“3.4 Billion People” live in the Asia Pacific area. Many are waiting their turn to jump into the consumer based economy. No all of this folks will be able to afford most of the products they import or produce. But many will become the next “mortgage” to the economic wheel. The upcoming sifhts need adjustments.
The aging countries will be looking at trimming working people’s benefits and increase dividends from investments.
Another reality will be: the disastrous economic policies and influence been supported from the IMF, WB and WTO agreements. Clearly biased the agrement are biased to favor mega consolidation in corporate structure, simulating the mega corporations of Russian despotic and authoritarian caliber. The proportionality of distribution of capital and access to economic developments will be limited. Specially, affects citizens eager for democracy. These influences, hopefully, while they are growing, the emerging economies will be able to be more adaptive and efficient than the old word econmies with risk averse directives.
The wealth distribution will continue its link to education and circles of nepotism. As past history reminds us and hold its truth over centuries. We can assume one tenth of this group will have access to the majority of what it is produced, the other ninety per cent will produce at a discount, benefiting even a smaller group. This reality has a very solid base in the present transactional system. One of the most evident is class warfare, laws that benefit very small groups, usually those who control the assets. But, it has diverse shapes, and the one will affect emerging markets will more similar to a medieval system. The one-tenth imposed to farmers from privileged-granted owners, higher taxation to lower earners or tithe will be more similar. The stated formula affects individuals in all economies. It will be safe to say, three hundred million people will enter this process in the next five years in the AP area, and another 100 million in diverse areas of the EC as the EU evolves. A new consideration is the integration in Latin America, and it seems to start to take place. The United States of Latin America is getting into shape.
This is at least a twenty year boom for those uniting into a borderless single market!
If growth continues at present rates of five to ten percent of gross domestic product in emerging markets, and its wealth distribution follows present patterns, this is a very solid argument for investors to buy into the equation.
What opportunities this represents to a dollar investor.
I briefly address what I consider to be above average return versus the US overall markets.
These are my top three for the next 20 years:
1) Raw materials, global demand in commodities from the growing, establish or diminishing economies will continue, incremental demand in the emerging markets area will increase producer profitability for the next two decades. The choice here will be to target a five percent of a portfolio in places like I-shares (IGE). To increment the returns, add a five percent from strong companies from the countries in which commodities are a major source of income as Australia, South Africa, Canada and Brazil, for a total of 10 ten percent of any allocation.
2) Energy consumption will continue to increase at above average levels. Crude Oil will continue to be the energy of choice due to its established roots, plus the secondary products from oil, as plastic materials will continue to be the product of choice in 70% of consumer items. Electric energy production from alternative sources is increasing in Europe, this increase will only reduce the construction of nuclear and probably natural gas plants, but it can take another decade until starts to make a dent. In addition, around the planet goals in alternative energy production are too small.
My choice here goes to Canada, specially the energy trusts, with strong leverages and good tract records paying to trust holder dividends for risk.
To complement Canada I will add China and India oil companies a non-managed fund such as i-Shares of the Dow Jones energy sector IYE, or the Spiders XLE, the beta and pricing in both baskets, are not that divergent, the Dow Jones, due to the larger sponsorship has a slight advantage over the S&P Spiders. Again this puts a currency fluctuation in the portfolio, with a ten percent allocation, makes for a riskier investment that can be compensated by re-investing the dividends from the trusts.
The risk on trust is large and fluctuations in share value can run as high as fifty percent.
3) Growing Global Economies, it might see redundant, localized investment in the areas of growth, it is my assessment it can produce above average returns. China, India and Brazil will be the three majors to invest for growth, if the EU starts to expand some smaller countries of the EU sphere, will low wages and competitive inside the euro market will be also a good choice. A non-managed fund for each country with addition of the top three companies in each country, it is my opinion will provide above average returns over the next two decades. Again this indicates a vote in a dollar that will continue to pay the price of poor US fiscal discipline. Everything has a limit and the dollar at $0.75 to the Euro has reached a substantial low limit.
Disclosure.
On Money and Else goal's is to provide a forum for personal finance and many other personal ideas including investment ideas. Articles, columns, message board posts and other features should not be construed as investment advice, nor does their appearance imply an endorsement by me of any specific security or trading strategy. An investor's best course of action must be based on individual circumstances. At any moment I might own any of the stocks I write about, and I might hold long and short positions.
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