For several weeks, a rotation has been underway in the U.S. market, with money moving away from some...
A Wide World of Great Opportunity
08/12/2008 12:00 am EST
John Dessauer, editor, Investor’s World, tells subscribers to look beyond America’s borders for new opportunities.
I was happy to see the relief rally last month. But I think most Americans are still making a huge mistake by focusing only on the United States.
Since the late 1990s, there has been an explosion in the global growth of the middle class in Brazil, Russia, India, China, and a dozen other countries, with roughly 70 million people entering each year. The world is becoming a massive consumer market, which for years had relied on the US consumer to drive global growth. But our total population is just 300 million (5% of global population) and now, the global middle class creates a market the size of the US every 4.3 years. Once they reach middle class, these people have enough income to climb further up the economic ladder. This process is unstoppable. In the next 20 years, two billion people could be lifted out of poverty into the middle class. This is a huge and growing new global consumer market
Millions of people in Eastern Europe, the Middle East, and Southeast Asia are climbing the economic ladder. This is the biggest and best opportunity ever for investors. It is happening based on free market capitalism and free trade. It has gained momentum and size. It is global and it is unstoppable.
The rate of growth could be slowed by bad political choices or central bank mismanagement in one country or another, but the rest of the pack will just keep marching on to a better life. Any bad policies will likely be short-lived because they will encourage unrest and political change. Once hundreds of millions have tasted real freedom and opportunity, they won’t want to give it back.
The question is how best to profit from this structural economic miracle that is shaping our era. Some choose to invest in one “hot” country.
Recently, China is the favorite. But this carries several risks. The biggest is the disconnect between the Chinese stock market and the underlying economy. In other markets, such as Russia, there are few stocks to buy, and there can be a lot of volatility.
In my opinion, the best strategy is to invest in a way that captures profits from the middle-class
growth in China, Brazil, and elsewhere. There are scores of ways to profit from the growth of the global middle class. Invest in big, proven, well-established global competitors that are deeply involved in satisfying the burgeoning demand from the new middle class—companies like General Electric (NYSE: GE), Nokia (NYSE: NOK), Microsoft (Nasdaq: MSFT), Intel (Nasdaq: INTC), Texas Instruments (NYSE: TXN), and Cisco Systems (Nasdaq: CSCO).
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