This week I gave my Macro Trader readers a prediction. But that
prediction wasn't just for 2013...
Neil Armstrong said, "Science has not yet mastered prophecy. We
predict too much for the next year and yet far too little for the next
ten."
Neil Armstrong died on Aug. 25, 2012, and closed a chapter in our great
book of science and innovation. But this quote reaches into economic
forecasting, too.
I told my readers:
For the past five years we've been worrying about the next quarter or
two without a care in the world for what will happen in the next decade. As
we head into the new year, we carry with us the threatening promise from our
Federal Reserve to cheapen our dollar until unemployment falls to a
"reasonable" level.
We carry with us the fear of impending economic disaster.
Will we be talking about the fiscal cliff in 10 years? Sure, but in
the same context as the dot-com bubble, or the stock market crash in 1987.
We will have moved on.
And all those predictions for 2013 will have been a blip on the
screen.
I'd rather talk about what the world will look like in 2023...
In 2023, emerging market middleweight cities will contribute more to
global growth than the developed world and global mega-cities. Over the next
10 years, more than 230 million households will earn more than $20,000 in the
developing world. That's up from only 80 million in 2007. In other words, an
extra $3.1 trillion worth of consumption
will hit the markets in developing economies.
But through a combination of consumption and investment, emerging
markets could contribute nearly 50% of the world's GDP.
And many of these markets are already pulling wealth from Western
developed countries and shifting it East... and South.
I've already picked out one country for my Macro Trader
subscribers to watch, but it's not the only one.
Let me give you the secret to finding out which countries will be game changers
over the next decade.
It's not just about money... It's about people.
Demographics will play the biggest role in the economics of growth
markets. The one segment we should be paying attention to is the number of
people on the verge of the middle class.
The McKinsey Global Institute predicts that there will be more than 4
billion members of the "consumer class" by 2025, and half of them
will live in emerging market cities.
Three cities with an annual income of $20,000 or more, with large numbers
of working-age people are Mexico City, Istanbul and Cairo.
Of course, you've also got Mumbai, Shanghai, Beijing, Sao Paolo, and a
couple other cities in well-known emerging markets. But Mexico City, Istanbul
and Cairo might get you thinking about other areas of the world with growing
demographics and climbing incomes.
One of my favorite companies in Mexico that we're holding in Macro
Trader is Empresas ICA, S.A.B de C.V. (ICA:NYSE).
It's a construction company that does a lot of civil works, like
hydroelectric dams and airports, and also builds a lot of housing. Shares
have climbed as high as $10.28 recently, and we've locked in gains of more
than 24% since mid-September.
But shares have pulled back over the past week, and you might have a good
chance to get in on this temporary move.
Another Mexican company that really takes advantage of demographics is FEMSA
- Fomento Economico Mexicano S.A.B. de C.V. (FMX:NYSE), a beverage and beer company that
holds the right to bottle Coke in Mexico and other Latin American countries,
and is just getting into the drugstore business. But right now, this company
is pretty expensive. It's been on a fantastic run since the bottom of 2008.
View Larger Chart
The company put up some great numbers for its third quarter...
double-digit growth in total revenue and income from operations across all
three of its business segments.
This company's key statistics aren't that far out of line with others in
the industry, but judging by the chart movements, I think you could probably
get in at a better price if you wait a couple months. This would be a prudent
move as we head into the new year anyway.
Mexico – though very different economically from the U.S. – has a strong
sympathetic response to financial news here in the States. Check on this
company again in late January or early February.
Happy Investing,
Sara
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