Keith Fitz-Gerald: You may be surprised to learn that some of the world’s best investors are buying heavily right now – not because they think we’ve hit a bottom, or even the bottom, but because they’re setting themselves up for the next big run.
Take Mark Mobius, for example.
Long regarded an emerging markets pioneer, Mobius is in charge of more than $50 billion worth of assets on behalf of Franklin Templeton. Lately, he’s snapping up Romanian real estate, Nigerian banks, Kazakhstani oil companies and more.
There are many reasons, but basically it comes down to this: Despite the fact that emerging markets returned almost 250% from 2001 to 2010, the old playbook no longer works.
And I have to be careful when I say that because many investors will blithely assume that emerging markets are dead. They’re not – it’s just time to redraw the map because the best opportunities are no longer where you’d expect.
It’s no longer about the BRICs – Brazil (NYSEARCA:EWZ), Russia (NYSEARCA:RSX), India (NYSEARCA:PIN), and China (NYSEARCA:FXI), for example. Sure these countries remain great places to stake your claims on the wealth of newly found purchasing power and consumerism, but it’s the so-called MINTs – Mexico (NYSEARCA:EWW), Indonesia (NYSEARCA:IDX), Nigeria, and Turkey (NYSEARCA:TUR) that may offer a faster route to riches.
Or the Next 11, or N-11, as Jim O’Neill, the economist who coined the term “BRICs” a decade ago, calls them. The N-11 is basically the MINTs plus Bangladesh, the Philippines, and Pakistan plus a few more countries on the fringe of “civilized” thinking.
Then there’s the VISTA – Vietnam (NYSEARCA:VNM), Indonesia (NYSEARCA:IDX), South Africa (NYSEARCA:EZA), Turkey (NYSEARCA:TUR), and Argentina (NYSEARCA:ARGT) nations and the CIVETS – Colombia, Indonesia (NYSEARCA:IDX), Vietnam (NYSEARCA:VNM), Egypt (NYSEARCA:EGPT), Turkey (NYSEARCA:TUR), and South Africa (NYSEARCA:EZA).
Yes. For the first time in modern history, emerging markets are no longer completely dependent on Western economies nor demand, a point you’ve heard me make repeatedly in the past. At the risk of sounding like a broken record, this gives them an unprecedented range of options largely independent of the political, financial, and economic swamp the developed markets have become.
This is not the kind of thing you’re going to pick up on in the mass media, but every single one of those nations is set for a runaway investment boom because they are advancing faster than almost everybody expects.
In fact, many of the big investing houses like Goldman Sachs Group Inc. (NYSE:GS), Fidelity, HSBC Holdings PLC (NYSE:HBC) and others feel the same way I do – that the MINTs and N-11 have the potential to be every bit as profitable over the next 10 years as the BRICs were over the past 10 years.
But why not stick to the BRICS right now?
Every one of the BRICS has moved from raw capitalism, for example, to the more refined steady state that is accompanied by an entirely new class of investments in insurance, medical treatments, education, and even entertainment. This makes them steady growers to be sure, but also potentially slows them down a bit.
At the same time, rising wages and dramatic increases in the cost of living in BRIC countries means that profit margins are being squeezed, so it becomes harder to generate the same returns in years that used to take months.
Consequently, many BRIC officials are more concerned with managing inflation and putting the brakes on at present . India has raised rates 12 times in the past 18 months while China has tacked on five rate hikes since last fall. Even so, the former is growing at 8% a year, while the latter is on track for 9% growth in 2011 — more than six times the pace of the U.S. economy.
The MINT and N-11 markets may grow even faster.
Admittedly, the thought of investing in markets that Indiana Jones would find appealing is scary.
The risks and volatility remain quite high. Fraud, insider trading, manipulation and graft are all part of the experience — and will be for some time to come.
But in the words of Jim O’Neill: “Just as we are getting downgrades in the developed world, we are getting upgrades in the developing world.”
Believe it or not, private growth drivers in key sectors in each of these markets are actually accelerating. Energy, technology, agricultural resources, and defense contractors, in particular, are all bright areas as the world learns to do more with less – especially in economies that have never had much of anything to begin with.
That’s why Mobius (and many savvy investors like him) aren’t particularly alarmed by the potential for market chaos if the euro comes unglued. He knows, as we do, that any temporary crash would simply give him new opportunities to buy already battered emerging market stocks at even steeper discounts to where they are trading now.
Still can’t stomach the thought?
Well, I hate to say it, but then investing isn’t for you.
If you can’t understand that whippy markets produce upside – especially when it comes to currently untapped, largely off- the- radar- screen markets – then you really haven’t got a decent chance of getting ahead over the long run.
There is no easy money – just intelligent decisions to be made.
Keith Fitz-Gerald is the Chief Investment Strategist for Money Map Press, as well as Money Morning with over 500,000 daily readers in 30 countries. He is one of the world’s leading experts on global investing, particularly when it comes to Asia’s emergence as a global powerhouse. Fitz-Gerald’s specialized investment research services, The Money Map Report and the New China Trader, lead the way in financial analysis and investing recommendations for the new economy. Fitz-Gerald is a former professional trade advisor and licensed CTA who advised institutions and qualified individuals on global futures trading and hedging. He is a Fellow of the Kenos Circle, a think tank based in Vienna, Austria, dedicated to the identification of economic and financial trends using the science of complexity. He’s also a regular guest on Fox Business. Fitz-Gerald splits his time between the United States and Japan with his wife and two children and regularly travels the world in search of investment opportunities others don’t yet see or understand.