“Six hours is for men, seven hours is for women, and eight hours is for fools.â€
I heard those words from my father’s mouth several hundred times. He was talking about sleep.
My father worked harder than anybody I have ever seen. He was out in the fields of our small vegetable farm before I ever got out of bed, and he came home after I was asleep.
Our family took exactly two vacations during the 18 years I lived at home. My father even worked half-days on Thanksgiving, Christmas, and the Fourth of July.
He was a man of few words, but he made sure his sons grew up with a strong work ethic. He pushed me to excel in school and to complete all the requirements to become an Eagle Scout by the time I was 13.
Admittedly, I didn’t like the demands at the time, but that work ethic has paid off in spades as an adult. Today I own three businesses and consider myself both successful and very blessed.
I regularly put in 80-hour workweeks, but I still feel lazy compared to my father.
Of course, my father isn’t the only person who makes me feel lazy. Every time I go to Asia, I see entrepreneurs, business owners, and other regular-but-ambitious people working like dogs to get ahead in life.
They’ve watched MTV, Beverly Hills 90210, and Lifestyles of the Rich & Famous … they’re eager to grab their personal piece of the American dream … and they’re willing to work hard to get it.
I’ve said it many times before, but the Asian economic miracle isn’t because of government policies, big corporations, or good luck — Asian economies are going gangbusters because of ambitious, hard-working citizens.
Asians’ Hard Work Is Rocketing
Their Economies Higher
These collective efforts are propelling Asian economies higher and higher. The signs of explosive growth are everywhere. But nowhere is the growth more visible than in China. Here are just five recent signs:
Sign #1: Exports skyrocketing. China’s General Administration of Customs reported that the value of the country’s exports ballooned to $428.5 billion in the first six months of 2006. That’s a 23.4% jump from the first six months of 2005!
Now, $428.5 billion is a big bundle of money, but historically, China’s exports have increased in the second half of the year. In other words, expect an even bigger number in the near future.
Sign #2: Trade surplus exploding. In June, China’s trade surplus increased to a record $14.5 billion — a 49% rise from the same month a year ago.
For the first half of 2006, China’s trade surplus was $61.4 billion.
And for the full year, that surplus should expand to about $140 billion, easily surpassing last year’s record-high $101.8 billion.
How does that stack up with growth back here in the U.S.? Based on the first five months of 2006, our trade deficit is running at an annual rate of $763 billion, higher than the record high deficit of $716 billion last year.
Sign #3: Bulging chest of reserves. You know what happens when you export more than you import? You end up with a big war chest of foreign currency reserves. Last Wednesday, state media reported that China’s foreign currency reserves increased by another $30 billion to $925 billion as of the end of May.
In a matter of months, China’s reserves could exceed $1 trillion!
What do you think happens to all those dollars? They end up as more fuel for China’s growth engine.
By the way, China — not Saudi Arabia or any OPEC member — is now the largest holder of foreign currency reserves.
Sign #4: Double-digit GDP growth. According to China’s National Development and Reform Commission forecast, the Chinese economy expanded by 10.4% in the first six months of the year. For all of 2006, the NDRC expects GDP to rise 10.2%.
This isn’t an anomaly, either. China’s GDP gained 10.3% in the first quarter of 2006 and more than 10% last year.
Sign #5: A cement foundation. Want concrete evidence of China’s growth? The China Cement Association reported that China produced 429 millions tons of cement in the first five months of 2006. Not only is that a new record, it is a stunning 20.4% increase over last year, and the fastest increase in half a decade.
When an economy is healthy, all sorts of new construction sprouts up. That why it’s often said that economies are built on a cement foundation. If cement sales are any indication, China’s economy is rock solid.
All This Hard Work
Is Paying off for
Citizens and Investors
All of this growth will ultimately create a new class of successful Chinese citizens. In fact, a new survey from McKinsey & Company forecasts a dramatic increase in the number of urban successful, middle-class Chinese.
Right now, 77% of Chinese families make less than $3,128 a year. However, by 2025, McKinsey expects only 10% of Chinese families to live on incomes below that mark. And McKinsey estimates that, just five years from now, there will be 290 million lower-middle-class citizens, with $60 billion of purchasing power.
All this increased power will only further strengthen China’s economy.
Don’t get me wrong: I’m not saying Americans are lazy. I have many friends — like Martin — who work as hard as anybody in the world.
I am saying that the most explosive growth is happening across the Pacific because an army of ambitious Asians are working like crazy to duplicate the American dream.
Another thing: I’m not saying you should completely avoid U.S. stocks.
There are some fast-growing U.S. companies. Ironically, some of the fastest growing ones derive a significant part of their revenues from Asia. For just one example, read my report “A Solid Bet in Macau.â€
But if you’re worried about the domestic stock market — and given the massive losses the U.S. indexes have been posting, you should be — remember that one of the very best defenses is owning only companies that are growing so fast that even a difficult market can’t hold them back.
Remember, earnings drive a stock’s value. Show me a company that doubles its profits and I’ll show you a company that will increase in value no matter what the market’s doing.
Bottom line: Right now, your odds of finding companies capable of doubling their profits are much, much higher in Asia than they are in the U.S. That’s not a knock against our companies — it’s just a testament to the rapid growth happening in China.
If you’re not interested in seeking out the best individual companies abroad, you have other choices:
First, there are dozens of high-performing Asian-focused mutual funds. One to consider is U.S. Global China Opportunities (USCOX).
Second, you can also invest in exchange-traded funds, such as the Xinhua China 25 Index (NYSE: FXI).
Third, there are dozens of Chinese stocks being traded on the New York Stock Exchange as American Depositary Receipts. Just three: China Life (LFC), PetroChina (PTR), and Yanzhou Coal Mining (YZC).
You can always start small, but make sure you at least plant a few seeds overseas. It could be the best investment decision you make this decade.
Best wishes,
Tony
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About MONEY AND MARKETS
MONEY AND MARKETS (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Sean Brodrick, Larry Edelson, Michael Larson, Nilus Mattive, and Tony Sagami. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MaM. Nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MaM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical inasmuch as we do not track the actual prices investors pay or receive. Regular contributors and staff include John Burke, Colleen Collins, Amber Dakar, Ekaterina Evseeva, Monica Lewman-Garcia, Wendy Montes de Oca, Jennifer Moran, Red Morgan, and Julie Trudeau.
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