China: Return of the Middle Kingdom.
China will continue to see another decade of high single digit , low double digit economic growth. The Eastern Seaboard will become more retail and service oriented as Chinese manufacturing moves to China’s North and West. The wealth effect in China from the property boom is still in it’s infancy. The country will continue to see massive increases in infrastructure spending in roads, bridges, high speed trains and airports.
Chinese national champions will continue to emerge in many industries and they will go global.
The China market will continue to be the key focus for global multi-nationals. For example, General Motors sells more cars in China than they do in the U.S. General Motors also extracts 90% of its profits from China. Over the next ten years, this will become a similar story in company after company.
Inflation will continue to be double digits in the next ten years.
Chinese property should add 15% per year for the next decade.
Investors in China will benefit from appreciation of the Chinese Yuan.
Some Chinese companies traded in the U.S. are shell companies and have two sets of books. Tiger Hill has identified some of these companies and is short these companies.
Mongolia – The Asian Kuwait:The Coming Mongolian Economic Expansion.
Mongolia has a population of 2.7 million people in a country the size of Western Europe. Mongolia is stocked with resources such as Cooper, Coal, Molybenum, Tin, and Tungsten, and Gold. All of East Asia is looking for supply. The Japanese are exploring for rare earth now in Mongolia. China’s rare earth reserves are just over the boarder in the province of Inner Mongolia.
Mongolia has never been able to develop these resources under Soviet domination and the previous twenty years has seen slow progress. At this time, Mining Contracts and profit sharing between foreign miners and the government have been put in place, the global mining giants have come in and the commodities are starting to flow. The wealth that will emerge will spread rapidly over a population of only 2.7 million people.
Peak Everything: Peak Oil, Rare Earth, Copper.
The Oil Story:
The Oil Supply Side:
Global Oil production peaked in 2005. There is a 9% global decline rate every year of existing oil fields. The world has not found a new major oil field in the last 30 years. The major oil fields in the world are very old. The worlds largest field, Ghawar in in Saudi Arabia was found in 1948. Saudi oil reserves have not been audited in decades.
The Oil Demand Side:
China puts an additional 17 million new vehicles on the road every year. Estimates are that China will grow to a market of 35-50 million vehicles per year in 10-20 years. The total global vehicle market only ten years ago was just 50 million new vehicles per year. Add in growth in India, Russia, and Brazil and the equation is clear. Electric vehicles will help offset this but will drive demand in electricity from power plants. Petrochemical products will also continue growing.
The Copper Story:
Copper is going into a long term supply deficit in 2011. Copper is widely used in housing and construction. J.P. Morgan is starting an ETF which will provide another source of copper demand. A new major copper mine has not been started in decades. Goldman Sachs is predicting copper to go over $5 USD/LB in the near future.
The Rare Earth Story:
The RE Demand Side:
Rare Earth are 17 key elements used in electric vehicles, windmills, greentech and water filtration products. They are used in many high tech products and defense applications such as radar and missle systems. China has adopted domestic production quotas on rare earth materials.
The RE Supply Side:
RE is found in only a few places in the world that can be mined economically. China produces 97% of the production of rare earth. China’s export quotas for the 2nd half of 2010 were 50-60% less than 2009 sending shockwaves through the markets. China will most likely increase export quotas in the future. China has said they may have only 15-20 years of reserves left .