The Century of the Emerging Markets

If the U.S. boom was yesterday’s boom…what is today’s and what will be tomorrow’s boom? What will our Trade of the NEXT Decade be?

Well, we don’t know. But we’re beginning to think our colleague, Manraaj Singh, is right. This is the Century of Emerging Markets.

“The first oil shock of the ’70s was fundamentally a transfer of wealth from the Western oil users to the oil producers,” he says. “Now, we’re seeing a transfer of wealth to the oil producers…and to the food and raw material producers too.”

The latest news is that the emerging markets have already recovered from their October-March losses. You’ll remember, dear reader, that they were hit especially hard by news of a credit crunch in the West – even though they, generally, had no exposure to subprime debt. But now they’re booming again.

The MSCI Emerging Market index has gone up four times in the last five years. Compare that to the Dow – which is flat.

Much of that growth can be traced directly to the boom to the commodities that these countries export – but not all. Some emerging markets – notably China – export neither food, nor fuel, nor raw materials. Instead, they are the biggest importers of these things in the world. In other words, they should be the countries that suffer most when prices rise. Instead, they’re booming too.

“In 1990, China imported 20,000 metric tons of copper. Today, it’s over 1 million…a 50-fold increase in less than two decades,” Capital & Crisis ’ Chris Mayer tells us. “China is now the world’s leading copper consumer.”

China’s not the only market to keep your eye on. Chris has been eyeing up India, whose modernization is about 13 years behind China’s, for a while now…and with good reason.

“Copper is one of the essential materials for any developing economy – for housing, for commercial construction and especially for an ever-expanding electrical grid…and you can imagine how copper use in India is about to explode.”

And copper is the main business of the next great Indian opportunity Chris has identified. In fact, this company is by some accounts the lowest-cost producer of copper in the world – at just 7 cents a pound.

What seems to be happening is that the emerging markets are doing just what you’d expect. After listening to so many lectures from so many American advisors and busybodies, they’ve finally turned on and tuned in to the new paradigm of modern development. It doesn’t seem to matter what kind of government they have, by the way. Oligarchy, communist dictatorship, old-fashioned dictatorship, popular democracy, monarchy – George W. Bush tells the world that it must have an American-style democracy in order to get rich; he needs to open his eyes. All these emerging markets have access to capital and technology…they have the desire… and they have globalized markets that allow them to sell what they make and buy what they need.

Will mistakes be made? You bet. Huge mistakes. Costly mistakes. But, at least from what we can see, there seems to be no stopping them. Which also makes sense. One of the universal laws of economics is ‘regression to the mean.’ The United States – along with other developed countries – must be expected to regress to the mean. There is no inherent reason why they should be richer than other countries – at least no reason we can see. Now, with the emerging markets growing fast…and sub-par growth the “new normal” in the United States…one rises, while the other falls. Before too long, they will meet – at the mean.

Bill Bonner
Markets and Money

Bill Bonner

Bill Bonner

Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America’s most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind Markets and Money.
Bill Bonner

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I think its time that America started thinking about rebuilting our manufacturing sector and started building products targeting the emerging markets – which will be rich after they sell their dollar.

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