The Silk Road to Riches

12/01/2006 12:00 am EST

Focus:

Yiannis Mostrous

Editor, The Capitalist Times

Investors are constantly seeking the next big thing, the future investment trends that will make them untold riches. Yet, as the authors opine, so many often find themselves arriving at the party day late and a dollar short, too slow to realize and accept change, that they never actually profit from those prospective opportunities.

And while this new book from these three esteemed authors doesn't promise to make you rich, these investment pros do offer a comprehensive perspective on what they consider a huge coming opportunity for investors: The Far East.

For years, we've been regaled with the promise of China and India, and some investors have managed to ride the recent waves up-and-down, making some profits along the way. Yet, according to the authors of The Silk Road to Riches, you ain't seen nuthin yet!

Their premise is simple but may be a little hard to swallow for those with the US is and will remain the superior global power mind-set. I'll forewarn you; these folks are predicting major changes that will move America from the front of the line to a subsidiary position—in wages, productivity, and global leadership.

Their reasoning is logical and historically-based. The US was certainly not the first global leader in history. That title has been held by many countries, for significant lengths of time. The authors basis for their theory is simple: capitalism is not stationary, and is shaped by constant improvements and changes. As other nations evolve, it may just be an expected occurrence that global leadership changes.

The authors state that several events in our country will aid our retracement in world leadership: the blooming twin deficits in our budget and current accounts, our declining dollar, the looming real estate crisis that will be the forerunner of other asset price decreases, and the shift already occurring from high-paying jobs to lower-wage positions.

At the same time, there is a sea-change occurring in Asia, led by the transformation of the financial sector and vast expansion of intraregional trade. Asia (especially China) has made its mark in the manufacturing arena, due to its low production costs. Now, the adoption of Western technology and business practices is beginning to engender additional marvels, including productivity increases and a tightening of the wealth gap among peoples in developing nations.

Much of Asia has made considerable progress to set the stage for rapid growth. Many countries now have surpluses in their current accounts and have rebuilt their foreign exchange reserves. Additionally, their corporations are becoming much more shareholder-friendly, decreasing debt, increasing dividends, and focusing on profitability rather than just revenue growth.

Accompanied by the blossoming young populations across Asia, the new career-oriented, single lifestyles, and the emergence of women as a force to be reckoned with, the authors believe that if infrastructure and economic improvements continue at their current pace, it will be inevitable that these changes will create explosive consumer demand. And once that demand is in place, the sky will be the limit for global growth.

The authors believe China will eventually emerge into a global powerhouse and certain investments there are currently compelling, but their prediction of the new winner if the country can step up to its needed adjustments and improvements is India.

The nation's young and huge workforce, its fairly conservative banking sector, developed capital markets, and most of all its peoples entrepreneurial spirit are all tremendous advantages in taking the global lead.

India has an abundance of water and fertile land, and finally is focusing on improving its infrastructure. It has a new tax system in place and is already operating under democratic rule. Its very educated workforce is changing the country's huge outsourcing service sector from commodity-based into more specialized and higher-paying jobs. Already, the country is home to the largest number of FDA-approved pharmaceutical plants outside the US. And while India still has numerous obstacles to overcome, including corruption and state and lower government inefficiencies, the authors feel the time is right to take a very close look at investing in its promise.

The authors provide great detail to support their theory of changing world leadership, in a well-written tome. Yet, this book is not just a summary of the whys and wherefores of their beliefs. They generously offer concrete investment advice, with a host of recommended stocks, funds, and exchange-traded funds to set the investor on the silk road to profits.

Whether or not you believe in their basic premise, the authors wealth of experience in global investments strongly lends credence to their position and their specific investment recommendations should be of benefit to any investor looking for additional portfolio diversification.

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