Invest in Asia even if it might be tricky if you never visited it. I suggest you go and visit because when investing, or doing anything else in life, you have to always check whether you have a biased opinion or not.
We are mostly listening to what western media outlets say and what western investors say. The picture they paint is in line with the situation in their environments.
Invest in Asia for GDP growth
A look at the 2019 global GDP growth map shows how the growth is slow in developed economies, despite all the financial stimulus.
However, if you don’t focus on the grey on the above map, but on the bright green, you see a square with 4.5 billion people growing between 3% and 10%.
Invest in Asia because of demographics
I firmly believe, the Asian economic development should be
the most important piece of news discussed on a daily basis. 4.5 billion people
outweigh the 1.3 billion in developed countries. Plus, developing countries are
much younger, more eager and thus, economic growth will continue, just perhaps
not in your currency and not where you might wish it happens.
Figure 12 Population pyramid – developed and developing countries – 1.3 billion vs. 5 billion
Then, there is something that makes comparing things to the
1930s, like Dalio is doing, practically worthless. In the 1930s, the new deal
saved America. Today, we have the Chinese One Belt, One Road initiative working
and developing the word – trade wars or no trade wars, this thing is moving
forward. The purpose of the one belt one road
idea is to “construct a unified large market and make full use of both
international and domestic markets, through cultural exchange and integration,
to enhance mutual understanding and trust of member nations, ending up in an
innovative pattern with capital inflows, talent pool, and technology database”.
The number of countries that have signed documents related
to the initiative is staggering.
If the level of urbanization reaches the level in developed
countries, there is a few billion homes that still have to be built over the
coming decades. Not to mention infrastructure etc.
Then, perhaps the most important thing that wasn’t there in
the 1930s, is technology and the internet. If I wish, I can chat with somebody
in India in the next 30 seconds, I can hire people all over the world and the
world is getting more and more connected. This communication, information and human
connectivity, alongside economic connectivity, will keep the world much more integrated
than it was the case in the 1930s.
Recessions can happen anytime and will happen sometime.
There is nothing we can do about it but we can have some certainties:
Currencies are and will continue to be
sacrificed all around the world.
The global economy will continue to grow with
ups and downs. The power of developing Asia is incredible.
There will be many issues in developing
countries, but I’ll park my money where whatever happens, I end up well off.
There are businesses selling in Asia and there are businesses selling in France and Italy. There are businesses selling globally and there are businesses focused on the local market depending on one company. Thanks to globalization, we can pick where to invest. That is what we as investors have to focus on. Dalio is playing a macro game, and he is really playing a game and he is a relative investor. Thus, the macro is what matters to him.
Figure 15 Building in Penang Malaysia
Individual investors have to play the micro game, invest is
what you need, minimize your risks and accept volatility as your best friend.
It allows you to buy cheaper and build your wealth faster. You can’t time
recessions nor predict economic developments.
It is pretty simple with the economy. In 15 years, the
economy is going to be very different than whatever we can imagine now. It has
been the case like that since ever.
15 years ago, nobody expected interest rates to be negative
and stay so for almost a decade now. 30 years ago, China was a poor and weak
country, now it is challenging the US for the globe’s dominant country.
30 years ago, you could buy good businesses with dividend yields of 7%, today you can’t. 30 years ago, we didn’t even have email (author’s note: I got my first email when I was 10 in 1993 – haha). So, worrying now about recessions or stock market crashes is a good story for the media to fill those headlines, but nobody knows what will happen. The solution remains always the same; invest in good businesses that will do well and deliver a good business returns no matter what happens and also, whatever happens, the businesses will be still in business. Focus on risk and leave the upside to the positive tailwind humanity creates.