The Silk Road to Riches: How You Can Profit by Investing in Asia's Newfound Prosperity

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9780131869721: The Silk Road to Riches: How You Can Profit by Investing in Asia's Newfound Prosperity

Asia is now the world’s #1 growth story. Farsighted investors will realize enormous profits by investing in companies that benefit from Asia’s historic transformation. In The Silk Road to Riches, a team of world-class financial analysts and newsletter editors point you to the right companies, the right sectors, and the right strategies.

 

You’ll learn how to leverage Asia’s accelerating integration into the world economy... profit from the pressure that Asia’s growth is placing on commodities and resources... anticipate changing needs of Asian consumers in financial services, health and pharmaceuticals, communications, and many other industries.

 

The authors offer powerful support for several provocative claims: that India, not China, is Asia’s best investment destination; that the price of gold is poised to explode; and much more. They illuminate global economic changes that will decide the fate of the U.S. dollar as the world’s reserve currency; and present an up-to-the-minute overview of crucial global security issues every investor must understand, no matter where they invest.

 

CONTENTS

Acknowledgments

About the Authors

Foreword

Introduction

Part I: It Is All About thePeople 

  • 1: A New Middle Class 
    • Looking Back
    • One Trick Pony
    • Time Is on Their Side
    • One Last Time
    • Endnotes

 

  • 2: Asia's Path to Prosperity 
    • Coming of Age
      • Outsourcing and Offshoring
      • A Changing World
    • Integration into the Global Economy
    • Lessons Learned
    • Endnotes

 

  • 3: The Great Comparison
      • India: A Powerful Force
        • Problems Abound
        • Democracy and Growth
      • China: Waking Up
        • Solving Problems
        • The Time Factor
      • Endnotes

Part II: RiskyBusiness 

  • 4: Power Games 
    • Ambiguous Relationships
    • The Dragon and the Eagle
    • Endnotes

 

  • 5: Straws in the Wind 
    • How Long Is the Long Run?
    • Unsustainable Macroeconomic Imbalances
    • Bubble All the Way
    • Endnotes

 

  • 6: The Lost Guarantee 
    • The Paper Standard
    • Gold Bullion Versus Gold Stocks
    • The Broad Diversification Approach
    • The Stocks
    • Endnotes

Part III: Trends of the Future 

  • 7: The New Agricultural Revolution 
    • Food Demand Grows
    • The Supply Side
      • Fertilizer Producers
      • The Processors
      • Food Producers
    • Endnotes

 

  • 8: Fueling Global Growth 
    • Rising Consumption
    • The Supply Side
    • The Refining Factor
      • Coal
      • Natural Gas
      • Nuclear Power
    • Renewables and Alternatiaves
    • Asian Energy
    • The Integrated Players
    • Endnotes

 

  • 9: The Lure of the Megatrend 
    • Dr. Copper
    • Nickel Is Worth More Than Five Cents
    • Buy High, Sell Low... When It Comes to Steel P/Es
    • The Fund
    • Endnotes

 

  • 10: Asia's Evolving Economies 
    • Travel and Tourism
    • The Necessities
    • Retail
    • Banking and Finance
    • Pharmaceuticals and Healthcare
    • Technology/Outsourcing
    • Telecom
    • Shipping, Ports, and Transport
    • That's Entertainment
    • Endnotes

Epilogue

Index

 

© Copyright Pearson Education. All rights reserved

 

"synopsis" may belong to another edition of this title.

About the Author:

Yiannis G. Mostrous is associate editor of Wall Street Winners, a financial newsletter that has been rated #1 by The Hulbert Financial Digest, and of www.GrowthEngines.com, an online financial journal dedicated to global markets. Formerly an analyst with Finance & Investment Associates and Artemel International, he has worked in international project financing and venture capital financing. He holds an MBA from Marymount University.

 

Elliott H. Gue is editor of The Energy Strategist, the premier financial advisory dedicated solely to covering the complex energy markets, a field he has been covering since 2002. He has been featured as a guest on Bloomberg Television and has been a regular guest in radio shows around the country. He is also an associate editor for Personal Finance. He holds a Masters of Finance degree from the University of London and a Bachelor of Science degree in Economics and Management from the University of London.

 

Ivan D. Martchev is editor of Wall Street Winners and associate editor of Personal Finance, which has been recognized by the Newsletter and Electronic Publishers Association as one of the nation's best financial advisory newsletters. He is also editor of the financial weblog www.attheselevels.com and www.GlobalViewPoints.com, a free weekly e-mail journal that provides commentary on the stock market, as well as bonds, commodities and currencies. Mr. Martchev has also been a frequent guest on many radio shows. 

 

The authors' commentaries have been published by Barron's, Forbes.com, and Marketwatch.com from Dow Jones.

 

Excerpt. © Reprinted by permission. All rights reserved.:

Introduction

Introduction

Preparing for Change

vast network of ancient trade routes, the "Silk Road," connected Asia with the West. From the Chinese metropolis of Xian to the shores of the Indian Ocean and the Mediterranean Sea, goods and ideas traveled on this road, enhancing the lives of millions of people.

In May 2005, during the annual meeting of the Asian Development Bank, finance ministers from 13 Asian nations moved a step closer to creating an Asian monetary fund and establishing a Silk Road for a new era. Although building this road is a long process, the fact is that Asian countries (including Japan) are pushing for more regional financial integration.

The reasons for this common desire are twofold. Asian governments were disappointed with the International Monetary Fund's response during the Asian financial crisis of 1997, and the region's emergence as an essential component of global growth is coming to fruition.

This book has at its core an "economic change" premise: Global economic leadership changes over time, and the world is now entering a period of such change. In coming years, Asia will emerge as the leader in global economic growth, whereas the West will enter a more subdued growth cycle.

A big part of the investment community dismisses this argument as nonsense. Very few contemplate imminent change at a time when America's economic and military powers seem boundless. Yet, historically, these are the times when change begins, when expectations are low. As myriad arguments are floated as to why the status quo will persist, those who fall for simplicity will be caught off guard.

Many skeptics will demand more concrete data in support of our conclusions and the underlying assumption upon which our assertions are based. We do not contest the rationality of this point of view, but the reality of structural change is that its evolution begins before hard data becomes available. Far-sighted investors must be ready to explore opportunities before indisputable proof emerges. When it does, everyone will jump at it—or will already have jumped—making it a more difficult, less profitable game. The old axiom that whatever everyone knows is not necessarily worth knowing is another underpinning of this book.

The main challenge, as with any macro-related investment decision, is to assess the impact of Asia's rise on the global economy and the region's role in the new world. Making the right calls regarding India's and China's futures will be critical for successful investing. China's size and rapid development has taken the world by surprise, making it very difficult for people to approach the problem with clear minds.

Large corporations have made Asia the center of their respective production operations. Although lower costs were initially the reason, the use of technology and the introduction of other Western business practices have been instrumental in increasing the productivity of the average employee. True productivity growth started from a lower level and has combined with a low cost base to form an integral part for the multinational corporation's production line. And as long as cutthroat competition remains the name of the game, there is nothing anyone can do to stop the trend.

As the productivity gap between the West and the East has tightened, the wealth gap, too, has begun to disappear, albeit at a much slower pace. In the meantime, expect an array of political moves in America and Europe designed to protect their workers. The process might be slowed, but the outcome is inevitable: the integration of China and India into the capitalistic system and their resulting claim for a bigger piece of the economic pie.

And here is the big question: Does Asia need the West more than the West needs Asia, or vice versa? The answer is that both need each other.

The economic dynamism Asia now projects will eventually lead to a structural rise in domestic demand—this will allow Asia to become more independent. Not long after the British left the Colonies, the New World not only outgrew its reliance on the UK, the Old Country became America's dependant. Asian development will trace the same arc. And as with the young United States, certain parts of Asia will grow not only economically, but politically and militarily as well.

On January 28, 2002, Barron's dedicated its cover story to hedge fund manager and legendary short-seller James Chanos because of his famous call on Enron, issued when the now-defunct energy trading giant was still riding high. In that interview, Chanos identified Tyco as the next problem. He was proven right. After the story ran, Barron's received letters from angry Tyco stockholders demonizing Chanos in particular and short sellers in general as enemies of America's economy.

Although such actions do, in retrospect, look silly, at the time people believed that the sad arguments put forward by the company and its cheerleaders to defend its actions were not only true but also justified holding Tyco shares.

The foregoing illustrates that investors are notoriously slow in realizing and accepting change. Throughout history, this shortcoming has cost people a lot of money, and will continue to do so. Making an effort to understand and (occasionally) anticipate social, economic, and political changes is one of the most important qualities of a successful long-term investor. Not everyone draws the same conclusions after examining a particular set of data, but different interpretation is a fact of life in the investment world.

This book is best characterized as a guide for the long-term investor. If the ideas and arguments have merit, those who heed them will realize great financial gains. As the story unfolds, fear and hype, booms and busts, and creation and destruction of wealth will mark what will be an explosive transformation altering the global economy—and our lives—forever.

The structure of this book is relatively simple. Part I anticipates and analyzes Asia's rise to global economic prominence. The first chapter discusses why Asia is now at a unique and critical juncture in its history, and how it is positioned to lead the next wave of global economic growth. In Chapter 2, we explore the economic development avenues the region could (and should) follow, and how Asia's decisions will affect the rest of the world. Chapter 3 offers a more detailed analysis of the two leading actors in this drama—India and China—and argues that India is a better destination for long-term investors.

Part II deals with the risks investors may encounter in the future. Risk tolerance—tempered by fear, flamed by greed-is the most basic element of the investment—decisions equation. A book on investing that fails to address this issue cannot be taken seriously. Chapter 4 explains the geopolitical underpinnings as the West is on the verge of ceding strong economic growth to the East. Political challenges facing the global economy at the outset of the 21st century are monumental, and so, too, are the economic risks. This is the focus of Chapter 5, which identifies specific economic imbalances and their potential impacts on world financial markets. Transitioning to risk management, Chapter 6 suggests ways investors can ensure themselves against these risks.

Part III offers investment ideas based on Asia's economic ascent. Chapter 7 deals with the importance of agriculture in the new world. Chapter 8 discusses energy, and Chapter 9 presents the opportunities industrial metals offer. Finally, Chapter 10 touches upon an array of investment opportunities in different industries that should benefit tremendously, and in due time, by the new economic order.

Many companies are identified and recommended for potential investments, but the "under the hood" analysis is not extensive. The purpose of this work is to identify investment trends and representative companies operating in industries that should prosper if the assessment is correct. Readers should use these recommendations as a point of departure.

Although the book is arrange...

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