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Today's Greatest Investment: Mongolia

Written By Christian DeHaemer

Posted February 10, 2010

Things are getting ugly. The Dow is down 7% for the year… The Chinese Hang Seng Index is off 3,000 points since November… The German DAX is off 500 points since January… The Euro is in freefall against the dollar, dropping to $1.38 from above $1.50.

Not that the greenback is in good shape…

Our fair government announced the news today that the trade deficit surged to $40.18 billion in December, the most for the year. But what’s the big deal of a trade imbalance when you are $12.3 trillion in debt and counting? 

The treasury is offering $81 billion in three-year bonds, this week alone.

You would think that oil might be the answer, but oil has gone nowhere for months. Light crude hit $70 in May 2009. It is at $73.42 as I write this. Granted, a 4% gain in 10 months is better than being snowed in for a week with the Huge Grant videography on cable television, but still…

In the midst of the biggest blizzard the Mid-Atlantic region has seen since the 19th century, it seems the market and the weather have decided to join forces in redefining the word bleak.

But I’m about to reveal to my readers the most undervalued investment out there — and how you can still get in on it. Oddly enough, this opportunity is a place that’s no stranger to billowing snow or freezing temperatures…

Now, the market can’t really be as bleak as the picture I’m painting… can it?

What about gold? Gold topped out at a little above $1,200 in December and has been going down ever since. Silver topped out at $19.29 and is back down to $15. Natural gas has been a big winner of late as it pushes the highs of $6. But I don’t want to be holding going into the spring.

Retail? Housing? Financials?  Laughable…  Semis? HA!

There is a very good possibility that most major markets will go sideways to down in a tight trading range for the next twelve to eighteen months. That’s what happened after the initial bounce on the NASDAQ after the dot-com bust. History has shown that markets must consolidate before heading higher.

Biotechs Don’t Care about that Stuff…

One sector where you can still make money is biotechs. Biotechs don’t trade on currency moves or national debt fears; they move on news, deals, and pipelines.

My readers are up 70% in the past few weeks on one company that makes pre-filled safety syringes. And just last week, I recommended another emerging drug company, due to the fact that the CEO was buying massive amounts of shares before the Phase III results come out.  

Don’t get me wrong — those can be fun and profitable one-off trades. But with the current state of Obamacare, you really can’t invest in long-term biotech with a degree of certainty that you will get rich.

My goal as an investor (like many of you, I’m sure) is to find a company that is so undervalued that it can’t go down — combined with a clear and simple path to becoming fairly valued.  

In other words, the best stocks are those that go up, year after year after year — until they reach a rarified state and become a “Wall Street Darling.” In this way, you can make ten times your money, and with very little effort.

Granted, it’s easier said than done. It takes a lot of work and more than a little guts to be the first one in.

I’ve done the work. And to tell you the truth, it doesn’t really feel “gutsy” to me because I’ve profited from these scenarios a number of times. To me, it just feels like massive opportunity. I’ve found the one country that is so extremely undervalued that it is going up despite the global gloom… And it continues to go up.

Mongolia is Up 39.5% Since November 6, 2009


The Mongolian Stock Exchange is up 39.5 percent from November and nine percent for the year. And it remains so undervalued that there are some companies, like an iron ore company I visited back in October, that have a P/E of 2.

One oil company would have to rise by more than 40 times to equal the fair value of its peers, based simply on its proven oil reserves. And this isn’t some “-stan” country where you have to transport oil through Afghanistan or the Ukraine. Mongolia shares a border with China — one of the largest importers of commodities in the world.

They Will Come

When I first went to Mongolia a few months ago, I was shocked by the total lack of foreign interest. They didn’t even have a clearing bank, which means that even though emerging-market fund managers like Templeton’s Mark Mobius were going to Mongolia in search of that country’s vast mineral wealth, they couldn’t buy shares on the local exchange.  

And believe me, when the flood of foreign cash hits the local market, those who have already bought will make some money. (As an aside, I have been working closely with the largest broker in Mongolia, and will show you exactly how to invest safely. You’ll want to be in before the Big Boys like Mobius start buying. More on that later… )

But now things are changing. The world is starting to wake up to the promise of Mongolia.

Bloomberg reported yesterday that “Mongolia plans to sell as much as $1.2 billion of bonds overseas later this year, its first benchmark offering of dollar-denominated debt, to fund infrastructure to support its mining industry.”

Let me remind you that total GDP of Mongolia was a very low $5 billion last year. In relative terms, $1.2 billion is huge. And get this: the bonds will pay between 8% and 11% — not too shabby.

Bloomberg goes on to say, “Mongolia, which shares a border with three Chinese provinces and Russia, is seeking $25 billion in foreign investment over five years to help mine metal and coal deposits, which are among the biggest untapped mineral resources in the world.”

Not only does the bond issue lend credibility to the Mongolia story, but it will make it happen.

Opportunity Knocks

The door was opened to Mongolian mineral investing by foreigners last fall. Ivanhoe Mines signed a deal to develop a $5 billion copper and gold mine at Oyu Tolgoi in Mongolia with its partner, Rio Tinto.

Commercial production at the mine — which Rio has described as the world’s largest copper and gold resource — is set to begin in 2011.

The Oyu Tolgoi project is about 80 kilometers north of the Mongolian border with China, and it may have copper resources of 78.9 billion pounds and 45.2 million ounces of gold resources.

Ivanhoe’s share price is up more than 600% this year based on this news.

But OT marks the beginning of the boom, not the end. There are between 15 and 32 other major mineral, oil, and coal deposits that will rival this O.T. deal. This means that Mongolia is the fastest growing country on earth.

The Clearing House Cometh

But time is running out for the ground-floor buyers. Remember how I said that emerging market funds need an international clearing bank before they can invest on the local exchange?

Well it’s about to happen, and the new money coming in will simply swamp the local exchange. There is even talk about an ETF. You want to be invested before this happens — you want the Big Boys buying after you do. And, for once, you have the opportunity…

I just got word from one of my contacts that President Ts.Elbegdorj, while he was at the Davos Summit, met with the Vice Chairman of the Deutsche Bank Group. The upshot: Deutsche Bank wants to become a “strategic partner” of Mongolia.

Deutsche Bank is the biggest bank in Germany, with over 17 million clients in 75 countries. And they are one of the few western banks that did not get a bailout from the EU.

Furthermore, Deutsche Bank invested $250 million in Mongolia last year. I expect they will have a branch on the ground in the near future that would allow the Templeton funds (among others) to start buying the local companies.

Mongolia offers extremely compelling values, strong demand, and a clear catalyst for share price appreciation.

But most importantly, Mongolia is a treasure trove of the resources neighboring China needs in order to maintain its status as the world’s factory: gold, copper, coal, uranium; sizable quantities of oil, molybdenum, tin, tungsten, fluorspar, and other vital raw materials.

If you can find a better deal, buy it. If not, I encourage you to free up some cash and get in now on what promises to be the world’s last mega-boom profit opportunity.

This report reveals everything you need to know before China’s pantry is raided, and the door for this mega-boom opportunity has closed.


Christian DeHaemer

Editor, Wealth Daily
Editor & Founder, Crisis & Opportunity