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Truth be told, I’m even more bullish now on gold, oil and other natural resources than I was when I nailed the start of the massive bull market in commodities nine years ago, in the middle of the year 2000 — before gold prices tripled and before oil rocketed up some 1,030 percent from $13 per barrel to its all-time high of $147.
But despite what you might expect, I am not bullish merely because the Obama administration seems to be committed to lighting the fuse on massive inflation in 2010 and beyond.
True; even in more normal times you’d expect Washington’s mind-blowing $1.8 trillion annual deficits and its plans to sink us even deeper in debt with health care reform and countless other “borrow and spend” initiatives to be massively inflationary.
Record-shattering borrowing by the U.S. Treasury combined with manic money-printing by Bernanke and the Fed — would be a dead give-away that massive inflation and soaring resource prices was a virtual certainty.
I’d be enthusiastically bullish on gold, oil and other natural resources even if the dollar’s buying power wasn’t being gutted by our own government.
But there’s another factor that has convinced me that energy, metals, food, water and construction and manufacturing materials are destined to be among the most profitable investments in the world going forward:
The emergence of China, India and the Asian bloc as the new economic superpowers of the 21st century
It’s not particularly a new story. At least not for me. But this massive global transformation is now a reality. And even the quickest glance of recent facts on Asian economic growth prove it in spades …
- While credit is still difficult to come by in the U.S., new loans made by China’s banks are exploding higher, more than TRIPLING in the first half of 2009.
- Through July of this year, auto sales in China increased a record 30.7 percent to 5.4 million vehicles, just slightly below the U.S. at 5.8 million.
- While U.S. retailers continue closing stores in droves, China’s retail sales in July are off the charts — up 15.2 percent since last year.
- While the overall U.S. economy was shrinking at annual 3.3 percent pace in the first quarter of 2009, China’s GDP was growing at a pace of 6.1 percent.
- While the U.S. economy was down 3.9 percent in the second quarter, China grew 7.9 percent. And get this:
Even if you accept Washington’s notoriously rosy estimates, the U.S. economy will not grow at all this year. More likely, it will continue to shrink, albeit at a somewhat slower pace than in the second half of last year.
By contrast, China’s economy is still growing by leaps and bounds — expanding at the breathtaking rate of 8 percent to 9 percent this year.
That’s about DOUBLE the economic growth the U.S. enjoys even in the GOOD times!
Demand explosion
These are crucial facts that have tremendous consequences for your investments. After all: Nearly one in four human beings alive on the planet today are Chinese. And while most of the world is still struggling through the worst recession since the 1930s, their economy is exploding.
And China’s not alone. India’s population is 1.1 billion strong — and its economy is still growing, too. In fact, it’s likely to grow 7 percent this year alone.
Think of it: Nearly one in every two human beings on Earth lives in one of these two countries — and they are growing their economies by leaps and bounds!
Now, think about this: Only about 10 percent of the Earth’s population live in Western Europe and the U.S. — and for the past 200 years or so, our nations drove the lions share of all economic growth on the entire planet.
It was largely OUR demand for gold, oil and other natural resources — growing demand from just 10 percent of the world’s population — that drove their prices ever-higher.
Today, demand for natural resources from the whopping 40 percent of the world’s population in China and India is colliding with our planet’s dwindling supply of natural resources.
That alone would make investment in natural resource stocks a no-brainer. But the fact is the growth in demand from these countries is not the routine, gradually rising demand you see in mature economies.
As I’ve just shown you, these two countries’ economies are positively exploding.
Together, since 2007, the emerging markets of China and India — along with a few other nations that supply them with natural resources — have been responsible for 50 percent of global economic growth.
Their citizens’ incomes are rising by leaps and bounds. More than 80 million new middle-class families are being created in Asia per year.
By 2015, just six short years from now, more than 800 million middle class families will live in these nations — 22 times more than now live in the U.S..
And every one of those new middle class families needs a place to live. Every one of them wants to enjoy the necessities and little luxuries of Western life.
That means no matter what happens to Western economies, you can expect global demand for oil and gas … aluminum … copper … gold … silver … nickel … rice … sugar … cocoa … coffee … cotton … timber … cattle — you name it — to continue to explode.
And as demand for these things soar, their prices will, too.
That means the companies that produce them will post even greater earnings. And that means you can expect their stocks to shoot for the moon.
Bottom line: Natural resources are a dream “double-play” for investors today
Washington’s run-away deficits and money-printing virtually guarantee sky-high inflation and soaring resource prices as far as the eye can see. And the demand explosion in China and India also means you can expect the stock of companies that produce oil, gold and other resources to skyrocket.
It’s clear that neither of these mega-trends is likely to end soon. To the contrary: Every scrap of data I study tells me that they’re likely to accelerate throughout 2010 and beyond.
The great news is, the advent of exchange traded funds on China, India, natural resources — and on the countries that are getting rich selling resources to the world’s two largest nations — have made harnessing this global sea change as easy as buying shares of IBM and Microsoft.
For a report on these profit opportunities, be sure you haven’t missed the Weiss Global Forum’s full report. To view it, just click this link.
Sincerely,
Larry Edelson
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Money and Markets (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Nilus Mattive, Claus Vogt, Ron Rowland, Michael Larson and Bryan Rich. 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 in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include Kristen Adams, Andrea Baumwald, John Burke, Amy Carlino, Selene Ceballo, Amber Dakar, Dinesh Kalera, Red Morgan, Maryellen Murphy, Jennifer Newman-Amos, Adam Shafer, Julie Trudeau, Jill Umiker, Leslie Underwood and Michelle Zausnig.
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