{"id":29459,"date":"2012-05-03T23:06:46","date_gmt":"2012-05-04T03:06:46","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/2012\/05\/why-chinas-new-consumer-economy-wont-give-you-the-trade-of-the-decade\/"},"modified":"2012-05-03T23:06:46","modified_gmt":"2012-05-04T03:06:46","slug":"why-chinas-new-consumer-economy-wont-give-you-the-trade-of-the-decade","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2012\/05\/03\/why-chinas-new-consumer-economy-wont-give-you-the-trade-of-the-decade\/","title":{"rendered":"Why China\u2019s New Consumer Economy Won\u2019t Give You the Trade of the Decade"},"content":{"rendered":"

By MoneyMorning.com.au<\/a><\/strong><\/p>\n

Today, we\u2019re back to giving you some actionable advice\u2026rather than just throwing a few thoughts at you.<\/p>\n

Yesterday we explained that China’s economy <\/strong>wasn’t\u00a0going to be a global economic saviour.\u00a0 Instead, it\u2019s about to head towards an economic death as it shifts directly from a producing economy to a consumer economy<\/strong>.<\/p>\n

But what you need to know is how to make a quid from this shift\u2026or whether you should ignore it.\u00a0 We\u2019ll show you our idea in a moment.\u00a0 But first let me fill you in on the background story\u2026<\/p>\n

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New Model for France<\/h3>\n

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\u2018I want a new model for France where success will be admired, where talent and merit will be rewarded.\u00a0 I want a new model for France, where those who\u2019ve worked all their lives can live through their retirement without being a burden on their children\u2019<\/em> \u2013 French President, Nicolas Sarkozy (as quoted by the Australian Financial Review<\/em>)<\/p>\n<\/blockquote>\n

We wonder if M. Sarkozy listen to Martin Luther King Jr.\u2019s \u2018I have a dream\u2019<\/em> speech before delivering his own garbled (and much less inspiring) effort.<\/p>\n

We hear the same message time and again from world leaders about rewarding talent.\u00a0 But you know the saying.\u00a0 They like to talk the talk, but they never walk the walk.<\/p>\n

Why?<\/p>\n

If you leave the market alone, it could go in any direction and do all sorts of impulsive and amazing things.<\/p>\n

This is what markets do every day and it works perfectly\u2026as long as busybody bureaucrats keep their noses out.<\/p>\n

But that\u2019s the thing, the maniacs who seek political office do so because they want power.\u00a0 The power to change things and interfere.\u00a0 You don\u2019t seek high office just so you can sit there and not<\/em> fiddle with things.<\/p>\n

But when bureaucrats fiddle, it\u2019s to curry favour with parts of the electorate.\u00a0 And that will always create distortions and bad investments within an economy.<\/p>\n

But not everyone agrees with us.\u00a0 In fact, it puts us in the corner opposite to David Thomas, an expert on the BRIC nations<\/a> (Brazil, Russia, India and China).\u00a0 He spoke at the After America<\/a> conference in March.<\/p>\n

At the conference, he told the crowd:<\/p>\n

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\u2018I think one of the things about China \u2014 and everybody in China always says to me \u2014 is that if you want to know where China is going, just read the five\u2013year plan because it tells you. There\u2019s no surprise. They don\u2019t miss targets that they set in their five\u2013year plan. This particular five\u2013year plan that was just released last year is one of the most colossal documents they\u2019ve ever produced. <\/em><\/p>\n

It\u2019s extremely detailed. It took years to create. It involved debate and discussion at every level of the government and I think it\u2019s one that we can rely on quite well. It\u2019s also a bit of a turning point because after 30 years of sort of growth at any cost type activity, now they\u2019re actually turning their economy into a modern\u2013type economy.\u00a0 I think looking at the five\u2013year plan gives us a lot of clues as to where the future opportunities are doing to be, both from a business perspective, but also as investors.\u2019<\/em><\/p>\n<\/blockquote>\n

David Thomas urged the crowd to read China\u2019s five\u2013year plan.\u00a0 He guessed that no one would.<\/p>\n

And we won\u2019t either.\u00a0 We see little enjoyment in reading the rambling words of maniacal clones who genuinely think they can steer the Chinese and global economies as they see fit.<\/p>\n

But it is true, some Australian industries will gain from the shift to Chinese consumerism.\u00a0 David Thomas listed a whole bunch of them.\u00a0 He included tourism and financial services.<\/p>\n

Trying to Ride China’s Consumer Dragon Won’t Work<\/h3>\n

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But we\u2019d advise caution about trying to ride the Chinese consumer dragon. Because if you think it will be a repeat of the Resources Boom, you could be in for a nasty surprise\u2026<\/p>\n

The easiest (and frankly, most obvious) trade is to make the following judgement: China bought Aussie resources<\/a> when it was building its infrastructure.\u00a0 And so China will buy lots of Aussie services when it becomes a consumer economy.<\/p>\n

Hold fast.\u00a0 Investing isn\u2019t that easy.<\/p>\n

For a start, Australia isn\u2019t called the \u2018Lucky Country\u2019 for nothing.<\/p>\n

It\u2019s lucky that it contains some of the biggest and most wide-ranging mineral and energy<\/a> deposits in the world.\u00a0 Having a natural resource<\/a> doesn\u2019t take skill.\u00a0 Of course finding it and digging it up does<\/em> take skill.<\/p>\n

But if a country doesn\u2019t have natural resources such as iron ore<\/a>, copper<\/a>, oil<\/a>, uranium<\/a> or gold<\/a>, there\u2019s not much anyone can do about it.<\/p>\n

Another speaker at the After America<\/a> conference was global strategist at Societe Generale, Dylan Grice.\u00a0 When he got back to the U.K., he wrote this:<\/p>\n

\u2018I had a great time in Oz: fantastic people, wonderful atmosphere, and a truly beautiful country.\u00a0 But I felt more relaxed when Australians called themselves the \u2018lucky country\u2019 with their typical honesty, realism and humility.\u00a0 Now that it\u2019s been upgraded to the status of \u2018miracle\u2019 I\u2019m worried.\u2019<\/em><\/p>\n

Grice was referring to a book by journalist George Megalogenis, where he talks about the \u2018Australian miracle\u2019<\/em>.<\/p>\n

Of course, having a bunch of resources isn\u2019t a miracle.\u00a0 It\u2019s luck.\u00a0 Australia was dealt a good hand in the resources department thanks to Mother Nature, rather than skill.\u00a0 But what about the consumer services sector?\u00a0 How do things stack up for the Aussie economy there?<\/p>\n

That\u2019s a completely different kettle of fish.<\/p>\n

Yes, Australia has a consumer services sector, but so does every other country<\/em>.<\/p>\n

Yesterday we wrote about competitive advantage.\u00a0 China\u2019s economy<\/a> has a competitive advantage over others due to a large population and cheap labour.<\/p>\n

Exactly where is Australia\u2019s advantage in the consumer services industry?\u00a0 To use David Thomas\u2019s two examples \u2014 tourism and financial services \u2014 where does Australia stack up compared to other nations?<\/p>\n

First tourism.\u00a0 Let\u2019s compare flight times between Beijing and Sydney, and Beijing and San Francisco\u2026both are roughly 12 hours.\u00a0 So no advantage there.<\/p>\n

And financial services?\u00a0 We hear talk that many would like to make Sydney an Asia financial hub\u2026surely if that happens it will attract the Chinese, right?<\/p>\n

Clearly those who think that have never heard of a place governed by China since 1997\u2026we\u2019re talking about Hong Kong.\u00a0 A city that already has one of the most developed financial markets in the world.<\/p>\n

Why would China leapfrog Hong Kong, where it can set its own rules and regulations, to support a finance industry in a foreign city that\u2019s a 12-hour flight away?<\/p>\n

But what about the idea that Aussie services companies are poised to strike when China\u2019s consumers unleash themselves on the world?\u00a0 We ask, \u2018Where are all those services companies now?\u2019<\/p>\n

If they can\u2019t get their act together to sell to the 5.5 billion people in the world who aren\u2019t<\/em> Chinese, why assume they\u2019ll do any better when 1.5 billion Chinese start buying?<\/p>\n

You only have to look at the weak online efforts of most Aussie retailers<\/a>.\u00a0 Aussie services companies are totally unprepared for globalisation and exports.<\/p>\n

The Best Investment Idea for the Next Eight Years – Won’t Rely on Chinese Consumerism<\/h3>\n

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All that explains why we\u2019re ignoring this line of investment completely.\u00a0 It\u2019s too obvious and it\u2019s a darn bad idea.<\/p>\n

Instead, we\u2019re looking where few others dare look.\u00a0 Where exactly?\u00a0 Africa<\/a> and Europe.\u00a0 And we\u2019re not wasting our time on waiting for the Chinese consumer to start spending, either.<\/p>\n

Because if you wait for that, sure, it could happen soon\u2026but it may never happen.\u00a0 And if you\u2019ve been twiddling your thumbs waiting to make a killing from the Chinese consumer, you\u2019ll have wasted a lot of time and many good opportunities.<\/p>\n

So our advice is this.\u00a0 Forget the Chinese consumer for now.\u00a0 If it ever happens, you don’t need to be in the trade from day one.\u00a0 You won\u2019t miss much if you turn up late.<\/p>\n

And rather than focus on pie\u2013in\u2013the\u2013sky investments, we\u2019re looking at companies that are searching for and producing things industries and consumers need right now \u2014 energy<\/a>.<\/p>\n

If you want a trade that could set you up for life, here\u2019s our advice\u2026<\/p>\n

Punt on stocks where Aussie companies have plenty of skill and knowledge.\u00a0 Companies that will see a strong demand for their products whether China becomes a consumer\u2013driven economy or not\u2026we\u2019re talking about oil and natural gas<\/a>.<\/p>\n

That\u2019s where Australia has a competitive advantage.<\/p>\n

It\u2019s the trade for 2012.\u00a0 And as we see it, it\u2019s the trade for the rest of the decade.<\/p>\n

Cheers.
\nKris<\/strong><\/p>\n

Related Articles<\/em><\/strong><\/p>\n

The Conference of the Year “After America” DVD<\/a><\/p>\n

Why You MUST Speculate<\/a><\/p>\n

Disruptive Technology Stocks For Smart Small-Cap Investors<\/a><\/p>\n

\n<\/img><\/a> <\/img><\/a> <\/img><\/a>\n<\/div>\n


\nWhy China\u2019s New Consumer Economy Won\u2019t Give You the Trade of the Decade <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

By MoneyMorning.com.au Today, we\u2019re back to giving you some actionable advice\u2026rather than just throwing a few thoughts at you. Yesterday we explained that China’s economy wasn’t\u00a0going to be a global economic saviour.\u00a0 Instead, it\u2019s about to head towards an economic death as it shifts directly from a producing economy to a consumer economy. But what … <\/p>\n

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