Understand one of the 5Es: the transfer of wealth and power from the West to the East

October 20, 2009 · Posted in Bad Credit Loans · Comments Off 

If you are like me, you probably have been hit hard by this financial crisis.

 

There is a lot of uncertainty in the air.

 

Conventional wisdom is not working any more.

 

Many are seeking to understand this turmoil and are wondering what they should be doing to not only survive, but thrive, during these turbulent economic times.

 

I recently published an article where I introduce a framework, called the 5Es, as a way to understand the magnitude and drivers of the change underway in the global economic landscape.  These changes are causing stress and anxiety for all of us along with the feeling that a financial rip tide is sweeping us out to sea.

 

As Steve Forbes likes to say, increasing our financial education and the resulting empowerment from this improved financial literacy are the keys to a recovery from this financial crisis.

 

In that spirit, I am going to describe one the 5Es, “the transfer of power and money from the West to the East” … use this description as a way to understand a key driver of the turmoil being experienced by many in the West and as a way to have your eyes open to the new alternatives that can be used to create wealth.

 

Let me start by providing an excerpt straight from my previous article … “from west to East … there is a transfer of wealth and power underway to the Asia Pacific region, especially China.  The USA is currently the world’s largest economy however it is estimated that China will be the world’s largest economy by the middle of this decade.  A lot of churn and turmoil is associated with this change.”

 

Some examples of this transfer follow.

 

From an auto market perspective, China and India caught and passed the US, the European Union, and Japan in 2008 as the world’s largest auto market.  And, the gap has even widened during this recession … while the heads of the US auto makers were in Washington pleading with the US Gov’t for a bail out

 

Cars don’t run in a vacuum.  They need roads, gasoline stations, and gasoline … all of this requires a lot of building materials and oil.  Just think about oil for a minute (as a reminder, Energy is another one the 5Es in the evaluation framework).

 

The U.S. consumes up about 25 barrels of oil per person per year. The oil consumption in China and India is tiny compared with the consumption in the US. China is at 1.5 barrels of oil per capita annually. And India barely registers.

So one can only imagine that as these economies grow and take up more of a share of the global economy, their oil consumption will rise exponentially.

 

Although China already has more than 160 cities, with each having a population of greater than one million (the U.S. has nine, the U.K has two), it still consumers half of all the world’s cement as it strives to build 97 new airports, 500 additional coal fired plants, and 30 nuclear plants in the next decade.

 

As a result of this build-out, just imagine what it takes to house, feed, and cater to the needs of China’s 1.3 billion people … it is no small task.

 

Commodities that are in demand in China, yet in short supply in China, include agricultural commodities like soybeans and potash, copper, natural gas, uranium, bauxite (important in making aluminum), chromium (a steel additive) and manganese (important for making stainless steel).

 

As far as keeping your eyes open to alternative wealth creating strategies, it boils down to investing in what these economies need, but don’t have.

 

In previous articles, I wrote that many of us are evaluating alternative wealth creating strategies outside of the US Dollar … outside of dollar-denominated assets … perhaps emerging markets … perhaps energy assets that are inherently useful like oil rigs, hydropower, or methanol plants … perhaps precious metals, water rights, oil, natural gas, potash mines, or gold mines … things hard to build, difficult to replace, and costly to substitute … definitely not financial stocks, definitely not retail stocks, definitely not commercial property.

 

I trust this article provides a little more insight as to why emerging markets with a demand for things that are in short supply (such as oil, food, water, precious metals, and potash mines) represent alternative wealth creating strategies.

 

In addition, a good book to read would be “Asia Rising” by Jim Rohwer.  This book provides a good read as to the economic success of the East and Southeast Asian countries and some insight as to lessons the West can learn from this prosperity in terms of breaking the paralysis of special-interest politics.

 

The world is changing dramatically and the emerging markets will potentially provide some light at the end of the tunnel.

 

I will continue to build upon the “transfer of wealth and power from the West to the East” theme of “the 5 E’s” framework, and the other Es in the framework (these are Energy, decline of (USA) Empire, Experiment with paper money, and Economic cycle) in future articles and updates at my blog which is at http://aspenIbiz.blogspot.com . 

Early in his career, Mike was an engineer with a large aerospace company. For many years, he was with a “marquee” consulting firm where he worked extensively with clients all around the world and became know as an American globalist. Most recently he has been providing technology, business, and management advisory services as a self-employed entrepreneur.

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Historic shifts are underway on the New Silk Road where East meets West creating alternative investment opportunities

October 15, 2009 · Posted in Bad Credit Loans · Comments Off 

You probably have heard of NAFTA (North America Free Trade Association), OPEC (Organization of Petroleum Exporting Countires), the EU (European Union) and the BRIC (Brazil Russia India China) countries … but have you heard about MENA?

 

Ok, you ask … what is it and why should I care?

 

When conventional wisdom is not working any more, we need alternative investment strategies and you should give consideration to a very important region that collectively has a bigger economy than Brazil, Russia, and India … 3 out of the 4 BRIC countries.  And, in terms of growth, this region is growing faster than any of these countries.

 

Population wise, this region is bigger than the USA and is approximately equal in population to the EU.  In addition, this region has an exploding population (which is good from an engine of growth perspective … reference a key theme in recent presentation from Stuart Varney of Fox News at WizeFEST 2009, a conference this author recently attended).

 

This region is in the center of a part of the world along the old Silk Road … where we think of a network of traders with caravans loaded with silk, spices, flowers, jewelry, and gold … and trading routes with the romance of the Indian Ocean.  From Perth, Australia to Mombassa, Kenya along the coast of East Africa with passages up and down the Persian Gulf and the Red Sea.

 

There is a political thaw underway in a country in this region that has been the mercantile crossroads between East and West since its days as a link on the old Silk Road.

 

Examples of this thaw are that the US is sending an ambassador to this country after a four-year absence and the US is easing export bans to this country.

 

The region is called MENA or the Middle East and North Africa.  Among its largest economies are Saudi Arabia (where this author had a home base for two years) and the United Arab Emirates (which includes the go-go city of Dubai).  As a result, MENA holds 60% of the world’s proven oil reserves and nearly half of its natural gas.

 

Much has changed in this region over the years and its reach has expanded such that The New Silk Road weaves through Damascus, Riyadh, Dubai, Mumbai, Chennai, Kuala Lumpur, Singapore, and Hong Kong.  Along The New Silk Road, key alternative growth strategies include the scarcity of water and food, infrastructure needs, energy (in terms of drilling, pumping, and distribution) and engineering services … and finally, it offers growth not dependent on US trade (which is expected to be quite anemic).

 

In 2000, China’s exports to the Arab world came to just $6B.  Last year, China’s exports to the Arab world ($48B) nearly matched America’s exports to the Arab world ($50B).  Earlier this year, China finally passed the USA to become the Arab world’s largest trading partner … highlighting how a rising Arab world is turning away from the West and Rediscovering China.

 

Syria is the country mentioned previously that has a political thaw underway and is the mercantile crossroads of the East and West on the old Silk Road.

 

The largest investor in Syria is the Chinese company, Haier, that makes washing machines and microwave ovens in the country.  Another Chinese company recently completed a $180M hydroelectric plant.  On the drawing board, there are big real estate projects, including resorts on the Syrian Mediterranean coast.  They are 48,000 hotel beds coming online over the next three years and this will almost double the amount of beds currently available.  Tourism is up significantly in this country and currently accounts for 13% of the economy.

 

The region benefits from expanded trade with China and the rest of the Asian countries that are in pursuit of the region’s oil.

 

The most interesting thing about this growth is that it is happening in a part of the world where water is scarce and it is most difficult to grow food.  In Kuwait, one of the countries in the region, annual water consumption is 22 times the rainfall.  Counties in the region import 60% of their food and are phasing out crop production in order to conserve water.

 

Ironically, many of the countries in the MENA block are investing in farmland overseas with major purchases of farmland in Indonesia, the Sudan, and Pakistan.

 

One of the key takeaways is that alternative investment opportunities in a growth region like MENA include food and water necessary to feed and meet the thirst of all these people as well as the energy, infrastructure, and engineering services to drill, pump, and distribute oil and natural gas.

 

Your author lived and worked in the region early in his career and was always impressed with the upside potential in the region once political barriers could be overcome.

 

In addition, a recent edition of The Economist had a cover story on the Arab world titled “Waking from its sleep” with a 14-page special report containing a collection of articles.  Key points in these articles indicate that there has been two decades of political stagnation but there is a fever under the surface for change.

 

In the Arab world, its people are starting to speak out, to strike, and to take to the streets in pursuit of their demands.  As more women are educated and as more business people want a say in the state-run economies, the old pattern of the Arab governments that are corrupt, opaque, and authoritarian, are changing.

 

The democratic and capitalistic movements underway include education, tolerance, and independent institutions such as judiciary and free press.

 

Once the last failed dictatorship is voted out, the quiet revolution will be complete and the tremendous upside potential from trade will grow the region even faster under the more liberalized economic governments.

 

I trust this article has introduced you to an emerging economic region … a crossroads where East meets West on The New Silk Road … and the various alternative wealth creating opportunities associated with water, food, infrastructure, energy, and engineering services related to oil and natural gas.

 

I will continue to monitor developments in the MENA region and report on alternative wealth creating strategies in future articles and updates at my blog which is at http://aspenIbiz.blogspot.com  

Early in his career, Mike was an engineer with a large aerospace company. For many years, he was with a “marquee” consulting firm where he worked extensively with clients all around the world and became know as an American globalist. Most recently he has been providing technology, business, and management advisory services as a self-employed entrepreneur.

Article Source:http://www.articlesbase.com/wealth-building-articles/historic-shifts-are-underway-on-the-new-silk-road-where-east-meets-west-creating-alternative-investment-opportunities-1335514.html

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