Recently, the G-20 meeting took place in Seoul, South Korea. The participants stated goals prior to the event were to “ensure global economic recovery and strengthening the global financial system”. I am offering no commentary here, as to the outcome.
The main economic council for ‘wealthy’ nations was expanded from the G-8 to the G-20in September 2009. This major shift in G’s is significant and confirms that emerging markets can no longer be ignored, as the current composition of the G’s serves as an accurate ‘mirror’ of where economic power currently resides.
Importantly: economic power is no longer measured in terms of output– consumption is equally valued.
When I ran a relative strength analysis of the G-20 participants emerging market members sat atop the grid as follows: Turkey, Indonesia, Mexico, and India, while the lower ranked participants come from developed markets - Germany, Italy, France, and the European Monetary Union (the EU is a member organization).
As the G-8 has evolved into the G-20 we too must evolve our portfolios to mirror this shift in economic power.
Tuesday, November 30, 2010
Tuesday, November 2, 2010
Putting your head in the sand is not a portfolio strategy
Many investors are frustrated at the perceived lack of results from the quick fixes enacted to stimulate the US economy, and thus remain wary of investing in equities. Money flows are still showing net reductions in equity funds and inflows to bond funds, with the ten year treasury yielding approximately 2.7%!?!
I believe this is wrong; there are a lot of opportunities ahead and the theme is ‘global’: global growth, global demand, global business opportunities and global investment opportunities.
Let’s examine the facts. Post WW II there were 600 million consumers between Europe, Japan & the US coming-on-line. Today, there are 2.5 – 3 billion (yes, billion) consumers coming on-line in the emerging economies. And while developed economies like (western) Europe, Japan & the US may lag, developing economies such as (eastern) Europe, Latin America, Asia and even parts of the Middle East are experiencing expanding economies. First-hand experiences travelling the world taught me that people with increasing affluence want to consume; the progression I observed is as follows: American cigarettes (Marlboro) and alcohol (Budweiser & Johnnie Walker; red & black), boom boxes, TVs and refrigerators, a more powerful motor bike and then an automobile. Already, automobile manufacturers including GM and Mercedes are having their Chinese design studios contribute greatly to the designs of new automobiles, thus enhancing global (and domestic) sales. Today, Mercedes sells more top-of-the-line cars in China than in the US. Bottom line, there is a lot of pent-up demand because of the desire to live the ‘good-life’ enjoyed in the West.
The growing affluence of the masses living in what is best described as ‘emerging markets’ and their consumption habits are where I believe the best potential for investing will reside for some time to come. US companies positioned to capitalize on this growth in demand will be the domestic beneficiaries, as will well managed companies domiciled in other parts of the world. So stop worrying about weak domestic economic growth and start focusing on the opportunities that abound around the globe and the companies which will benefit.
I believe this is wrong; there are a lot of opportunities ahead and the theme is ‘global’: global growth, global demand, global business opportunities and global investment opportunities.
Let’s examine the facts. Post WW II there were 600 million consumers between Europe, Japan & the US coming-on-line. Today, there are 2.5 – 3 billion (yes, billion) consumers coming on-line in the emerging economies. And while developed economies like (western) Europe, Japan & the US may lag, developing economies such as (eastern) Europe, Latin America, Asia and even parts of the Middle East are experiencing expanding economies. First-hand experiences travelling the world taught me that people with increasing affluence want to consume; the progression I observed is as follows: American cigarettes (Marlboro) and alcohol (Budweiser & Johnnie Walker; red & black), boom boxes, TVs and refrigerators, a more powerful motor bike and then an automobile. Already, automobile manufacturers including GM and Mercedes are having their Chinese design studios contribute greatly to the designs of new automobiles, thus enhancing global (and domestic) sales. Today, Mercedes sells more top-of-the-line cars in China than in the US. Bottom line, there is a lot of pent-up demand because of the desire to live the ‘good-life’ enjoyed in the West.
The growing affluence of the masses living in what is best described as ‘emerging markets’ and their consumption habits are where I believe the best potential for investing will reside for some time to come. US companies positioned to capitalize on this growth in demand will be the domestic beneficiaries, as will well managed companies domiciled in other parts of the world. So stop worrying about weak domestic economic growth and start focusing on the opportunities that abound around the globe and the companies which will benefit.
Subscribe to:
Posts (Atom)
