Conquer the greatest money migration in history Keith Fitz-Gerald, Chief Investment Strategist...
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Transcript of Conquer the greatest money migration in history Keith Fitz-Gerald, Chief Investment Strategist...
Conquerthe greatest
money migrationin 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?
Copyright 2011 – All Rights Reserved
Keith Fitz-Gerald• Chief Investment Strategist, Money Map Press
- 640,000 daily subscribers in 30 countries• 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
I’ve been trading & travelling for 20+ years
And I have never seen
as much opportunityas 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 Americancountries account for 47.88% ($11.3 trillion) of global economic leaders
Adapted from CNN.com interactive graphic
Asian countriesaccount for 25.00% ($5.9 trillion) of global economic leaders
Adapted from CNN.com interactive graphic
European countriesaccount for 24.57% ($5.8 trillion) of global economic leaders
Adapted from CNN.com interactive graphic
North Americancountries account for 39.51% ($16.2 trillion) of global economic leaders (…a 17.48% decline from 2000)
Adapted from CNN.com interactive graphic
Asian countriesaccount for 30.73% ($12.6 trillion) of global economic leaders (…a 5.73% increase from 2000)
Adapted from CNN.com interactive graphic
European countriesaccount for 24.87% ($10.2 trillion) of global economic leaders (…a 0.30% increase from 2000)
Adapted from CNN.com interactive graphic
Asian countriesaccount for 39.6% ($21.4 trillion) of global economic leaders (…a 28.86% increase from 2010)
Adapted from CNN.com interactive graphic
North Americancountries account for 33.33% ($18 trillion) of global economic leaders (…a 15.71% decrease from 2010)
Adapted from CNN.com interactive graphic
European countriesaccount 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 growththe shift is even more apparent
Adapted from CNN.com interactive graphic
Adapted from CNN.com interactive graphic
Adapted from CNN.com interactive graphic
2000
2005
2010
2015
GDP Growth – 2000~2015
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
ItalyAdapted 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 IsCatching Up
http://imgs.sfgate.com/c/pictures/2007/08/31/bu_bric.jpg
The biggest
spending gap in
recorded history
Source: McKinnsey & Co. IMF
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
Renren, Inc. IPO$854.9 millionMay 4, 2011
U.S. listed Chinese IPOs
• 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
• Since the beginning of 2010, Chinese high technology companies have raised $1.7 billion in the US IPO market for 30% of all activity.
• 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.
• 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
SALES $8,869 BILLION 7%
PROFITS $576 BILLION 105%
ASSETS $36,501 BILLION 23%
MARKET VALUE $10,215 BILLION 16%
BIGGEST COMPANY
PETROCHINA
Asia by the numbers
Source: Forbes – The Global 2000 (2011)
Asia Is The Billionaire Factory
Total number of billionairesin Asia in 2011
332Total number of billionairesin Asia in 2001
79Source: 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
Most to gain
Most to lose
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
China
United States
Western Europe
• Japan’s Lost Decade begins• U.S. real estate bubble• Dot.bomb
The point: China’s just coming back up to speed…
China’s growth is not an aberrationnot going awaynot 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
Emerging markets had less debt going into this crisis and will have less debt coming out
Less inflationary pressure and greater strength
Debt
Sell
Buy
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
Buy Most investors have only 6% overseasData suggests 40% may be more appropriate
U.S. only choices – they underperform
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?
• Expect Chinese Yuan in trading pairs within a decade
http://1.bp.blogspot.com/_1V7wnZxPqok/RqWqS9Y-fdI/AAAAAAAAF04/6jgdlxW1jOc/s400/usd+cartoon.bmp
Sell
Buy Asian currencies, Swiss Franc
Euro, U.S. Dollar
Purchasing power shifting from West to East
Will haunt badly scared US consumer for generation or moreEmerging markets consumers will take up the mantel
Sell
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 overseasWeaker dollar helps ‘em earn more moneyBuy
Oil
• Emerging market demand will push price higher
• Falling western demand a fallacy• Alternative energy remains wishful
thinking• $100 a barrel or more Buy
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…
Declining
Growing
Follow the money…
Share of worldwide capital
RecappingAsia 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
• Makes Greece look good• Experienced mis-managers• The trade of the century• 2-10 year horizon • More this afternoon
Thank you!
Friday1100 Conquer the Greatest Money Migration1615 Making the Currency Trade of the Decade Count
Saturday1630 The best places to hide from the falling dollar
www.moneymorning.com