Chris Mayer of Mayer's Special Situations is having a wonderful time cruising
around China and marveling at the changes that the last 25 years have brought,
and is thus driven to say, "One of the great investment opportunities of the
next decade will be catering to the emerging middle class in China, India and
Indonesia."
Immediately, the Intrepid Entrepreneurial Mogambo (IEM) is planning and
wondering how I am supposed to cater to these Asians with my new Mogambo Brand
Lucky Tasty Eggrolls (MBLTE), who are half a world away. The logistics are
boggling, but I am inspired to persevere in that he is not alone in that
assessment, and he writes that CLSA, "an investment house with expertise in
Asia" thinks that the future is even more stellar than that, and "predicts the
consumer markets in China, India and Indonesia will enter a ‘hypergrowth' phase
as disposable incomes rise".
And how high will Asian disposable incomes rise? Well, CLSA
"notes that the number of Asians (excluding Japan) with disposable income of
US$3,000 will rise from 570 million people to 945 million by 2015. About 85% of
that increase comes from just China and India." Wow! In 4.5 years!
This is stunning stuff, but I groan in dismay, as multiplying 945 million
people times $3,000 is a job for a calculator, and so I just unceremoniously
stop and flop, hanging my head in weary anticipation of wrestling with a damned
calculator using numbers so large that, deep down, I know that any number that
comes up will be suspect, if not incomprehensible, and usually both.
So I am busily rooting around on my desk, trying to find the damned calculator,
and I get mad because I can't find it, and then I run across a memo from last
week where my boss is informing me that some guys from the home office are
going to be coming by - tomorrow! - to meet with me about my progress on some
mysterious "report" that I was, apparently, supposed to be working on, and now
I am mad AND scared out of my freaking mind, which I gather from finding my
calculator only to hear it laughing rudely at me!
My own calculator is mocking me! Its frightening rudeness cuts through me like
a knife, although nobody else can hear it until I jam it right up against their
ears and say, "Listen to it! Listen to the laughing! Say you hear it or I'll
beat your brains out!" and then they all admit that, yes, they hear it, too,
proving that I'm not crazy.
So, reassured, I was, at last, ready for my ordeal with the laughing
calculator, and I returned to Mr Mayer's report for the data, where, to my
delight and surprise, I see that he has done the math for me! Great!
He writes that by 2015, by which I figure he means "on December 31, 2014" that
the consumption spending of this Asian (ex-Japan) middle class will rise from
US$2.9 trillion to US$5.1 trillion." Wow! Almost doubling in under five years!
And this does not even count all the spending by lots of upper income people,
whose incomes will rise, nor does it count any of the hundreds of millions of
the poorer Asian people who will still not be middle class, but whose incomes
will also go up! Wow! That's a lot of spending!
In considering China alone, he says that "By 2014, about 44% of the population
in China will top this $3,000 threshold - a 27% increase over 2009." Wow again!
The point is not that that whole Asian region is a hotbed of potential economic
activity, perfect for Mogambo Brand Lucky Tasty Eggrolls (MBLTE), which it is,
but that a lot of that growth is going to be electronic and electrical, and
that means silver. Lots of it! Oodles of it!
And this does not even mention all the myriad other industrial uses of silver
that will demand more silver, which doesn't even get started on how these
famously health-conscious people are going to want the powerful anti-bacterial,
anti-viral, anti-fungal, anti-everything qualities of silver in huge
quantities, too! Wow!
Thus, the future of silver is mind-boggling, which gets me back to the
staggering implications of the supply/demand dynamic, where buyers and sellers
use price to change supply and demand until they are equal and thus clear the
market; the price of silver must zoom because there is a shortage of silver
now, and demand will increase tremendously into the indefinite future!
And, as hard as this is to believe, while silver historically sells for about
1/15th the price of gold, which means that silver should be somewhere around
$75 right now, that low figure is only if the comparative gold does not go up
any more, which it will! By a lot!
That is why I cannot believe my eyes that silver is selling for less than $20
an ounce right now! Twenty stinking dollars an ounce!!!
Those three exclamation points at the end of that last sentence are, as all
Junior Mogambo Rangers (JMRs) know, a Secret Mogambo Code (SMC) for, "Hey! Wake
up, moron! This is important!"
And indeed it is. And easy, too! All you have to do is buy silver and then just
wait, sitting back in your chair watching TV which, from an investing point of
view, is so pleasant that you tingle all over to realize that "Whee! This
investing stuff is easy!"
Richard Daughty is general partner and COO for Smith Consultant Group,
serving the financial and medical communities, and the editor of The Mogambo
Guru economic newsletter - an avocational exercise to heap disrespect on those
who desperately deserve it.
Republished with permission from
The Daily Reckoning. Copyright 2010, The Daily Reckoning.
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
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