Transcript of global economic leaders

Conquer
the greatest
money migration
in history
Keith Fitz-Gerald, Chief Investment Strategist
MoneyMorning.com
All investments have inherent risks.
Past performance does not guarantee future results.
All investments are undertaken at your own risk.
Recommendations are subject to change at any time.
No representation is being made that any account will, or
is likely to achieve profits or losses similar to those
discussed in this presentation.
The risk of loss in online trading of stocks, options, futures, forex, foreign equities, and bonds can be substantial. Options are not
suitable for all investors. For more information read the "Characteristics and Risks of Standardized Options". For a copy, call +1
203 618-5800 or click here. YOU SHOULD THEREFORE CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN
LIGHT OF YOUR FINANCIAL CONDITION.
Should you
listen to anything
I have to say
Keith Fitz-Gerald
• Chief Investment Strategist, Money Map Press
- 640,000 daily subscribers in 30 countries
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•
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Former Trade Advisor in global markets
Regular - Fox, Marketwatch, Forbes, others
Founding Fellow of Kenos Circle
Author Fiscal Hangover: how to profit in the new
global economy
Copyright 2011 – All Rights Reserved
I’ve been trading &
travelling for 20+ years
And I have
never seen
as much opportunity
as I see now
Image: Adapted from Inc.com
There is a $300 trillion recovery
building that almost
nobody sees coming…
What to do with your money is perhaps the
most challenging question of all
How much?
Where?
When?
What about cash?
Stocks, bonds, gold?
Income?
International holdings?
Image: Matt Collins, Scientific American
I recognize that many of you want to go straight
to the secret sauce…
Sweet Love Sauce: Amazon.com
That’s great…
but without context
the results are meaningless
http://4.bp.blogspot.com/_hBiBaUg_1rA/SJTQE0ymK7I/AAAAAAAABxI/OIKhMiaaQ2E/s400/confusing_signs2.jpg
So let’s step back a minute and examine the
broader scheme of things…
…then we’ll know what to do
Money is like water…
if it is flowing out of one part of the world,
that means it’s flowing into another
Most people understand this instinctively
on some level but I find that
few have thought about what it really means
for your money
http://trustedbi.com/images/puzzled-man.jpg
Let’s take a look
http://www.ony.unu.edu/images/world_with_money.jpg
North American
countries account for
47.88% ($11.3 trillion)
of global economic
leaders
Adapted from CNN.com interactive graphic
Asian countries
account for
25.00% ($5.9 trillion)
of global economic
leaders
Adapted from CNN.com interactive graphic
European countries
account for
24.57% ($5.8 trillion)
of global economic
leaders
Adapted from CNN.com interactive graphic
North American
countries account for
39.51% ($16.2 trillion)
of global economic
leaders
(…a 17.48% decline from 2000)
Adapted from CNN.com interactive graphic
Asian countries
account for
30.73% ($12.6 trillion)
of global economic
leaders
(…a 5.73% increase from 2000)
Adapted from CNN.com interactive graphic
European countries
account for
24.87% ($10.2 trillion)
of global economic leaders
(…a 0.30% increase from 2000)
Adapted from CNN.com interactive graphic
Asian countries
account for
39.6% ($21.4 trillion)
of global economic
leaders
(…a 28.86% increase from 2010)
Adapted from CNN.com interactive graphic
North American
countries account for
33.33% ($18 trillion)
of global economic leaders
(…a 15.71% decrease from 2010)
Adapted from CNN.com interactive graphic
European countries
account for
21.85% ($11.8 trillion)
of global economic leaders
(…a 12.14% decrease from 2010)
Adapted from CNN.com interactive graphic
When viewed through growth
the shift is even more apparent
Adapted from CNN.com interactive graphic
Adapted from CNN.com interactive graphic
Adapted from CNN.com interactive graphic
GDP Growth – 2000~2015
2000
2005
2010
2015
It’s worth noting…
despite$14.85 trillion in guarantees and stimulus the U.S. doesn’t even make the list
Here’s another way to look at it…
Asia’s share is growing**
Oil exporters
US, OCADC countries, & rest
of the world is shrinking
It’s also worth noting…
That our own zero-interest-rate-policy, TARP and QE2 makes this worse
**Asia has attracted $2.3 billion a day since April 2009 - DBS Group Holdings
China
United States
India
Japan
Brazil
Russia
U.K.
Germany
France
Italy
Adapted from original by Joe Swainson/VisualizingEconomics.com
It doesn’t matter
if you prefer pie charts…
Or simple line charts…
As recently as 2005, only 27 Fortune 500 Companies were based in BRIC countries.
That number today – a mere five years later – is 67.
The conclusion is the same…
Money is
leaving the
developed
economies &
nanny states…
…and flowing
into the
emerging
markets
Despite overwhelming evidence, people
dismiss what’s happening…
http://www.aspencountry.com/assets/product_images/product_lib/29000-29999/29586.jpg
That’s a costly mistake
Because the risks have never been higher
when it comes to our money
Many people are understandably frightened by
the changes taking place…
http://jan.freedomblogging.com/files/2009/11/frightened-guy-560.jpg
Yet history shows that
The trick is knowing what to look for
Half the World’s GDP
In 2009, 55% of the world’s GDP
is concentrated in just 3:
EU, USA, PRC
http://imgs.sfgate.com/c/pictures/2007/08/31/bu_bric.jpg
And Half the World Is
Catching Up
Source: McKinnsey & Co. IMF
http://imgs.sfgate.com/c/pictures/2007/08/31/bu_bric.jpg
Top 5 Exchanges (Capital Raised) 2008
Source: Ernst & Young
Top 5 Exchanges (Capital Raised) 2009
Source: Ernst & Young
Top 5 Exchanges (Capital Raised) 2010
Source: Ernst & Young
Looking at it another way
Source: Ernst & Young
Top 10 Global IPOs (YTD as of March 18, 2011)
Source: ipo-book.com
U.S. listed Chinese IPOs
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May 4, 2011 Renren, Inc. (NYSE: RENN) , a China-based a social networking provider
raised $854.9 million in its IPO making it the largest Chinese IPO since 2009
•
2010: a record 22 Chinese companies listed on NYSE
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Since the beginning of 2010, Chinese high technology companies have
raised $1.7 billion in the US IPO market for 30% of all activity.
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2011 YTD: eight Chinese companies have listed in the United States raising $1.5 billion
…more than triple the activity over the same time period in 2010.
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Since 2006, Asian issuers, particularly China and Hong Kong, raised the most IPO capital on record,
making up almost 65% of global proceeds (US$183.9 billion, 789 deals).
Source: Ernst & Young, Thomson Reuters & NYSE.com
Asia by the numbers
SALES
$8,869 BILLION
7%
PROFITS
$576 BILLION
105%
ASSETS
$36,501 BILLION
23%
MARKET VALUE
$10,215 BILLION
16%
BIGGEST
COMPANY
Source: Forbes – The Global 2000 (2011)
PETROCHINA
Asia Is The Billionaire Factory
Total number of billionaires
in Asia in 2011
332
Total number of billionaires
in Asia in 2001
79
Source: Forbes – The Global 2000 (2011)
Many people think that somehow things will go
back to the way they were…
…they will
…but it’s not what they expect
Source: Visualizing Economics; Angus Maddison, University of Groningen
Copyright 2009 – All Rights Reserved
While we’re on the subject of China, this next
chart takes many people by surprise…
China has had the world’s largest economy
for 18 of the last 20 centuries
The point: China’s just coming back up to speed…
China
United States
Western Europe
• Japan’s Lost Decade begins
• U.S. real estate bubble
• Dot.bomb
China’s growth is not an aberration
not going away
not stopping
Whether or not we like it is immaterial…
…get over it or get left behind
China will affect every asset class and every
investment choice on the planet for the next
100 years…
…it is the single largest opportunity
we will see in our lifetimes
And the best part…
You don’t have to invest there to profit…
…But you do have to know
how this money shift
will play out in world markets
Let’s break it down to brass tacks
http://4customers.files.wordpress.com/2008/11/brass-tacks.jpg
Debt
Sell
Buy
Emerging markets had less debt going into this crisis and will have
less debt coming out
Less inflationary pressure and greater strength
Geopolitical influence
• Recent events show the US is outmatched, isolated and
increasingly irrelevant. Expect Europe to show renewed
strength not as the EU but as individual nations doing business
with China and with Asia.
• US fails to recognize that even though we are uncomfortable
with China’s rise, increasing number of nations are okay with it
Sell
U.S. only choices – they underperform
Buy
Most investors have only 6% overseas
Data suggests 40% may be more appropriate
Currencies
• $202 trillion in unfunded
liabilities signal weaker
U.S. Dollar
• Short term tactical rise in
USD is temporary “risk off
trade”
• End of the Euro?
http://1.bp.blogspot.com/_1V7wnZxPqok/RqWqS9Y-fdI/AAAAAAAAF04/6jgdlxW1jOc/s400/usd+cartoon.bmp
Sell
Euro, U.S. Dollar
Buy
Asian currencies, Swiss Franc
• Expect Chinese Yuan in
trading pairs within a
decade
Purchasing power shifting from West to East
Sell
Will haunt badly scared US consumer for generation or more
Emerging markets consumers will take up the mantel
Buy
Manufacturing in most countries is expanding
but PIGSs risk contraction, Japan risks failure
“Glocal” branding means bigger cash flow
40% of S&P 500 already drive earnings from overseas
Buy Weaker dollar helps ‘em earn more money
Oil
• Emerging market demand will
push price higher
• Falling western demand a fallacy
• Alternative energy remains wishful
thinking
Buy
• $100 a barrel or more
Resources & Commodities
• Gold $2500 an oz or more
• Chinese view these as alternative
currencies because they preserve
value
• Bid up so have to step carefully
http://www.heatingoil.com/wp-content/uploads/2009/11/rising-oil-price.jpg
Buy
This all boils down to one key thought…
Follow the money…
Share of worldwide capital
Declining
Growing
Recapping
Asia will become largest driving force in world trade
• Led by China, it will become single biggest market and influence in global
trading for the next 100 years
• 40% of the S&P 500 earnings already come from outside the U.S.
Western Economies are falling by the wayside
• Aging population
• Very high Debt to GDP ratios severely hamper GDP growth
• Private growth reduced by higher taxation and larger public sector spending
Even though people are paralyzed by high unemployment, low
inflation, and a housing market that may not come back for a
decade, your money doesn’t have to be.
Some choices to get started…
The risk of loss in online trading of stocks, options, futures, forex, foreign equities, and bonds can be substantial. Options are not
suitable for all investors. For more information read the "Characteristics and Risks of Standardized Options". For a copy, call +1
203 618-5800 or click here. YOU SHOULD THEREFORE CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN
LIGHT OF YOUR FINANCIAL CONDITION.
Chinese RMB
• World’s new reserve
currency?
• Global swaps are enabling
this even as western
banks don’t yet see it
coming and major
currency pairs have not
priced it in…yet
• 2-10 year horizon
• EverBank Deposits
• WisdomTree Dreyfus
Chinese Yuan (CYB)
• MarketVectors RMB/USD
(CNY)
US Dollar
• Risk off make this a
nimble trader’s play
• EU debt crisis
• Commodities play implied
• 3-6 month horizon
• PowerShares DB USD
Index Bullish (UUP)
Japanese Yen
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Makes Greece look good
Experienced mis-managers
The trade of the century
2-10 year horizon
• More this afternoon
Thank you!
Friday
1100 Conquer the Greatest Money Migration
1615 Making the Currency Trade of the Decade Count
Saturday
1630 The best places to hide from the falling dollar
www.moneymorning.com