Britannia Radio

Emerging Markets’ Next Top Models

Looking for beauty in some of the world’s most out-of-the-way places

Eric Fry Reporting from Laguna Beach, California... Alisson Chornak is an Emerging Markets investor - a true boots-on-the- ground type. Before he commits to any new investment, he conducts an exhaustive top-down analysis of all relevant statistical factors. He examines websites, history books, maps and even genealogical data - all in an effort to inform his ground-level research.  Chornack's objective, according to a recent article in The New York Times, "is to find the right genetic cocktail of German and Italian ancestry, perhaps with some Russian or other Slavic blood thrown in. Such a mix...helps produce the tall, thin girls with straight hair, fair skin and light eyes that Brazil exports to the runways of New York, Milan and Paris with stunning success." Since the most alluring of these Brazilian "cocktails" become millionaire-models, the search for these rare beauties resembles a kind of gold rush. Ever since 1994, when a 13-year old girl named Gisele Bündchen, was "discovered" in Rio Grande do Sul, talent scouts have been combing the farms and schools of southern Brazil in search of the "next Giselle." (As the world's top-earning model, Giselle booked about $25 million in earnings last year). "Dilson Stein, who discovered Ms. Bündchen...called Rio Grande do Sul a treasure trove of model-worthy girls," the Times article relates. "A year before discovering Ms. Bündchen...he found 12-year-old Alessandra Ambrosio, now famous for her Victoria's Secret shoots... More than half of Brazil's models continue to be found among the tiny farms of Rio Grande do Sul, a state that has only one-twentieth of the nation's population and was colonized predominantly by Germans and Italians." During the 16 years that Giselle has progressed from a 13-year old farm girl to a 29-year old Supermodel, the Brazilian economy, itself, has progressed from a brackish economic backwater to a glistening sea of dynamism. During those 16 years, Brazil has converted its habitual government deficits into habitual surpluses. Private industries have also flourished. Let the reader decide if any relevant connection exists between the conspicuous success of Brazilian models and the notable resurgence of the Brazilian economy. But before deciding, let the reader consider the curious connection between fashion trends and macro-economic trends. Read on...

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The Daily Reckoning Presents

The Bare Realities, an Update

Eric Fry Are supermodels like Argentina's Yamila Diaz-Rahi or Brazil's Gisele Bündchen able to provide valuable investment insight? The answer may surprise you! Every winter, as arctic temperatures descend upon the Northeast,Sports Illustrated contributes a welcome dose of sunshine to our frigid landscape by releasing its infamous "swimsuit issue." Each issue contains the usual tiresome collection of impossiblybeautiful women wearing - or not wearing - exotic bikinis in exotic locales. To which your editors respond, "Ho-hum." For dispassionate financial types such as ourselves, for whom scantily clad models are but so many inadequately dressed Homo sapiens, the swimsuit issue nevertheless offers a particular allure - investment guidance. A few years back, your editors discovered an improbable connection between the nationality of the model appearing on each cover of the SI swimsuit issue and the subsequent direction of share prices on the national stock exchange of her home country. After rigorous research, we concluded, "When a bikini-clad supermodel is the first from her country to grace the cover of Sports Illustrated, her appearance kicks off a four-year bull run in the stock market of her native land." Is this indicator a mere fluke or a can't-miss barometer of global investment trends? Let the reader decide. In 2001, Sports Illustrated placed the beautiful and talented Elsa Benitez on the cover of its swimsuit issue, making her the first Mexican to claim the honor. Now that the indicator has four years under its g-string, let's check the results. Despite a very rough time for the stock market here north of the border since the early days of 2001, the Mexican bolsa has doubled since Elsa adorned the SI cover. Sure, this strong performance might seem purely coincidental. But facts are facts. Let's briefly review: In 1978, Brazil's Maria Joao became the first foreign-born supermodel to appear on the cover of SI's swimsuit issue. Four years later, her country's Bovespa index had soared an astounding 465%. Next up, in 1986, the stunning Australian model, Elle MacPherson, made her first of several cover appearances. Over the ensuing four years, the Australian Stock Exchange's 50 Leaders Index rose 75%. The swimsuit edition continued to deliver eye-pleasing results into the 1990s. In the very first year of this new decade, the bonita Spanish senorita, Judit Masco, landed on theSports Illustrated cover. Four years later, Spain's IBEX index had appreciated 21%. When the Swedish beauty Vendela Kirsebom graced the cover of the magazine in 1993, the OMX-Stockholm index rose to the occasion by appreciating 161% over the next four years.  "Kiwi model Rachel Hunter might not have lasted with Rod Stewart," we observed in our original report, "but her appearance on the 1994 cover kept SI's winning streak alive - barely. New Zealand's Top 40 Index rose a mere 6% over the next four years." Four years later, German "über-model" Heidi Klum adorned the swimsuit cover, which presaged an eye-pleasing 24% gain for the German Dax Index between 1998 and 2002. Then, in 2002, Sports Illustrated gave the nod to Argentina, birthplace of the stunning cover model, Yamila Diaz-Rahi. We admit; we were skeptical. Argentina seemed a very dicey investment proposition, given the country's travails at the time. Fresh on the heels of a wrenching currency devaluation and amidst mounting economic difficulties, Argentina did not seem like a red-hot investment destination. But Yamila's appearance in a swimsuit consisting only of silver and jade argued persuasively to the contrary. "Riches await" seemed to be the message to intrepid investors in Argentine stocks. Once again, the Argentinean stock market has delivered on Yamila's implicit promise. Over the following four years, Argentina's Merval more than tripled. Perhaps these remarkably favorable results are no mere accident. After all, as we noted in our original report, "What better way to strike patriotic fervor and self-confidence in the heart of a nation - and stimulate its economy - than by splashing one of its bathing beauties on the cover of Sports Illustrated? When the Czech supermodel Paulina Porizkova first appeared in 1984, her native land was in the grip of Communist rule and had no stock exchange. Today, freedom rings in the Czech Republic and its vibranteconomy is the backbone of central Europe." The parting of the iron curtain exposed the Czech Republic's considerable indigenous assets - assets which are now attracting acute interest from the West. In 2000, Daniela Pestova became the first Czech to appear on the SI cover since the Prague stock exchange opened for business. Thus, for purposes of evaluating the indicator, we consider her the "first" Czech to appear. The investment consequences did not disappoint. Four years after Pestova's appearance, the Prague PX50 Index had advanced 36% - a remarkable feat considering the fact that most other world markets fell during the same time-frame. Pestova's Czech comrades, Petra Nemcova and Veronica Varekova, claimed the SI covers for the homeland in 2003 and 2004 respectively. Accordingly, the PX50 continued to advance into late 2007. Which foreign bourse or bolsa should the philogynistic global investor now consider? Israel perhaps? Bar Rafaeli, an Israeli supermodel, graced the cover of SI's 2009 Swimsuit Edition. Since then, the Israeli stock market has nearly doubled. Weird, huh? Eric J. Fry,  for The Daily Reckoning Joel's Note: Eric will be emceeing proceedings here at our Agora Financial Investment Symposium in Vancouver this week. For anyone who was unable to join us, please note that we'll be offering both CD and MP3 recordings of the sold out presentations all week. During the conference, they'll be available at a bit of a discount, too. If you're interested,get yourself on the list for first delivery here.

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US Jobs Data: One Reason Why It Might Not Be Getting Better

Bill Bonner Reckoning from Vancouver, Canada... No time to write today. We're getting on a plane for Vancouver...and experiencing technical difficulties. Back in the '50s, TV screens would frequently go into test pattern mode. An announcement would come on saying the station was 'experiencing technical difficulties.' We were surprised. It seemed like a miracle that the 'idiot box' would work at all. Dow up 56 yesterday. Gold down $6. Deflation stalks markets and economies. Don't believe us? Just look at the 10-year T note. It's about the only thing that is going up. It means people want safety, safety and more safety. Of course, they will find little safety in T-debt. But that's a long story...and it's what makes markets so entertaining. This note from The New York Times...and then we're signing off. If the rich won't spend, who will? The economic recovery has been helped in large part by the spending of the most affluent. Now, even the rich appear to be tightening their belts.  Late last year, the highest-income households started spending more confidently, while other consumers held back. But their confidence has since ebbed, according to retail sales reports and some economic analysis.  "One of the reasons that the recovery has lost momentum is that high- end consumers have become more jittery and more cautious," said Mark Zandi, chief economist for Moody's Analytics.  Though stock performance has a bigger psychological and financial impact on high-income households, consumers of all income levels are fretting more about their financial future, perhaps bracing for the possibility of another economic contraction. Consumer confidence slumped in July to its lowest point since August 2009 in the Thomson Reuters/University of Michigan index released on Friday.  Even Federal Reserve policy makers have acknowledged that the recovery is losing steam and suggested that should conditions worsen further, additional stimulus may be needed, according to minutes of their last meeting, released on Wednesday. But the Top 5 percent in income earners - those households earning $210,000 or more - account for about one-third of consumer outlays, including spending on goods and services, interest payments on consumer debt and cash gifts, according to an analysis of Federal Reserve data by Moody's Analytics. That means the purchasing decisions of the rich have an outsize effect on economic data. According to Gallup, spending by upper-income consumers - defined as those earning $90,000 or more - surged to an average of $145 a day in May, up 33 percent from a year earlier.  Then in June, that daily average slid to $119. "I think a lot of that feeling that the worst was over has sort of abated," said Dennis J. Jacobe, Gallup's chief economist. *** And here's an interesting item that is going around the Internet: If July has ides, this is it. Ever had a job? A chart that showed past presidents and the percentage of each president's cabinet appointees who had previously worked in the private sector - you know, a real life business, not a government job? Remember what that is? A private business? Roosevelt - 38% Taft - 40% Wilson - 52% Harding - 49% Coolidge - 48% Hoover - 42% FDR - 50% Truman - 50% Eisenhower - 57% Kennedy - 30% LBJ - 47% Nixon - 53% Ford - 42% Carter - 32% Reagan - 56% GHWB - 51% Clinton - 39% GWB - 55% And the Chicken Dinner Winner is......................... Obama - 8%* This is the guy who wants to tell YOU how to run YOUR life! ONLY ONE IN TWELVE in the Obama Cabinet HAS EVER HAD A JOB. *YEP, EIGHT PERCENT! And these are the guys holding a "job summit"; going to tell us how to run our businesses, make our decisions for us? Do you want to trust them with every aspect of your life? Regards, Bill Bonner,  for The Daily Reckoning