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Stock Market Bubble in Trouble

Asian Emerging Economies Are Still Booming!

Economics / Asian Economies Mar 14, 2008 - 02:00 AM GMT

By: Money_and_Markets

Economics

Best Financial Markets Analysis ArticleLarry Edelson writes: It's 3:30 AM here in Bangkok as I write this edition of Money and Markets . Across the street from my apartment, four towers are rising toward the sky. A 52-story luxury condo development is under construction with crews working 24 hours a day, seven days a week.

It's hard to believe that the crane operators, now perched over the 22nd floor, can see what they are doing as they hoist up tons of rebar, bins full of cement, rolls of steel sheathing and stacks of glass.


To the south, I count five more brand new high-rise condos being built with work also running 24/7. And to the west, two 42-floor office towers, a brand new luxury Crown Hotel and convention center are going up.

As I watch all this frenzied building activity from my window, it's easy to see that ...

Asian Economies Are Still Booming!

Here on the ground, I'm seeing the exact opposite of a slowdown. And the numbers confirm that ...

Property prices are soaring: The residential condo market here in Bangkok has seen prices jump an average of 12% in the past 12 months. And that's just in local currency terms; for investors buying into Bangkok's market with U.S. dollars, prices are up even more — as much as 30% — because of the weak dollar.

The amount of construction I'm seeing in Asia is astounding!
The amount of construction I'm seeing in Asia is astounding!

In Hong Kong, property prices are up 11.25%. In Shanghai, 27.85%. In Singapore, 27.59%.

New construction activity is at record highs in the above four cities. And that doesn't even count Mumbai, New Delhi, Macau, Kuala Lumpur, Jakarta — or any other Asian city where unprecedented economic booms continue.

In fact, scheduled new building starts in Southeast Asia show a 45% jump from a year earlier, driven by demand for transport-related buildings, offices, health facilities and exhibition spaces. In China, scheduled building starts are estimated to rise 21% on strong residential demand.

Keep in mind, there's no subprime mortgage crisis in Asia. In the residential property markets here, lenders have almost always required a minimum 30% deposit. For commercial projects, you need to have at least 40% of your own equity involved.

And that's just the property markets. Let's not forget the fact that ...

GDP is on fire: China will grow at 10% plus again this year. Thailand at up to 5.5%. India at 8.4%. Indonesia at 6.4%. Singapore at 6.5%. Malaysia at about 5.4%. Vietnam at 8.2%.

Exports are surging: In 2007, Thailand's export industries sold 27.17% more goods than the previous year. Vietnam, 22.17% more. Indonesia, 14.4% more. And then of course, there's China, whose total exports for the past 12 months jumped almost 26%!

Thailand's exports (such as rubber) are surging!
Thailand's exports (such as rubber) are surging!

But all those exports aren't going just to the U.S. In fact, the U.S. share of Asian exports has fallen in the past 12 months.

Most of the export growth in Asian countries is now actually going to other Asian countries. In other words, China is trading with Indonesia, Japan, Europe, and Thailand. Thailand is exporting to Vietnam, Cambodia, and Malaysia. And so forth.

This is an important point to understand. It means Asian economies have matured to the point where trade among them is now beginning to eclipse exports to the West . It also means ...

Domestic consumption is going through the roof: In Thailand, retail sales are up more than 12% in the past 12 months; overall domestic consumption has risen to 56.1% of GDP.

In Indonesia, consumer spending has been increasing at an annual rate of better than 10% for the past five years. Domestic consumption now accounts for almost 63% of GDP.

In India, domestic consumption now stands near a record 67% share of GDP.

In India, domestic consumption now stands near a record 67% of gross domestic product.
In India, domestic consumption now stands near a record 67% of gross domestic product.

And then there's China, of course, where retail sales are booming at an incredible 16.8% growth rate — and where consumer spending accounts for 37% GDP and has plenty of room to grow.

To be sure, Asians are getting richer and spending more money than ever before. As a result ...

Demand from Asia Is the Principal Force Behind Soaring Natural Resources

The demand in Asia for natural resources is unprecedented in the history of civilization. As three billion souls have been unleashed from economic state systems into free markets and capitalism, their pent-up needs, wants, desires and dreams have been unleashed in a torrent of self-improvement as they race for better quality lifestyles.

I've said this before and I'll say it again so you can understand the full impact: The world has never before seen nearly half its population explode out of repressed economies and onto the modern stage all at one time.

Unless you've traveled through Asia, it's almost impossible to grasp the power of this force.

Unless you talk to taxi cab drivers ... farmers ... waiters, waitresses ... chuppies ... street food vendors ... and shop keepers, you can't really grasp the power of three billion people all moving in the same direction — regardless of the culture — at the same time aiming to achieve the same dreams we take for granted in the West.

It is, by far, the largest, strongest, most enduring force to ever hit civilization. It's the industrial revolutions of England and the U.S. combined — and then multiplied 1,000 times over.

And it's the principal driver behind all the record high prices you are seeing in natural resources ...

Gold is at $1,000 an ounce and going higher!

Oil at $110 a barrel!

Wheat to a record high of $13.49 a bushel!

Soybeans to an all-time high of $15.86 a bushel!

Copper to record highs at $4 a pound!

Platinum to all-time record highs!

Sugar, coffee, cocoa all starting to take off to the upside like moon shots!

Even palm oil, the price of rice, rubber, all at or approaching record high prices!

And Natural Resource Prices Can Go a Lot Higher!

So far we've only experienced the first major phase of the bull market in commodities — the phase where they blast off historical lows and play catch up to two decades of undervaluation during the '80s and '90s.

Now, with Asia continuing to grow dramatically ... the Federal Reserve printing more and more fiat money ... and supply shortages showing up in nearly ever commodity (there's only 3.5 days worth of global copper supplies right now, for instance) — the real phase of the boom — where prices go vertical, will soon be upon us.

I believe more money will be made in commodities than in any other sector, bar none. In fact, I think more money will be made in commodities than in all other sectors combined.

If you are not in these hard assets ... while your paper assets go up in smoke — your wealth is at serious risk of ruin.

Remember, natural resources offer you ...

Arrow Protection against inflation;

Arrow Protection against the falling dollar;

Arrow Opportunity to capitalize on the booming growth in Asia and other emerging and frontier markets;

Arrow Tangible underlying assets; and

Arrow A long-term bull market that should last at least another four years, and possibly much longer

So, I don't think there's ever been a better time to hold these investments.

My other suggestions also remain the same ...

Stay out of U.S. stocks, with the exception of my recommended natural resource plays. The Dow is headed down to 11,000, perhaps even lower.

Stay out of the bond markets . They are highly vulnerable to collapse due to the subprime mortgage and credit market disasters.

Own gold! As much as 10% of your total investable funds should be in gold. Consider a mix of physical gold in the way of bullion coins ... gold funds such as the streetTRACKS Gold Trust (GLD) ... and gold stock mutual funds such as the Tocqueville Gold Fund (TGLDX).

Last, if you're a Real Wealth Report subscriber, be on the lookout for the March issue which will be published next week.

I'll be reviewing eight kinds of inflation so that you fully understand the economic environment you're dealing with — and know how to profit from it.

Be sure to read the issue as soon as you receive it!

And if you're not yet a subscriber, you can order Real Wealth Report online now so you get it in time for my latest recommendations.

Best wishes,

Larry

This investment news is brought to you by Money and Markets . Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com .

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