What happens next?
The answer is nobody knows.
But as investors, we’re always trying to answer this elusive question.
We’ll never know for sure if we get the answer right.
But we must think through the possible answers if we are to stay on the right side of major world events and trends.
I’ve just come back from a three-day meeting in France aimed at trying to answer this very question.
Every year the wealth protection “club” I work with, Bonner & Partners Family Office, assembles a group of very long-term oriented investors to share ideas and insights about the “big picture” trends happening in the world and how to profit from them.
This year, one of the topics we discussed behind closed doors was the trends taking place in the “emerging markets.”
There are many different angles and perspectives to this story:
…the growth of the emerging market middle class…
…the slow and painful declines of the dollar relative to emerging currencies…
…and the move away from a unipolar world, with the U.S. at the helm, to a more multipolar world, where power is shared by the U.S. and other strong overseas economies…
You’ll read about all these themes and how to profit from them in International Living Investor. And long-term readers have already have come across dozens of interesting ways to play these trends.
But for me, the single most important trend is the growing pressure on the world’s finite natural resources as a result of the explosive growth in populations and wealth in the emerging world.
Consider the following…
Despite a huge jump in the amount of fertilizers being used, per-acre crop yield growth has gone down from 3.5% in the 1960s, the heyday of the Green Revolution, to a growth rate of just 1.2% now.
At the same time the world’s population is set to grow from just over 6 billion, where we are today, to somewhere between 8 billion and 11 billion over the next 40 years.
Incomes are rising too, leading to greater consumption of natural resources (driven by higher protein diets, more demand for oil-fueled cars, motorbikes and air travel and more demand for basic materials such as copper, steel and concrete for building better houses).
India and China alone – which account for 2.5 billion people between them – grew their economic output at a level last year of over 8%!
And even if population growth in the emerging world happens at a dramatically slower pace of growth than forecast, as the emerging world catches up to the developed world consumption levels will grow along with pressure on resources.
According to UCLA professor Jared Diamond our “consumption factor” in the West – that is for roughly 15% of the world’s population – is 32.
This means we consume 32 times more and produce 32 times more waste than, say, your average Kenyan, who has a consumption factor of 1.
If you could wave a magic wand and bring the other 85% of the world’s population in line with the West’s standard of living… and its consumption factor of 32…you would raise global consumption 11-fold.
It would be as though the world’s population went overnight from 7 billion to 72 billion!
Now, please don’t get me wrong. I’m not a “doom and gloomster.” And I’m not a frothing Malthusian either, predicting a bitter end for a ballooning population.
Quite the opposite. I am a big believer in our ability to solve many of the problems the world faces due to the growing stresses on natural resource supplies.
And there will be fabulous opportunities to profit for investors along the way…either by investing in resources-rich overseas markets or by backing companies that seek to solve the world’s resource problems.
I’ll have more for you on these opportunities in future issues.
For now, remember that the investors who will be successful over the next decade and beyond are the ones that back the big trends.
And the biggest trend of them all is the massive strains being put on our finite resources by the lightening-fast growth in the emerging economies.
P.S. We will be posting video recordings of all the presentations at the recent Bonner & Partners meeting in France. This is strictly for members’ eyes only. To find out more about membership, please read the invitation letter by the group’s Executive Director, Will Bonner.
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