Understand one of the 5Es: the transfer of wealth and power from the West to the East

If you are like me, you probably have been hit hard by this financial crisis.

There is a lot of uncertainty in the air.

Conventional wisdom is not working any more.

Many are seeking to understand this turmoil and are wondering what they should be doing to not only survive, but thrive, during these turbulent economic times.

I recently published an article where I introduce a framework, called the 5Es, as a way to understand the magnitude and drivers of the change underway in the global economic landscape.  These changes are causing stress and anxiety for all of us along with the feeling that a financial rip tide is sweeping us out to sea.

As Steve Forbes likes to say, increasing our financial education and the resulting empowerment from this improved financial literacy are the keys to a recovery from this financial crisis.

In that spirit, I am going to describe one the 5Es, “the transfer of power and money from the West to the East” … use this description as a way to understand a key driver of the turmoil being experienced by many in the West and as a way to have your eyes open to the new alternatives that can be used to create wealth.

Let me start by providing an excerpt straight from my previous article … “from west to East … there is a transfer of wealth and power underway to the Asia Pacific region, especially China.  The USA is currently the world’s largest economy however it is estimated that China will be the world’s largest economy by the middle of this decade.  A lot of churn and turmoil is associated with this change.”

Some examples of this transfer follow.

From an auto market perspective, China and India caught and passed the US, the European Union, and Japan in 2008 as the world’s largest auto market.  And, the gap has even widened during this recession … while the heads of the US auto makers were in Washington pleading with the US Gov’t for a bail out

Cars don’t run in a vacuum.  They need roads, gasoline stations, and gasoline … all of this requires a lot of building materials and oil.  Just think about oil for a minute (as a reminder, Energy is another one the 5Es in the evaluation framework).

The U.S. consumes up about 25 barrels of oil per person per year. The oil consumption in China and India is tiny compared with the consumption in the US. China is at 1.5 barrels of oil per capita annually. And India barely registers.

So one can only imagine that as these economies grow and take up more of a share of the global economy, their oil consumption will rise exponentially.

Although China already has more than 160 cities, with each having a population of greater than one million (the U.S. has nine, the U.K has two), it still consumers half of all the world’s cement as it strives to build 97 new airports, 500 additional coal fired plants, and 30 nuclear plants in the next decade.

As a result of this build-out, just imagine what it takes to house, feed, and cater to the needs of China’s 1.3 billion people … it is no small task.

Commodities that are in demand in China, yet in short supply in China, include agricultural commodities like soybeans and potash, copper, natural gas, uranium, bauxite (important in making aluminum), chromium (a steel additive) and manganese (important for making stainless steel).

As far as keeping your eyes open to alternative wealth creating strategies, it boils down to investing in what these economies need, but don’t have.

In previous articles, I wrote that many of us are evaluating alternative wealth creating strategies outside of the US Dollar … outside of dollar-denominated assets … perhaps emerging markets … perhaps energy assets that are inherently useful like oil rigs, hydropower, or methanol plants … perhaps precious metals, water rights, oil, natural gas, potash mines, or gold mines … things hard to build, difficult to replace, and costly to substitute … definitely not financial stocks, definitely not retail stocks, definitely not commercial property.

I trust this article provides a little more insight as to why emerging markets with a demand for things that are in short supply (such as oil, food, water, precious metals, and potash mines) represent alternative wealth creating strategies.

In addition, a good book to read would be “Asia Rising” by Jim Rohwer.  This book provides a good read as to the economic success of the East and Southeast Asian countries and some insight as to lessons the West can learn from this prosperity in terms of breaking the paralysis of special-interest politics.

The world is changing dramatically and the emerging markets will potentially provide some light at the end of the tunnel.

I will continue to build upon the “transfer of wealth and power from the West to the East” theme of “the 5 E’s” framework, and the other Es in the framework (these are Energy, decline of (USA) Empire, Experiment with paper money, and Economic cycle) in future articles and updates at my blog which is at http://aspenIbiz.blogspot.com . 

WELLINGTON, New Zealand (AP) — A powerful 7.1-magnitude earthquake struck much of New Zealand’s South Island early Saturday and caused widespread damage, but there were just two reports of serious injuries. Looters broke into some damaged shops in Christchurch, police said.

more… L.A. Times – Middle East

Troops rescued three hostages and seized drugs and weapons in the clash with purported drug traffickers in Tamaulipas state, the army says. Meanwhile, a former mayor is reported missing.

At least 25 people were killed Thursday in a gun battle between army troops and purported drug traffickers in the violent border state of Tamaulipas, just south of Texas, Mexican authorities said.

more… L.A. Times – Middle East

Oxleas Wood a beautiful and protected part of South East London

Out in Oxleas Wood

A few weeks ago I was sitting with my 3 year old daughter after breakfast deciding what to do for the day when she asked me that “what are we doing today mummy”, this was the question I had no answer to until i got a flash of inspiration from my own childhood.

Where better to run free and forget your living in the middle of South East London than Oxleas Wood.

As a child my father had taken my sister and I here often to ‘get out and get some fresh air’ and we had such great fun playing hide and seek and making camps.

So we jumped in the car and set of to this wonderful, unspoilt natural piece of open space in the madness that is South East London.

When we arrived my daughter believed she was in the 100 acre wood and went of looking for Winnie the Pooh and Tiger.  We collected leafs and sticks to take home and make pictures with, played hide and seek and walked up the hill to the cafe at the top for a well deserved drink.

Why had I not taken my daughter here before, who knows she had a great time, we got exercise, fresh air and used our imagination in play.  What better way to spend a couple of hours that does not cost a penny.

The South East London Green Chain runs through Oxleas wood so for older children you can organise a full day out walking, taking in allotments, ancient woods and majestic park lands.  You can picnic in flower filled meadows or stroll through formal gardens.

To give you a brief history of the Green Chain, in 1977 four of London boroughs along with the GLA got together to create the South East London Green Chain.  This chain is today made up of nearly 300 Green Chain open spaces.

This initiative has resulted in our open spaces being protected and helped prevent further building taking place.

Taking in historical places such as Eltham Palace, passing through Shooters Hill and woods that were once the hideout of Dick Turpin the Green Chain offers both old and new sites to see, such as the world’s second largest movable flood barrier at Woolwich, the Thames Barrier, which was opened in 1984.

This weekend why not get the children to put away the game consoles and put on their trainers and get out and about in Oxleas Wood, you will not be disappointed.

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Public servants say a 7.5% increase is not enough. They march through Johannesburg in protest.

A strike by 1.3 million South African public servants threatened Thursday to drag on for a third week as unions signaled that they would reject the government’s latest compromise offer, a wage hike that would be more than double the rate of inflation.

more… L.A. Times – Middle East

2007 NFC East

When Eagles quarterback Donovan McNabb went down for the season, combined with the team already floundering before his injury, it seemed to sound the death knell for their chances at the playoffs. But charging in from out of nowhere to save the day was Jeff Garcia, he who couldn’t change the fortunes of Cleveland and Detroit, and the Eagles crept off with the division title. Dallas and the Giants stumbled in, and also stumbled out, of the playoffs. Washington just plain stumbled. Will the division take the backdoor again or walk proud into the limelight?

From bottom to top, the NFC East in 2007-08:

Washington Redskins: Joe Gibbs came back like a conquering hero to the Redskins four seasons ago. After this season, he may want to consider trying the reception back in NASCAR again. He’s now on his third starting quarterback in Jason Campbell, and he should improve some, but it’s still a long way to go. RB Clinton Portis is there, but even an injury-free season and his usual production may not be enough. And the Redskins signed LB London Fletcher and drafted top DB LaRon Landry, but two players added to the 31st-ranked defense will take it where? The Chase for the Cup must look awful good to Gibbs right about now. Prediction: 6-10, fourth place

New York Giants: Head coach Tom Coughlin is batter-dipped and heading for the oil, and the heat is coming from all sides. Eli Manning has been inconsistent at best, Tiki Barber retired, Michael Strahan is mulling retirement, and even if he should return, has been injury-plagued for a while now. It was hard for this team to finish .500 with Barber, the heart of their offense, last year, and unless Manning shows some major improvement, this will be another long year for Big Blue. Prediction: 7-9, third place

Dallas Cowboys: The Cowboy fans have to be hoping for a year of less drama. They surely want their quarterback to be set, and if he can catch and hold for a field goal, all the better. They don’t want their star wideout to be in the middle of a media storm questioning whether or not he tried to kill himself, or spit on somebody, or, well, anything. And they want everyone to get along and play nice with the head coach. New coach Wade Phillips inherits a pretty decent team from Bill Parcells. QB Tony Romo did fairly well last year, and should only improve from there, and WR Terrell Owens, is, well, Terrell Owens, so he’ll get his catches, his touchdowns, and the lion’s share of the attention as usual. If Big D can hold it together, this team should give the rest of the NFL some drama of their own. Prediction: 9-7, second place, wild-card team

Philadelphia Eagles: A lot of the questions about the Eagles’ upcoming season revolve around quarterback McNabb, and considering his last two seasons ended early due to injury, that is certainly warranted. But even a McNabb at 80% has the ability to outduel a lot of teams, especially in the NFC, and his competitive drive to show the Eagles they made a mistake in drafting QB Kevin Kolb in the second round was premature. Defensively, Philly adds LB Takeo Spikes from Buffalo to an already solid defense, and if Jevon Kearse can stay healthy, they become so much more dangerous. All in all, if the injury bug doesn’t bite in Philadelphia, this should be the team to reckon with in the NFC East. Prediction: 10-6, division champion

The old saying, “Sometimes it’s better to be lucky than good,” never had a better example than the NFC East. If Philadelphia is lucky, they’ll take the division. If they’re not, Dallas could just be good enough to bring it home.

A UPS cargo plane crashes after take-off near a motorway in Dubai, killing two crew members aboard, officials say.
more… BBC News – Middle East

Why East European Real Estate Is A Hot Commodity For Investors

The United States housing market may still be in the middle of a downward slump, but East European real estate investors are reaping the benefits of double-digit returns – some as high as over 50 percent! The explosive growth in Central and Eastern Europe are bringing investors from all over the globe to the area.

Poland

With the housing market growing at more than 33 percent last year, property in Poland has the distinction of being at the top of the list for the East European real estate market. In the ancient city of Krakow, for instance, investors are celebrating a 58% rise in 2007. That means that Krakow currently generates the highest returns on real estate investment in all of Europe.

This rise in property value in Poland can be partly attributed to the fact that a number of American and British companies have elected to open offices in the country. Another reason that property in Poland has become highly desirable is due to the recent trend of Poles moving to Britain to make money and returning to their homeland to open their own businesses. It comes down to basic supply and demand!

Bulgaria

Bulgaria is an emerging economy still finding its place after its 2007 EU accession and adoption of the Euro. This has many investors watching the East European real estate market in this area very closely. With a 30 percent gain in housing values in 2007, this East European real estate market looks to continue its growth in 2008 as well.

The capitol city of Sofia has seen significant employment growth over the past couple of years and as a result property values have also been on the rise. This level of growth has been seen in the ski resort towns and coastal vacation areas as well.

Czech Republic

The Czech Republic is one of the shining stars in the East European real estate market. Foreign investors find that the country makes business investments and real estate investments extremely easy to conduct.

Businesses who choose to set up offices in the Czech Republic find that the country offers an efficient infrastructure that can connect them directly with most European centers via railway. They also have a pool of skilled workers that work for a comparatively cheap hourly rate as compared to their output.

The Czech Republic also offers East European real estate investors a high credit rating as compared to other Eastern and Central European states. Businesses who have already made significant investments in the Republic include such well-known names as Coca Cola, Volkswagen, Pepsi Cola, Siemens and others.

Romania

Romania is perched on the cusp of a huge real estate surge. With many lenders currently offering 100 percent mortgages, Romanians have more money available to invest in a limited supply of property. This is another example where the power of supply and demand is expected to cause property values to soar in Romania in 2008 – making it one of the top East European real estate markets to watch.

Supply is so limited in Bucharest, for example, that a new complex called The Old Bread Factory has 500 reservations for just 200 units and another development called The New Town has over 450 reservations for just 220 units.

There is no doubt that the real estate market in Eastern Europe is becoming one of the most competitive in the world. As people emerge from the confines of communism and embrace free trade economics the investment opportunities in these countries will simply explode.

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More than 100 are injured in the assault on a Shiite procession in Quetta, which comes two days after similar attacks on Shiites in Lahore.

A suicide bomb blast targeting a Shiite procession in the southern city of Quetta on Friday killed 58 people and injured more than 100 others, police said. The explosion came two days after bomb attacks killed 35 people during a Shiite march in another Pakistani city.

more… L.A. Times – Middle East

East Village, Calgary Renos Could Mean Big Opportunity

The East Village has long had a less than savoury reputation as the home of the homeless, drug dealers and prostitutes. This does not make it the first place that comes into one’s mind as a possible opportunity for real estate investment, but the master plan that the Calgary Municipal Land Corporation (CMLC) unveiled on September 16, 2009 could mean that this ravaged chunk of the city could see some new life.

Construction in the East Village has been going on for a few years now, with street realignment, wider pedestrian thoroughfares, and lighting installation. 12 blocks are currently under construction and more will undergo redevelopment in the future. However, CMLC’s plans for the area are even grander.

The master plan calls for six “character” areas, gateways at the 4th St. underpass and the northwest corner of the neighborhood, green space along the Bow River, including a riverside pathway, and a pedestrian walkway that runs right through the middle, from the intersection of 4th St. and 8th Ave. to the river. Commercial and residential developments are planned within this framework to create a revitalized live/work community and encourage Calgary’s up-and-coming residents to consider this place as home.

Other plans include work on St. Patrick’s Island with a new bridge and a swimming/skating pool, a new music centre design by the Cantos Music Foundation that will include the King Edward Hotel. There have been many concerns about how best to preserve the condemned heritage building, which were allayed when the Foundation moved in and started plans for revitalizing it. Now those plans are aligned with the CMLC’s bid to transform the entire neighborhood.

Hopes are high that the East Village will follow in the path of Eau Claire, once industrial land, now a thriving mix of condos, businesses, and the famous Eau Claire Market. The Market is home to unique shops and restaurants that draw people from all over Calgary as well as visitors to the city. If the East Village can capture the attention of consumers and businesspeople, chances are that its establishment as the newest live/work neighborhood in Calgary will be successful.

Time will definitely tell whether the latest attempt to reclaim the East Village will be successful. If it is, the people who invest in real estate first will be the winners. The CMLC plans to market the “new” East Village as “the newest oldest coolest warmest neighborhood”. If their plans succeed, the hope is that 11,500 people will call the East Village home by 2020.

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