A major investor enters Spain...

 The expanding credit that led to the collapse of the U.S. housing market didn't stop here... The destruction spread to Dubai, Ireland, Iceland, and other European countries like Italy and Spain.

 

But Stansberry International editor Brett Aitken saw an opportunity in Spanish real estate earlier this year. Spanish bond yields were falling, meaning investors had more confidence in the country. Sentiment was becoming more positive and more money was flowing into battered-down European countries. And GDP was expanding.

 

 Of course, the recovery was due to the massive amount of money printing from global central banks... Steve Sjuggerud dubbed this the "Bernanke Asset Bubble" in the U.S… and later, the "Draghi Asset Bubble," as the Fed's policies were exported abroad. European Central Bank head Mario Draghi said he would keep interest rates low "for an extended period of time." As we learned in the U.S., it doesn't pay to fight a central bank with its finger on the "print" button.

 

As we outlined in the April 30 Digest...

 

The yields on Italian and Spanish bonds now hover around record lows of 3.1%. U.S. 10-year Treasurys, by comparison, yield 2.7%. And German 10-year bonds, the eurozone's benchmark, yield 1.5%. Last week, Italy and Spain sold enough new debt to meet close to 40% of their funding targets for 2014.     As recently as 2012, during the sovereign debt crisis, yields on Italian and Spanish bonds reached 7%. Since that time, yields have come down... but debt levels in terms of total debt and debt to GDP are currently at record highs. Italy's total debt went from 1.9 trillion euros (93% of GDP) in 2011 to more than 2 trillion euros (132% of GDP) today. Spain's total debt went from 739 billion euros (61% of GDP) in 2011 to 1.1 trillion euros (119% of GDP) today.

 

 With major institutional investors like Blackstone Group buying tens of thousands of single-family homes across the U.S., the big money focused its attention on real-estate opportunities abroad. From the January issue of Stansberry International...

 

The worst is behind [Spain]. Things are improving. Its stock market is up over the past 18 months, which means we've got some wind in our sails.

 

 

 And the big money was flowing into Spanish real estate. As Brett wrote...

 

Over the past few months, U.S. firms have been buying up bank property subsidiaries, apartment blocks, and various buildings and property portfolios around the country.   Among them are the biggest names in private equity – including Blackstone Group, which has built a massive home portfolio in the U.S. In July, Blackstone bought a parcel of apartment blocks for €125.5 million ($170 million). That's small stuff for a firm like Blackstone. But it's also in negotiations for larger parcels, so we think we'll see more activity over the coming months.   Paul Singer, founder of the Elliott Associates hedge fund, has put about €1.3 billion ($1.75 billion) into various Spanish investments, according to Expansion.   Other funds that have already invested or are waiting for the right opportunities include Apollo Global Management, Kohlberg Kravis Roberts, TPG Capital, WL Ross, and Cerberus Capital, where former U.S. Treasury Secretary John Snow serves as chairman.   "When we looked at the situation in Spain," Blackstone's senior managing director of real estate Anthony Myers said recently in Barcelona, "we thought we could see something similar, where we could replicate a lot of the systems and technology that we created in the U.S."

 

 The trend continues today...

 

One of the most conservative investors in the world, Seth Klarman – founder of value-focused hedge fund Baupost Group – is buying into the country.

 

Baupost recently invested more than $200 million in Spanish commercial real estate. The fund purchased seven shopping centers and a shipping and logistics park – mostly around the capital city of Madrid. Baupost will make 7% annually on the real estate while waiting for the asset to recover (compare that with 4% yields in Germany)... And a source close to Klarman says he expects the asset to double in a few years, according to financial publication Value Walk.

 

 Brett recommended Banco Santander, the largest Spanish bank, as one way to profit from the trend...

 

 

 If the thought of buying Spanish banks makes you queasy, then stop reading now...

 

At the Ira Sohn Conference in New York City yesterday, Jim Grant, editor of Grant's Interest Rate Observer, told the crowd to buy Russian oil giant Gazprom...

 

You need more time than I have today to enumerate the reasons not to get involved. In the last decade, its management has made every conceivable mistake.

 

 But as we've outlined in the Digest, Gazprom is cheap, trading for about 2.5 times earnings... And as Grant pointed out, "good things do tend to happen to cheap stocks." The company could supply more gas to China... It could stop misallocating capital... And it could potentially increase its already large 5.5% dividend.

 

 It turns out that other companies can sell their goods online, too...

 

As regular Digest readers know, we've recently expressed concern over the sky-high valuations of online retailer Amazon. As we wrote in the April 28 Digest...

 

Shares of online-retail giant Amazon fell nearly 10% on Friday after the company announced disappointing earnings... The company reported revenue of $25.6 billion in the fourth quarter – a 20% increase from a year ago, but still below estimates of $26 billion. Net income was $239 million for the quarter – up from $97 million a year ago, but again, missing estimates.   Before its earnings miss, Amazon was trading around 150 times earnings – an absurd valuation. That's the problem with buying shares of companies that are priced for perfection... If the market smells anything but roses, the stock tanks. But Amazon's problems are a bit deeper than a fickle market...   Earning only $239 million on revenue of $25.6 billion is dismal... And the reason for it is CEO Jeff Bezos' soaring capital expenditures. Amazon's total operating expenses rose from $15.9 billion a year ago to $19.6 billion in the fourth quarter. The company's operating margin fell from 1.1% to 0.7% over the same period.   Bezos spends a fortune to maintain and grow Amazon's infrastructure... And he's continuing to spend on warehouses, grocery delivery, and a TV set-top box. In fact, the company expects a loss this quarter between $55 million and $455 million.

 

 

 In addition to a valuation that makes zero sense... Amazon's competition is growing. Wal-Mart's global Internet sales grew 30% in 2013 – besting Amazon's 20% for the first time in history.

 

While Amazon's total sales ($67.8 billion) still beat Wal-Mart's online sales ($10 billion), the game is on... Wal-Mart has been investing lots of capital into the online business and buying other e-commerce businesses.

 

 

 New 52-week highs (as of 5/5/14): Apple (AAPL), Carrizo Oil & Gas (CRZO), ProShares Ultra Oil & Gas Fund (DIG), Dorchester Minerals (DMLP), Enterprise Products Partners (EPD), Freehold Royalties (FRU.TO), PowerShares S&P 500 BuyWrite Fund (PBP), Targa Resources (TRGP), Walgreens (WAG), and ExxonMobil (XOM).

 

 Quiet day again in today's mailbag. Send your comments, complaints, and concerns to feedback@stansberryresearch.com.

 

 "Kudos to Porter for a most entertaining segment on the Alex Jones Show today. Not that I learned much new since I've been reading Porter for a couple of years now. Keep spreading the word." – Paid-up subscriber Bruce

 

Regards,

 

Sean Goldsmith

Baltimore, Maryland

May 6, 2014

 

Editor's note: Today's Digest Premium is excerpted from the April issue of Stansberry International. Editor Brett Aitken recently got back from a trip to Greece. While he was there, he found some interesting ways for investors to make large profits in the country...

 

 

 Since 2010, Greece has received €240 billion ($330 billion) in bailouts from the Troika. Private investors had to take a haircut... in some cases up to 75% of what they were owed. And refinancing was agreed to at lower interest rates. The yield on the 10-year bond soared to more than 35% at one point midway through 2012. Pundits were calling for Greece's exit from the euro and even a breakup of the common currency.

 

That was right around the time when ECB chief Mario Draghi made his famous statement: "Within our mandate, the ECB is ready to do whatever it takes to preserve the euro... Believe me, it will be enough."

 

As part of Greece's bailout, its lenders, the Troika, forced the country to adopt tough austerity measures. And while we believe we are starting to see signs of a recovery... the government still has plenty of work ahead before the nation can say it is on the road to prosperity.

 

 The protests we saw last week indicate that many of the working population are still facing tough times. But talking with retailers, restaurateurs, and financial experts in Athens also confirmed most people feel the worst is behind Greece.

 

Some of the data are showing optimism, and that the country's economic woes are lessening. Things are improving slightly... Things are, as we like to say, a little less bad.

 

And remember, despite the economic trouble, Greek businesses are still engaged in plenty of economic activity. Even after the crisis, the country's GDP is still more than double its pre-euro days. Despite the government's debt problems, the private sector will continue to do business.

 

 While the stock market is up more than double from its 2012 lows... we believe it has a long way to run over the next few years as Greece gets back on its feet.

 

As so often occurs in a crisis, market prices can drop lower than anyone can possibly imagine. As we've mentioned before in these pages, this is where we can find outstanding opportunities as investors. Remember, we want to invest in places that are coming out of a crisis. We want to get in when things are still cheap... but the economy is starting to improve. We'll pocket healthy profits as we ride the trend back to normalcy.

 

We believe this to be the case in Greece.

 

– Brett Aitken

Investing in one of the world's most hated markets...

 

Stansberry International editor Brett Aitken recently got back from a trip to Greece. While he was there, he found some interesting ways for investors to make large profits in the country...

 

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