- Market Witch is a compendium of theory, context, and thoroughly practical information about the equities markets and the factors that affect them.
- Market Witch offers the broadest and most comprehensive perspective of any financial monthly you can buy, together with specific Strong Buy recommendations.
- We favor a long-term investment strategy.
- We focus upon what occurs in our culture and in others, how it affects the equities markets, how we profit from it and how you can too.
At Market Witch we keep an eye on the past, but we look out ahead two three four years and more, both for our own financial well-being and yours. What we suggest you invest in is what we ourselves invest in and we tell our readers exactly what changes we’re making in our portfolio every month and immediately when we buy or sell -within an hour- in our free updates and commentary.
As 2014 opens, the United States is continuing to undergo dramatic, elemental and fundamental social and economic changes. The culture war divide that broke the US into separate populations, much similar to the US circa 1859-1860 shows no sign of abating. About 45% of Americans have no allegiance to the federal government that is backed by Americans who comprise what we call "the People's Republic of America" or "the USSA" and Obamacare remains a fiasco still gathering momentum. Americans who oppose both the Obama regime and the John Boehner/ John McCain traditional Elephant Republicans are starting to become far more vocal. The European EU economy is quite strong, especially Germany's economy following Angela Merkel's re-election and the formation of a successful coalition government (Germany's DAX is up 21% over year 2013) but also Holland's and the UK's as well. Gold has just been discovered, in a big way, in Ireland, probably something that was known about and mined in pre-Gaelic Ireland but lost in the mists of time for centuries if not millennia, and a new gold rush is about to get underway. We're not as concerned about Germany leaving the EU as we were two years ago but German opposition over EU immigration mandates specifically immigrants from Bulgaria and Romania that the Germans call "poverty migrants" whom they think will wreck welfare and social services safety nets may once more cause Germany to threaten to exit the EU this year. We are very confident in the Indonesia economy this year (see ETF IDX). Brazil is about to take center stage for the next 24 months with the 2014 World Cup and the 2015 Olympics and we think Brazil's economy, much stronger than you might think from reading American financial journalism, has bottomed out and is headed upward. We expect Dilma Rousseff to lose the 2014 Brazil election in October and we think that's a good thing. We tend to stay away from all but a few China stocks but we recognize that China and its probable 9% GDP growth rate this year is a force to reckon with. Watch for iron ore prices to remain high, for steel prices to rise, and copper too. We're looking at the rebirth of manufacturing bases in Asia Europe and even the US and we expect 2014, even with some possible wild cards and black swans, to be a strong economic year. The USA's Fed and Treasury remain in denial about gold, and even as the year begins are already unable to continue to exert pressure to hold down gold's price. Gold is wildly undervalued.
The Big picture: work forces that used to be national and regional and isolated from each other are now one single global work force, and money flows to wherever the labor is stable, most skilled, and least expensive. This means that globally, while wages for labor in most countries are generally rising, in the USA, wages continue comparatively to fall as wages in a single global market reach a global norm and standard that is higher than some countries have traditionally had, but lower than ours.
This is a major shift, probably a once-in-a-century one, in the USA's economy because it means that a widely available American Middle Class lifestyle- one like most Americans in the post- WWII 1950s era the Swingin' 60s decade the Ad Age and X-rated movies 70s the Gay Rights 80s and even the early Clinton 90s experienced, with easy job availability and high wages, a job market in an expansionistic economy and a job market easy to enter and advance in, is just not there. And it won't be. This broad-based US Middle Class is gone and it is not coming back.
For most Americans, the spotlight remains on our own country, and the American predicament with unemployment & underemployment, the high cost of higher education that is for the most part not relevant to the available job market, and Americans' increasing distrust of a newly-emerging Big Brother style USA police state controlled by an Imperial Presidency, and their increasing awareness of having been sold a bill of goods in several facets of life. Outside the US, the rest of the world goes right on, not oblivious but certainly uncaring toward America's plight. An American subculture much larger than you might suppose idolizes Vladimir Putin, thinks he is gutsy and macho and a leader like Teddy Roosevelt and would choose him as USA's president of they could, and applauds Russia's newfound Orthodox conservatism.
Meanwhile, technology is wreaking fundamental global changes. Some 775 billion photographs will be taken globally this year, almost all of them with cell phones. The social media phenomenon, with star players like Facebook and Tweet, has probably peaked in popularity and has entered the stage of being just another advertising venue. But 40% of American teenagers own iPhones and young
Americans are increasingly reluctant to buy own and maintain cars (and houses too). They also don't buy movies in DVD or long-dead VHS either and they don't buy music CDs either, they download all the contents to portable devices. Mobile point of purchase and Online retail sales, a groundbreaking phenomenon in Japan fifteen years ago, now is global and is fast gaining momentum in the US. A major cultural innovator and strongest retailer in America is: Amazon (USA: AMZN)
Connectivity, a mere theory in the mid-1990s at the dawn of the Internet and cellphone era, at first was based on Corning's (USA: GLW) fiber optic cable, but has now gone completely wireless and mobile as far as individual consumers are concerned. Retailing is handheld, mobile, and instantly available anywhere. So is banking, social networking, investing, movie and dinner reservations and airline tickets, and so on. The US remains obsessed with text-messaging, to the detriment of job skills, etiquette, and the US GNP as Americans obsess over meaningless moment-to-moment keeping in touch, broadcasting to each other minutiae about their lives.
The Transnational Islamic Superstate remains a threat to the West in the form of (a) Iran and its Bomb (b) immigration by Muslims who don't assimilate but simply work toward turning the host country Muslim. The Indonesian Islam-Indonesia is the world's 4th largest country and has a marvelous future ahead of it- is something entirely different. It is industrious, hard-working, ambitious, family-oriented, and wealthy. We invite you to invest in it. A new facet is Islamic banking, which, even with its different values, has joined global mainstream financial system.
Gold remonetized beginning in 2007 and following a reaching high point of above $1900 against the US dollar in mid-2011, has fallen considerably lower. This fosters the illusion that gold has now de-monetized in favor of the power of the US dollar. Gold is the 21st century's primary money and secondarily, platinum and silver. Even though we will almost inevitably see a global digital currency and Bitcoin is probably it, Bitcoin will become tied to gramweight gold, and that will be our money. No government can create wealth. Govts can only create money by extending credit, which is, in fact, potential debt that becomes debt as soon as anyone accepts and uses the credit. Gold is destined to rise far higher in price.
The United States has a negative real interest rate, something that occurs when the inflationary rate, or CPI, is greater than the current national prime interest rate. This means if you have American dollars in a bank account or a CD, you are losing money. The majority of the G7 and E7 countries have negative interest rates entering 2014 and those countries include Germany France the Netherlands Sweden Finland Denmark Japan China the US Canada the UK India and Italy. China has a positive real interest rate but is keeping interest rates so low that depositors are losing money too. China however 'gets' gold and is the world's largest purchaser of gold buying 52% last year of all gold produced. All this does not bode well, long-term, for these paper currencies against the value of precious metals. This also contributes to also means stunted or even negative GDP growth, though we see the US GDP growing 3% and very possibly as high as 4% this year.
Some of the countries that do not have a negative real interest rate are Brazil, Mexico, Pakistan, Japan, South Korea, Indonesia and Russia. The strongest of these is Brazil, which will this year become the world's 5th largest economy and is a country that has been our favorite long-term investment climate since 2004.
War, we think, is less likely to happen in 2014 than it was in 2012 or 2013. But in 2015/2016 watch out, because US White House policy has in effect given Iran the nuclear weapon it so hopes to have.
In times like these, an era of great upheaval and social transformation, investing seems iffy, uncertain, and even ill-advised. Rest assured that the alternative- keeping your money in the bank- is far worse.
We remain profoundly confident in big multi-national Brazil companies and their stocks. The United States' S&P 500-based and Russell 2000-based economy is far stronger than it seems, even though US unemployment will remain high and the fate of the Mainstream America is, for the foreseeable future, a lower standard of living. We continue to favor Market Witch High Net Asset Value stocks picks, companies that have real physical assets and whose stocks pay high dividends. These (mostly big mostly multi-national) companies have a superb future heading deeper into this TwentyTeens Decade and into the TwentyTwenties, and also offer growth and the prospect of additional stock splits.
From late 2013 forward into the deep TwentyTeens and early to mid- TwentyTwenties, we will gain from not only via MW's Global High Net Asset Value stocks, but from long-term commodity shortages (copper, steel, wheat) and the (probably permanent) priciness of key commodities. We'll also benefit from the Global Infrastructure Buildout that has affected China and India this past decade but is now starting to affect Africa, Russia, the more backwater regions of Asia, and virtually all of Latin America, which is headed long-term toward the same economic model that has turned Brazil into an economic powerhouse starting to rival even the USA.
In addition both Europe and the US need Infrastructure Rebuilds- of highways, railroads, electricity grids, ports, bridges and buildings, and this will begin yet another growth facet of a very strong global economy beginning in late 2014- early 2015.
Beyond that, The Global Commodities Supercycle you've been reading about in our pages for more than ten years has, we think, at least another twenty years to go, and probably more. Needless to say, the Global Infrastructure Buildout and the ongoing Commodities Supercycle means there's lots of money to be made in the RRs of several countries (especially ours) and even more so in mining stocks and in Global Oceanic Shipping.
The widening & extension of the Panama Canal, currently under a cloud over cost-overrun issues, is set to bring enormous positive changes in global shipping, will place several East Coast US seaports including Baltimore and Savannah far higher in economic importance, and will be a gift from the heavens to Eastern US RRs.
A continuing goal for us during these coming years is to maintain a high level of safety, on a day-to-day basis, in our portfolio. That means High Net Asset Value stocks. In 2013, that continues to mean high levels of holdings in gold, iron ore and copper and utilities companies. Especially copper. Here's an easy freebie: the ratio between the value of gold per oz and copper per pound is 463:1. The ratio between gold per oz and copper per oz is 463x16=7411:1. Copper is selling at 23 cents an oz. we expect copper to rise to above $0.70/oz in late 2015/early 2016. At Market Witch we call this free money.
A continuing priority investment in our favorite High Net Asset Value stocks are Agribiz companies. You'll find our favorites- and shares we hold- in any MW issue.
In 2014 the Global Infrastucture Buildout, plus a slightly improving economy in the US and Europe, plus the expansion of Latin American and Indonesian economies, plus the continuing strength of the China economy, mean higher prices for iron ore and higher prices for steel. That will start to mean, for us, larger positions in Global Steel Companies, as steel forms the groundwork for development all over Latin America and also Africa.
We remain profoundly skeptical of solar energy companies but we are bullish on certain key wind-farm companies particularly Siemens.
Global shipping is at the bottom of a cyclic low, and in 2014 is very likely to be, once more, the start of boom times which will accelerate as an expanded Panama Canal opens in 2015.
We expect China to have GDP growth of above 8% in 2014. China, always a centerpiece of Black Market activity, has moved into the manufacture of American-style Outlaw Economy drugs, and now has meth labs similar to those that American Outlaw Biker clubs have been operating for decades.
Brazil (GDP $2.48trillion) will have a 2014 GDP growth rate of 4% to 5% this year. Even though doom and gloom forecasts (from Americans) say 2.2%, expect the Brazil economy to accelerate a great deal as 2014 moves from early to later. and probably a weaker currency as the US solves problems by making deals that create more debt, and give the illusion that the US has solved its economic problems.
India, world's 10th largest economy (GDP about $1.9 trillion) has been had strong growth throughout the early 21st century but is at a crossroads. Western country 'outsourcing' to India peaked and is in decline. India has strong inflation, elevating interest rates, and its new-century 'white collar' class that was thriving five years ago now isn't. India's prime minister Manmohan Singh, confused by it all and unable to provide solutions, will step down in May and his replacement will determine the direction this country takes. Whatever, it means big changes for India. India had begun to become a global powerhouse in steel and mining but has faltered. India's long-term future is most likely Agribiz (grains and lumber) and mining. A new Middle Class that had begun to thrive in India (and serve as a new consumer market for world goods including ours) is now in jeopardy.
The 'sick man' of the EU economy is France. Europe's 2nd largest economy is burdened by Francois Hollande's radical-leftist government, and moves like his 75% 'millionaire confiscation tax' have put a damper on French optimism, French manufacturing, and the additional moves by big companies into France.
India's economy is far larger but not nearly as strong right now as Indonesia's (GDP about $900 billion) though Indonesia's economy (and its population) is far smaller too. Indonesia is quite recently on Wall Street's radar, but it has been on our radar for seven years. Indonesia's only wild card and downside is that it on the Pacific Rim Ring of Fire, an earthquake and volcano zone.
We expect China to have near double-digit GDP growth in 2014. China now is led by the ambitious, successful, young, sophisticated, educated,- and rich- citizens of the Shanghai region, and has outgrown its provincial and still-Marxist government based in Peking that had not changed a great deal since the 1949 China Revolution. This new government faces forward. And it represents young 21st century Chinese. In 2014, the year of the Wood Horse, will be a prosperous economic year for China. But China's prosperity comes now from Peking, with its backward Marxist government, it comes will come from Shanghai and Hong Kong and the Eastern and Southern coasts. The 30-mile long Hong Kong-Macao-Zhuhai bridge, scheduled to open in 2016, will be one of the wonders of the 21st century, much as the Alexandria Lighthouse was in the once-upon-a-time Mediterranean. A wild card here is China's new military (especially naval) ambitions, which immediately threaten Japan (turf issues in the Sea of Japan) and longer term threaten the US (who rules the Pacific?) China's stupendous growth rate has also come at a fierce price: bad air, and bad water.
Russia's economy has barely even begun to fulfill its 21st century potential. Later this decade we expect to invest much more in Russia via both individual mining companies and ETFs. Russia's 2012 election put Vladimir Putin back into the Presidency. This former head of the USSR's KGB rules with an iron-velvet and sometimes not quite so velvet hand, tolerates no public opposition, and envisions a Russian return to former greatness and power. Russia's ace in the hole, long-term, is not its political clout nor its charismatic leader nor its military nor its Moscow billionaires. It is Russia's enormous commodities wealth.
Australia and Canada are both countries in similar circumstances. Enormous size, tiny populations (34.1 mil for Canada, 22.3 mil for Australia) strong economies both with strong agribiz bases and great and untapped natural resource wealth. Eventually these countries especially Canada will be the beneficiaries, should they choose to accept population gain, of an Exodus of Americans from a country that no longer offers the prospect of economic opportunity that it once did, to countries that do.
Africa is no longer a wild card, Africa has an inevitable future The development of Africa is fully underway even though it's a bumpy road as we are currently seeing in the instabilities in what is now called the Central African Republic, and in areas that were once part of a French colonial empire. And you're witnessing the end of the African Wilderness Frontier much as 1820-1870 signaled the end of the Wild West in the USA. What we're also seeing is the beginning of the end of warlords, dictatorships, and regional tyrants as development (not yet civilization) comes to this once-dark continent. Africa is a source of untold and barely even charted, much less tapped, natural resource and mineral wealth, and the world is flocking to the African doorstep for a piece of the pie. As instability threatens (in places like the Democratic Republic of Congo, once the Belgian Congo) Big Global Mining companies have backed off temporarily. But railroads, agriculture, mining, and perhaps even social stabilization are in sub-Saharan Africa's future.
Middle East and North African Islam is a dramatically-changing region. What is steadily becoming the Transnational Islamic Superstate has cash to invest and is increasingly far more than an oil-based economy. Islam has essentially won acceptance in the West by operating via passive resistance and refusing to assimilate into the values and mores of host countries. Now, in these countries, Islam is slowly initiating and pushing for- Sharia law and expansion of its turf and influence.
2014 is the 4th year of post-collapse America. The USA: 1776-2008. We told MW readers at the start of 2009 that Obama was president of something that was no longer the United States but not yet something else: a sort of no-man's land, a place that was once the USA and sits on the space the USA used to occupy but is no longer the USA. And that whoever won the 2012 election would become the George Washington of what was there, the president of an entirely new country. What happened in fact is that Obama became president of the Peoples Republic of America, and president of only half the states, because the US broke in two. One of these countries, the PRA, is spiraling downward to Third World Country status. The other country, the Former United States of America, is doing just fine financially: strong job market, buying gold and gold ETFs, and paying no allegiance to Washington DC whatsoever.
Nevertheless we are very bullish in 2014-2017 toward selected American companies. We remain very bullish toward the ability of the American people of the Fromer United States of America to invent, to manufacture, to choose the best path, to overcome the bad choices that have led to ignorance greed and debt, to change course, and to prevail. We are in fact, far more confident in the dissident portion of the US, the states in the Former United States of America, than we are in Europe. The states in the former United States of America will lead the US back toward both fiscal responsibility and toward a system that is family-oriented work-oriented and values-laden, or it will secede. Globally speaking fracture of the US and the debasement of its currency are probably additional aspects of the scenario leading to a form of 'world money' based on grams of gold.
Recent years have been very much a stock-picking era. Conventional wisdom is that it has BEEN a stock-picking era since Microsoft and Harley-Davidson went public during the 1980s and Intel and Corning and Cisco in the 90s.
A secret: it has always been a stock picking era. There is no such thing as a 'sector' that you can safely buy into. There are only great well managed and well-positioned individual companies that are undervalued or which show huge potential for growth into the future.
We at Market Witch are cultural theoreticians with backgrounds in anthropology sociology history marketing and advertising and only secondarily in finance, although that 'secondarily' now has a history that spans more than two decades.
Our perspective on 'finance' basically comes from studies of ancient trade routes across North Africa, the Silk Road and the early oceanic routes and what was considered valuable and what was bought and sold and was so valuable it could be moved, even by today's standards, huge distances to make a profit.
We could care less what folks think in lower Manhattan, which is to this day remarkably provincial: Ameri-centric at a time when the US no longer is the center of the economic universe. We study contemporary global sociology and economic and social history with an eye toward what was bought and sold – and what will be bought and sold and we bring forward issues we believe are relevant and which will make us and you our readers lots of money.
We don't study the things analysts think about on Wall Street: no graphs no waves no stochastics no moving averages and no day trading.
We watch the changing relative economic positions of nations, we pay attention to the world's newest products, we find out what's most in demand both here and abroad. And we invest into those trends and we tell our readers exactly what we're doing. Every time we make a move in stock, every time we buy or sell, our MW readers know about it with an hour.
Most of all, we are using history but we are practicing futurist studies. We enjoy identifying the starts of huge oncoming global trends, shifts in relationships between regional continental and national economies, and finding global economic hotspots that will make our readers big profits a year, two years, or even three or four years from now. We enjoy it even more when our stocks- and yours- go up.
The US is even deeper in economic and social transition than it was in 2011 2012 1nd 2014 and a big part of this is the nationalization of health care. An open secret: The Federal Reserve cannot raise Fed Rates because if it does, the interest on the total US debt becomes unpayable and the US will default its bonds. That means near-zero fed rates not because of some plan but out of necessity. This is back- to-the-wall economics, which is why such enormous pressure is being brought to bear on gold. Issues that have been points of argument and disagreement since 2008 were relatively calm in 2013 but in 2014 2015 may become points of action.
Meanwhile: copper, gold, platinum, tin, nickel, silver, wheat, corn, rice, soybeans, platinum, palladium, lumber etc will rise in value.
We believe in, we practice, and in 1995 we probably invented Big Picture Investing. Two and a half decades ago we were studying American pop culture and Americans to find out what to invest in. America's Middle Class Consumer Culture is gone and it is not coming back any time soon, and probably never.
Today, in 2014, we do something similar, but on a far larger scale. Via global financial newspapers periodicals and websites from Europe, Indonesia, Malaysia Russia China, Australia and South America. Plus travel. Occasionally we simply go there. And we also study global economic social and political trends to establish a clear sense of what's going on in the world that affects the equities markets, and where America, its people and its companies fit into that Big Picture.
In 2003 we began characterizing the USA as an oncoming Third World Country- one fast becoming 5% rich and 95% poor, with no Middle Class: badly educated, violent, anti-science, prone to religious primitivism and making political and economic decisions based on ignorance and superstition, with failing health standards, a falling standard of living, no social safety net, and an impoverished powerless debt-ridden citizenry grateful for any jobs at all. That Third World America, jobless in a nation that gave away its manufacturing and industrial base, has since come to pass. But we're at the turning point. As 2014 begins one half of the United States has become a Third World Country. The other half, the states in the Former United States of America, is experiencing a powerful economic rebirth, and is prospering.
We only invest in those individual companies which are creating or providing wealth through marketing key products and providing sought-after basic materials and products. Those remarkable- and often timeless- goods. Those resources and commodities which are and will be most in demand. Sometimes those new key services that Americans, and to a far more important extent, the world, clamor for, spend their money on, and cannot live without.
In general we have no faith in the concept of "sectors." Within any what Wall Street calls a 'sector' there might be a two, three, companies worth buying shares in that just happen to be in the one business. Trust us to find them. The rest of that 'sector' is just a Wall Street fantasy.
We like investing in even numbers, and we like big gains. If we are not going to get 15% or so in a good year on a majority of our key picks and holdings, or terrific dividend yields in a bad year, what's the point of doing all this? We are willing to be patient in order to achieve that end. When we make profits, we take the profits and use them to purchase shares of some additional company we like… while keeping the dollar amount of the original investment in that original stock… so we are in effect getting those new shares "for free". We do the same thing with dividends.
We tend to be a more than a little conservative. In late 2004 and early 05, for example, we were watching RTP (Rio Tinto's former call letters, now it's RIO) at about $88 and we did not buy in until around $112.That stock has since split 4:1 and we've reinvested all the dividends. We've done something similar with other iron ore shares and other big mining co shares since 2005. When we first began investing in PCU (Southern Copper, now SCCO) shares were $52…and that was two or three runups and 2:1 splits ago, plus dividends…so our cost basis per share is around $6 tho the stock as we write this is just below $40. In January 2009, when we began posting Once In A Lifetime Buy stock lists, if you had invested $100k in GGB, you would have bought 17,271 shares @ $5.79. At the end of the year those shares were worth $306,358 and the stock has split since. We listed a stack of opportunities like that one. Did we buy shares? Of course.
We like "sure things," not gambles. We love monopolies. Sometimes other investors are jumping into things while we are still watching. Because of our patience however, plus our intense research, we have an 89% success rate: between eight and nine of ten stocks we recommend increase in value.
Also, while our friends at Motley Fool® constantly search for the legendary "ten-bagger" as Motley Fool® founders call them, we go after doubles triples and 2:1 splits, and we actually find those stocks. We invested in Genentech in 1989. We were investing in Harley Davidson in 1990. We invested in Intel in 1995. We were invested in Cisco and QualComm in early 1997 and in SDLI in 1998. We began investing in Rio Tinto and BHP Billiton in 2003 and in Southern Copper in 2005.
BHP Billiton caused an uproar three years ago when, as a Big Six mining company, it spread out and bought energy companies Chesapeake Energy and Petrohawk and Agribiz co Athabasca Potash. We said: great. In late 2012 when Big Six Mining Stock Freeport McMoRan, a stock we hold, bought a pair of oil companies, FCX stock fell from near $40 to $30. We simply bought more shares.
We are not exactly only interested in basics. We also own and follow Infotech, Biotech, War Stocks, etc etc and we list and address these stocks in MW categories in each issue. Here's an easy one and a freebie: we expect Nvidia and Intel to merge this year, or for NVDA to be bought by Microsoft.
Do we own shares of Intel? No. Not for years. But we bought shares of intel in 1995 and made a ton of money. Do we own shares of Nvidia now? Of course. And we will make a lot of money on this merger or buyout. And you will too.
Longtime Market Witch readers who were with us in August of 2002 were buying into Corning at between $1.95 and $2.40 and the profits on that one actually did achieve 10X status when the shares went to $28. And we believe that because of the way we look for companies and at them, additional ones will became apparent to us- and to you- to in the future.
Bear in mind that 3 6 10X stocks , multiple gainers, are rare and happen two or three times a decade, if that. Much more common for us is to "roll doubles"- to buy PCU (now SCCO) in 2005 at $53, watch it run to $108, split 2:1 and begin running up again. The last 2:1 split was in July of 08. We'll see another in 2015 and SCCO heads from now steadily toward $60. Ditto with many companies over the years. We talk about these things every month in every issue.
We sometimes watch a company, a market or an industry or a situation for a year or more before we say yes to an investment. We don't want to invest in fads that will disappear after their fifteen minutes of fame. We want instead to back upcoming institutions-in-the-making and icons-to-be. We occasionally make short-term mistakes and when we do it usually has to do not with a product but with a corrupt or incompetent management, not with a product.
We're not always right. But a 92% success rate on our Market Witch Strong Buy Lists- 92% of the stocks we recommend appreciate- means most of the time we are.
We are love "monopolies"…we love companies which field such a wonderful product or are so well-managed offering their services that they own their market (like Dollar General and Nvidia and Deere) and have huge market share, and have no serious competition. We also then watch for rivals with something better to offer. We believe in momentum investing and we practice it, too, when we feel it's safe, but only in companies we're sure are creating products that capture the world's heart, imagination, and wallet.
Here are a few other Big Picture ideas to think about:
America is formerly the world's greatest consumer economy , but today 70+ per cent of the USA's GDP has to do with American consumers "buying and selling stuff" and the US is no longer able to support the world's other economies by buying their exports. The US is officially supposed to have a GNP of about $13 trillion. It's actually about $9 trillion and the reason is that much of what's logged in as the USA's GNP is nothing more than buying and selling goods and services back and forth to each other, and payment from service occupations to those who wish service. Under these circumstances, in this huge part of the economy (which is now more like a Third World economy than that of an Industrialized Nation) no wealth is being created. A New Class War that began as the US became a nation of The Few Rich and Superrich and The Many Poor, and which resulted in the 08 election of Obama, which morphed the US into half- nation that conforms to those beliefs and values and is more 'fair' and a half-nation that doesn't. This engendered the break of the US into two separate countries and two separate economies.
The scramble for global resources means Africa, with its enormous natural resource wealth and still mostly-unstable politics, will continue to be a magnet of activity as other nations vie for control of a continent that is literally up for grabs. Africa is becoming both an exploration hotspot in a world desperate for its natural resources, and a new source of cheap labor if its nations can be politically stabilized. Recently the most successful exploiter of Africa is China, somewhat corrupt itself and making resource deals with corrupt unstable governments in Africa. But China is becoming interested too in its own resources, and also in its own giant projects, like the Hong-Kong-Macao Bridge. Expect much more European activity in Africa these next few years.
The additional most-sought-after 21st century commodity: WATER. We've talked about this for more than a decade: wars may be fought over water. The US can become energy- independent via wind-generated electricity and biomass transportation and industrial fuels. But unpolluted fresh water is fast becoming rare (The US, Brazil, Canada and Russia have most of it and the US may badly damage its own sources via fracking) and valuable and unless massive desalination industries are begun in the decade we are entering now, there will be trouble. Look for Corning (GLW) to begin manufacturing substrate materials for water and sewage filtration systems as well as diesel engine 'clean-air' products. A stack of other 'water-issue' companies bear watching.
It may be Islam's 21st century destiny to rule the world. But we think as the Islamic Fundamentalist culture, enormous though it is, gets passed by as the world moves on, fundamentalist Islam will falter in power.
Here is a list of the top ten largest countries in the world, by area in square miles:
- Russia 6,592,850 square miles
- Canada 3,855,101
- United States 3,794,083
- China 3,705,405
- Brazil 3,300,169
- Australia 2,969,906
- India 1,269, 211
- Argentina 1,073,518
- Kazakhstan 1,049, 155
- Sudan 967,500
This is 19th century not 21st century thinking.
View Islam not as a series of small "tribal" nations but rather as a single unified region: The Transnational Islamic Superstate.
These "nations" of Islam are often "fantasy" nations, many of them arbitrarily cobbled together from the turfs of nomadic tribes by the British Crown during the early days of the 20th century, others created via French colonialism. Let's tally them up, West to east, to create ISLAM: Morocco, Algeria, Libya, Egypt, Saudi Arabia, Yemen, Oman, Syria, Jordan, Turkey, Iraq, Iran, Afghanistan, Pakistan.
Now the list of the world's largest countries looks like this:
If we add some of the wilder and more marginal and underdeveloped "nations" of Islam like Mali, Mauritania, Sudan, Kazakhstan etc, the two largest countries in the world are Russia and Islam, a dead heat.
Many of these "nations" of Islam have enormous wealth in a broad spectrum of natural resources, not just oil: resources that are in short supply and gaining in value weekly. TWO of the world's very strongest economies, Iran and Saudi Arabia, are Islamic. A third one, Afghanistan, has the world's largest and most financially successful Global Outlaw Economy (poppies/opium/heroin) on earth, and is estimated to have a trillion dollars in untapped resource commodities, probably far more.
Islam was once, centuries ago, the world's center of knowledge and renaissance- math languages engineering navigation commerce etc- but degenerated into a stone-age culture with money- and also with nuclear weapons expertise sourced by blackmarket information. Islam can be contained/neutralized and rid of nuclear weapons nuclear ambitions but its turf-hungry expansionist ideology will likely remain intact, and the TransNational Islamic Superstate will continue to solidify.
In a decade or two, Islam may very well become a banking and high-tech manufacturing powerhouse, while the US becomes a source of cheap unskilled labor. Or it could return to its nomadic, roots: tents and campfires plus iPhones. Or it could in the future rule much of the world, especially Europe. And potentially, thirty to forty years ahead, the US as well.
Another Big-Picture issue: population.
Until roughly 12,000 years ago 'modern' humans eked out a living by hunting and gathering. Our hunter-gatherer ancestors were replaced by farmers and herders who crowded into villages following the invention of agriculture.
During the last 200 years a major resettlement pattern has emerged:
- In 1800 only about 2 percent of the world's population lived in urban areas
- In 1950, 30 percent of the world population was urban
- In 2000, 47 percent of the world population was urban
- Today, 53 percent of the world's population is urban
What was predominately a rural culture has become a predominately urban one and this transformation will likely continue unless there is a catastrophe that shrinks the population or unless there is radical change in thinking among the entire species. By 2050, according to 70 percent of the world's population will have become urbanized, will live in cities and metrozones. There are many reasons for this centuries-long rural flight; greater and more varied economic opportunities; enhanced education and health care; much improved services such as entertainment and other urban amenities and an expectation of social mobility.
The advantages of living in a city can be summed up as:
-Marketplace competition (meaning higher variety of goods, and higher profits selling them)
In China the average salary for urban residents stood at 22,068 yuan in the first three quarters of 2013, up 9.5 percent YOY. The figure for rural residents rose by 12.5 percent YOY to 7,627 yuan. Urban consumption hit 1.76 trillion yuan in September of 2013, up 13.1 percent year on year, while rural residents spent 304.7 billion yuan, up 14.8 percent from the previous year.
The rural-urban economic divide is obvious. Megacities and large cities are the richest places to live and offer far better access to basic public services. Smaller towns, secondary cities, and areas on the perimeter of urban centers are less rich, and rural areas are the poorest.
In India there's also a wide difference in wages between urban and rural areas. A male casual laborer can earn Rs 150 per day in rural areas, his urban counterpart receives 180 Indian Rupees (Rs) a day. A salaried employee in rural areas might earn Rs 300 per day but in urban areas the same employees daily earnings would rise to nearly Rs 450.The Philippines' overall ratio of rural-urban wage gap is 67 percent. When skilled and unskilled workers are considered separately a much higher ratio becomes evident.
At this moment there are 7.1 billion people living on this planet, an urbanization rate of 53 percent means there are roughly 3.71 billion urbanites in the world today. It has been estimated that by the year 2050 our global population will reach 10 billion people. If our global population does indeed reach 10 billion people and if the urbanization rate of 70 percent is achieved, some seven billion people, or almost the equal of today's current world population will have become urbanized.
Could we hit the ten billion population mark? Could 70 percent of us be living in cities by 2050? The answer is a likely yes unless there is a biocatastrophe: a plague or the collapse of our ability to fight bacteriological infections with antibiotics, or a full-scale 21st century war. Developing countries are responsible for 90 per cent of current population growth and these populations are on average very young people with many years of fertility/reproduction left to them. By the year 2025, in just 11 years, 84 per cent of the world's people will live in developing region Almost all urban population growth during the next 30 years will occur in cities of developing countries. Between 1995 and 2005, the urban population of developing countries grew by an average of 1.2 million people per week, or around 165 000 people every day. By the middle of the 21st century, it is estimated that the urban population of these counties will more than double, increasing from 2.5 billion in 2009 to almost 5.2 billion in 2050.
What it means to investors: Urban populations consume far more commodities natural resources and basic materials than rural populations. More copper more steel more aluminum more lumber more manufactured hardware more cars more beer more Harley-Davidson™ motorcycles more fiber optic cable more Scotch tape™. Urban cities and metrozones consumer far more basic materials and need far more alloys to build bridges and skyscrapers. And urban populations have much more money to spend. Understand? The price of copper is going to go up.
We began our Market Witch efforts nineteen years ago studying the American product mainstream and pop culture, and investing in America and American companies and products on that basis…Barbie® dolls, Harleys, Pentiums, iPods, Oreos…but a decade ago, as the US lost economic clout and began to become a Third World country, Market Witch moved to a global perspective. Now, US companies are on the comeback trail even as the Brazil economy remains strong and expansive.
After 19 years of producing Market Witch and getting feedback from readers, we believe the best way to USE Market Witch is to read it regularly for a year or more and to watch our consecutive monthly STRONG BUY lists which represent what we believe are unusual or even remarkable opportunities, and
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Here is a PREVIEW of 2014 and beyond for Market Witch readers: more of 2014’s issues and concerns. Here are a variety investment subjects, and broad trends that affect investments, that you should be aware of: