock prices that have nothing to do with football.)

On average, the host country market has outperformed the index. The average return for the host country during the year of the World Cup was 14.9 percent, compared to 2 percent for the index.

In total, six host countries out of seven (Japan and South Korea co-hosted the World Cup in 2002) outperformed the index. For example, in 1998, France hosted the World Cup. In the lead up to the event, French shares outperformed the MSCI ACWI with a 40.7 percent return versus just 13.6 percent.

So far, Russia (the host of this year’s event) has also outperformed the index – although not by a big margin. Russian shares are up around 3 percent… compared to 1.6 percent for the MSCI ACWI index.

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So what about during the event?

As you can see in the following table, on average, the host countries only marginally outperformed the MSCI ACWI index from the day before kickoff through the final whistle (returning a loss of 0.1 percent compared to a loss of 0.7 percent for the index).

Some host countries outperformed better than others… For example, Germany returned 6.7 percent during this time, compared to 4 percent for the index. And South Africa returned 3 percent, compared to 2.1 percent.

Meanwhile, the stock markets of U.S. and France underperformed the index during their tournaments.

So the excitement of the Word Cup while it’s taking place doesn’t seem to have a significant impact on the host country. And it doesn’t last after the event is over. In our research, we found on average, the markets of host countries underperformed (returning around 0 percent) the MSCI ACWI index (which returned 1.8 percent) after the final whistle through the rest of the year.

So if a host country’s market is going to see a bump from the World Cup, it’ll likely be before the Cup even begins.

And if you think about it, it makes sense. The actual economic impact of a World Cup comes from investment in infrastructure – building stadiums and roads and trains to support the brief but intense upsurge in tourism – in a host country. That’s the real tangible effect. That’s why you’ll see the biggest outperformance in the host country leading up to the tournament.

Of course, there will be less impact on a large economy, or one that already has the infrastructure, like when the U.S. hosted in 1994 (it had a 0.4 percent loss leading up to the tournament).

So while Russia has likely seen most of its gains from hosting, it could be worth keeping an eye on the host of the next World Cup in 2022… Qatar (a country we’ve told you about before).

Good investing,

Kim Iskyan
Publisher, Stansberry Churchouse Research

P.S. Over the past 25 years, I’ve lived and travelled all over the world in search of investment opportunities… the type of opportunities that could lead to big gains. And right now, although many stock indices are at all-time highs, I’m seeing big opportunities in markets and easy-to-buy stocks that probably aren’t on your radar.

I write about investing around the globe in a supplemental e-letter, Kim’s Global Insider. I talk a lot more about global investment themes… markets around the world… where, and how, to invest internationally… what I see in Asia from Singapore (where I live)… and my boots-on-the-ground travels.

I invite you to join me on my profit-making journey around the world.

Please go here (just one click and you’re done) to automatically receive the complimentary Kim’s Global Insider.

If you’re looking to invest when the odds are in your favour… where you can make life-changing gains… then look no further than a crisis.

When asset prices collapse, it creates life-changing opportunities to buy (the right) assets on the (very) cheap.

But investing in markets or companies in crisis requires leaving what you know… overcoming your “home country bias”… and running towards the fire. (That’s part of what I do in my investment research service… I travel to off-the-radar – and big-upside – destinations around the globe. Find out more here.)

What follows are three of my favourite examples of markets in crisis that were fortune-making for savvy investors. The exciting thing is that the “before” part of each of these situations exists today – in some market or sector or company… it’s just a matter of finding it – before it becomes the “after” of the examples below.

Profiting from Spain’s “Return to Europe”

Today, it’s strange to think of Spain as a fascist dictatorship. However, from the 1930s through the 1970s, its markets and economy were largely isolated from the rest of the world. Europe effectively ended at the Pyrenees, the mountain range separating Spain and Portugal from France.

When Spain’s longtime dictator, Francisco Franco, died in November 1975, the country’s future was up in the air. For several years, civil war and chaos looked like a real possibility. (I lived in Spain at the time… and though as a pre-adolescent I didn’t realise it, the country was at a true crossroads.)

But Spain slowly evolved into a democracy. It adopted a new constitution in 1978, and the government put down a coup attempt in 1981.

The 1982 elections solidified Spain’s transition to democracy and its eventual position in the western military alliance, NATO.

In 1986, Spain joined the European Economic Community – now the European Union. (People rang in the new year, marking the official entry into the EEC, with the cry, “We’re Europeans!” I was living there then… and it made a big impression on me.) At the time, new EEC members received massive infrastructure investments in order to help lift their standard of living to be on par with the rest of the union. These funds fuelled a two-decade economic boom in Spain that only ended with the 2008-2009 global economic crisis.

Investors who saw the opportunity for enormous positive change in Spain in the 1970s could have made returns of 4,300 percent in subsequent years.

Profiting from the end of a 26-year civil war

In 1983, Sri Lanka, a small island nation south of India, entered a prolonged civil war. The conflict between the Sinhalese ethnic majority and the Tamil ethnic minority lasted 26 years. (It was one of history’s more brutal conflicts… the Tamil Tigers reportedly invented the suicide vest – and pioneered suicide bombing as a war tactic.)

The long war stunted the country’s economic growth and created political uncertainty. Suicide bombings and other terror tactics by the Tamils posed an ongoing threat to the rest of the island. This fueled a steady migration out of Sri Lanka and strongly deterred foreign investment.

Meanwhile, excessive government spending fostered high inflation and constant budget deficits (when governments spend more money than they take in). As a result, Sri Lanka’s stock market suffered low turnover and minimal foreign interest. Sentiment toward the country was overwhelmingly negative.

(In fact, to much of the rest of the world, Sri Lanka’s civil war is what they know of the country… I’ve often been asked, “Oh, are they still at war?” after I mention that I lived there for a few years.)

In 2002, Sri Lanka’s economy began to slowly improve, and the country made some progress toward political harmony. The turnaround was strong enough to trigger a sharp rally in the Sri Lankan market. In November 2005, the election of President Mahinda Rajapaksa, coupled with a strong public mandate to end the civil war, further fueled the rally.

Then the global economic crisis hit, along with the final and most ferocious chapter in Sri Lanka’s civil war, and in early 2009 the country’s stock market fell sharply.

The Sri Lankan stock market didn’t re-rate until the Tamils were definitively defeated in May 2009. The northern and eastern regions of the country – previously off-limits to investment and economic development because of the war – were gradually re-integrated into the economy, bolstering growth.

Investors who bought Sri Lankan stocks amidst negative sentiment could have made gains of 2,000 percent – though with plenty of volatility along the way.

Sugar prices rocket 45 times higher

The sugar industry experienced multiple price shocks throughout the 20th century. That’s not unusual for commodities, which tend to go through cyclical “boom and bust” periods.

Sugar boomed from 1962 to 1964, after the U.S. suspended imports of sugar from the Caribbean island of Cuba. (Socialist Fidel Castro led the Cuban Revolution that ousted President Fulgencio Batista in 1959, and the U.S. imposed a multi-decade economic blockade on the country, as part of its failed effort to undercut Castro.)

In 1964, the price of sugar started to fall. By 1966, the price had collapsed to close to a penny per pound. Finally, sugar was so cheap that demand started to rise. Then, in 1969, the U.S Food and Drug Administration banned cyclamate, a common sugar substitute, after researchers discovered it was carcinogenic. This pushed demand for sugar even higher.

Over the next four years, consumption outpaced supply, and inventories dwindled. This triggered a dramatic increase in sugar prices. Sugar hit a high of $0.64 per pound in October 1974.

Investors who got in at the 1966 low could have made just upwards of 5,000 percent through late 1974.

These types of markets…

Today, many markets are close to all-time highs. But there are plenty of assets that are in crisis… or – maybe even worse – are unloved and ignored, and as a result are trading at crisis-like levels.

Finding high-upside opportunities like these are the reason I launched International Capitalist. I look all over the world for attractive investment opportunities with the potential for big – and even life-changing – profits. And for a limited time, we’ve opened International Capitalist to new subscribers… you can learn more about it here.

Good investing,

Kim Iskyan
Publisher, Stansberry Churchouse Research