The Best Sector for Investment In the Next 50 years

If you had to pick stocks and hold them for fifty years, what would you choose? The reason I ask is that I’m currently reading a book called The Forever Portfolio by former hedge fund manager James Altucher. It’s from 2008.

The premise of the book is to find ways to capitalise on the biggest trends in the stock market with a time frame of half a century.

If you’re holding for that long, you don’t worry about the next Fed meeting or almost any other standard economic indicator. I’m talking about trends that are so big that they override the inevitable slumps and dips in the stock market and the economy.

The Australian Financial Review reported yesterday on a trend that’s shaping up something like that. It’s called Chinese tourism. A recent study says that the number of Chinese households earning more than US$35,000 (AU$45,970) will nearly triple, reaching 63 million by 2023.

According to the study, that figure is the threshold for being able to afford overseas travel. Chinese arrivals to Melbourne are expected to be up 109%, while Sydney should see 98% more Chinese visitors, and Brisbane 90% more.

-According to the AFR,

“As Chinese tourism demand matures, we expect preferences to shift toward more expensive, longer haul experiences,” the study said.

Australia was the ninth largest outbound spending market for Chinese visitors in 2013 and most travellers to Australia visit for holidays rather than business and tend to prefer cities over rural areas.’

But Australia isn’t even in the top ten for forecast growth in Chinese arrivals. The top honour goes to the United States, followed by France.

And this trend is not just limited to Chinese tourists. If you want an idea of just how wonderfully bullish the travel sector might get, low cost European carrier Ryanair is preparing to launch a transatlantic airline.

If you’ve spent time in the UK, you’ll know the name. Ryanair relentlessly cut costs and drove ticket prices down across Europe. They also have the worst customer service, but they are so cheap most people put up with it.

A Ryanair transatlantic offering could conceivably bring fares between the US and Europe down to 99 pounds one way for the cheapest seats. Promotional offers might even go as low as 10 pounds.

Their biggest problem seems to be finding planes to put people in. The major manufacturers have a backlog of orders measured in years to delivery. This is hardly the stuff forecasting collapse anytime soon.

-Airlines are not just benefiting from increasing wealth in the developing world. With the low cost, who knows what the economic boom might be. US oil output and stockpiles are now running at their highest levels in more than three decades. Over at Cycles, Trends and Forecasts, we keep making the case that this is incredibly bullish for the economy and stocks. But it’s only part of the reason. The full one is here.

The benefit from the decline in oil is showing up right where we’d expect: energy importing countries! That accounts for most of Europe. For example, the German DAX index has broken into all time new highs. Even former basket case Spain is growing at a nice clip again.

The Financial Times reported earlier in the week that the forecast for Spanish GDP now ranges from 2-3% growth. That’s twice as fast as Germany. The FT:

Spain’s economy is now firing on most of its critical cylinders: demand and consumption are on the rise, domestic and foreign investment is up, house prices have turned the corner, and even the bombed-out construction sector is set to grow, albeit modestly, this year.

The low cost of energy is one nice tailwind for Spain. The other one is the falling euro. As a result, US dollar investors are hunting for deals across Europe. Asset prices are up between 5% and 20% in the last three months alone.

The trend is so strong the mainstream have switched from reporting about possible sovereign debt defaults in Europe to there being a possible property bubble brewing!

Like everything, it’s a question of timing. That’s why the real estate cycle we study at CTF is so valuable. It’s one thing to see the trends. It’s another to have the courage to act on them and hold steady when you see so many conflicting opinions and forecasts.

But European property will keep rising, despite these worries. In fact, as you can see here, the cycle has a long way to run yet indeed.


Callum Newman,
for Markets and Money

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Originally graduating with a degree in Communications, Callum decided financial markets were far more fascinating than anything Marshall McLuhan (the ‘medium is the message’) ever came up with. Today Callum spends his day reading and researching why currencies, commodities and stocks move like they do. So far he’s discovered it’s often in a way you least expect.

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