By William Patalon III
Money Morning/The Money Map Report
There's an old Wall Street adage that tells us that "the trend is your friend."
And there's a witty bit of wisdom we've developed here at Money Morning to help guide our readers and us that says: "Go global or go home."
Combine those two and you'll discover that you've got yourself one very strong investing strategy – if you choose the right trends, that is.
Surprisingly, that's nowhere near as difficult as most investors think. All you have to do is to look around you, and study the forces that are at work in the markets each day. If you do that on a consistent basis, you'll soon discover that no matter what kind of "trick play" the financial markets throw at you, you'll be able to side-step the tackle attempt, will avoid being thrown for a loss – and will actually end up scoring some hefty profits for your portfolio.
To show you what I mean, let's take a quick look at the markets right now…
The New World Disorder
For decades, America's Wall Street was the financial center of the world, if not the universe. That New York-centric viewpoint was so pervasive that one of the most-recognizable investment aphorisms to emerge was the ubiquitous: "When Wall Street sneezes, the rest of the world catches a cold."
But as we've all seen during the wild markets we've had to navigate of late, that's not true any longer – and may never be again.
For the first time in modern history, the U.S. economy finds itself back with the masses, flying coach instead of first class. We've all heard the statistics.
- From 2005 to 2010 alone, worldwide wealth will soar from $118 trillion to more than $200 trillion – with the newly capitalist markets of Asia and Europe accounting for the biggest share.
- Over the next 25 years, America's share of the worldwide economic pie will slip from 28% to 24%…
- While during that same stretch Asia's share of the global market will almost double – meaning it will account for a whopping 55% of the global economy by 2030.
But those are just statistics. A confluence of powerful forces is responsible for those changes. So let's take a look at some of the global trends that are the actual catalysts behind those numbers.
Key among them:
- The emergence of such new economic heavyweights such as China and India, which are now competing for the capital, the jobs and the business contracts that U.S. companies for decades had almost all to themselves.
- The perfection of new telecommunications technologies that are making national boundaries largely irrelevant from a business standpoint, while also enabling global corporations to shift labor and capital wherever it's needed around the world.
- The emergence of new capital sources; in particular, the so-called "sovereign wealth funds" – the massive state-run pools of investment capital that are now operating like venture capital funds with a worldwide reach.
- A global credit crisis – which grew out of a U.S. housing-market bubble – that continues to wreak havoc on the U.S. economy and the U.S. dollar.
- An unprecedented escalation in global energy and commodity prices that, combined with the weak U.S. greenback, is allowing inflationary forces to take hold in the American market for the first time in nearly three decades.
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Taken at face value, such trends are terribly unsettling for U.S. consumers and investors alike. And the unease in this country is growing at an alarming rate. Believe me, we here at Money Morning know that as well as anyone. As our team of global investing experts beats the bushes in search of new trends and new investing opportunities to bring your way, we hear these concerns voiced over and over again.
We certainly understand folks being worried. After all, with change comes uncertainty. And uncertainty can breed worry, if not fear.
For those of you who are understandably fearful, I'll ask you to consider one other longtime Wall Street adage: With change comes opportunity.
Global Profit Opportunities Abound
With all the global changes we see, we also see plenty of opportunity – especially for U.S. investors. While I understand if many investors can only see a burly group of blockers standing between them and the profits they'd dearly love to lock in, we here at Money Morning see a playing field that's wide open all the way to the end zone.
All you have to do is call the right plays – by picking the right trends. Here are 10 that are worth watching – and capitalizing on – as they play out in the global capital markets at different times over the next 12 months or more.
- Cash in on the Cash Barons: Sovereign wealth funds from China and the Middle East are pouring billions into stocks too many investors would rather ignore.
- Energize With Energy: Energy will be a recurrent theme in the months to come – and not just in terms of oil and gasoline. Crude oil will remain in the forefront of the profit plays to come. But that's not all: Alternative energy opportunities such as uranium and so-called "green energy" investments will benefit from soaring prices for conventional energy sources. When it comes to these profit plays, it will pay to keep all your bases covered.
- Buy into Buyouts: Mergers and acquisitions, management buyouts and private-equity deals helped fuel the record run in the U.S. stocks in the first half of 2007. The subprime-mortgage mess and ensuing credit crisis will make it tougher to do deals in the next 12 months, but the choicest buyouts still will get done.
- Build With Biotech: This isn't your father's biotech sector. No longer are we talking only about the "Big Pharma" drug-development firms. Some of the biggest players are now trying to solve the world's food and fuel shortages – with some notable successes. With special, more-environmentally friendly herbicides and higher-yielding, genetically engineered crop seeds, these companies have already engineered big increases in sales and profits – and there's a lot more to come.
- Home in on Housing: Housing's down, but it'll never be out. The turnaround is still some time off, but this sector isn't going to go away. It'll take careful and patient investing to profit here, but keep the sector on your radar screen – if for no other reason than to use it as a barometer for the rest of the currently moribund U.S. economy.
- Invest in Income: Studies show time and again that income is key to any portfolio's success. And those same studies show that if you call the dividend play during a bearish market, your portfolio will easily beat "the spread" – in this case, the market averages as measured by the Standard & Poor's 500 Index and Dow Jones Industrial Average. And if you can't decide between stocks or bonds for income, don't flip – our report covers both sides of the coin.
- Hit the "BRICs:" BRIC is a Goldman Sachs Group Inc. (GS) acronym for "Brazil, Russia, India and China." Three of the four – Brazil, India and China – are not to be ignored in the months to come. After the wild ride Chinese stocks have provided in recent months, too many U.S. investors are ready to give up on the Red Dragon. Don't make that mistake. We've seen some life in China's stock market in recent days, and there will be plenty of ways to profit from that emerging economic colossus, some of which involve only moderate risk.
- Go for Gold: The yellow metal has enjoyed a record run. And it's subsequently dropped back. But don't let that disappoint you: With global demand for commodities of all kinds soaring, there's plenty of yardage left on this play. Besides, if inflation escalates as many experts expect, gold will provide a terrific portfolio hedge.
- Couple up With Commodities: The gangbusters global growth that's causing gold and crude oil prices to "go long" is having the same effect on such commodities as wheat, corn and soybeans. Even Jim Rogers says the global demand for commodities is only going to escalate, meaning this is a play you can call now with a high degree of confidence and score again and again.
- Don't Give up on the Greenback: The U.S. dollar has been sinking against virtually every other major currency, a trend that could well continue for some time to come. That doesn't mean you should ignore the greenback. Run a reverse and look for ways to profit on its pain. Not only will you score now, you'll be focused in and ready to profit when playing field changes and the U.S. greenback reverses course on its own run for the end zone.
Think of this list as your own personal "mutual fund" of investing strategies. By mutual fund, I mean that this is a list of potential profit plays that are worth watching – and probably investing in – over the next 12 months to 18 months. Like a mutual fund, it's a diverse list, meaning that different trends will be working for you at different times. But that's okay – it means you're more likely to be involved in whatever trend happens to be hot at the time.
One last point that's worth noting: By advocating investments in food and commodities – the most controversial of topics right now – we're not talking about acting as profiteers. We're talking about taking steps to protect yourself and your family from the very real fallout caused by the soaring prices. It's a trend that you cannot stop. But you can take steps to reduce the damage it inflicts on your family budget, and on your ultimate retirement.
News and Related Story Links:
- Money Morning Special Investment Research Report:
Six Ways to Play Money Morning's Prediction That Gold is Headed for $1,500 an Ounce.
- Money Morning Financial Analysis:
Making Sense of (and Profiting from) Gold's Dip Below $850 an Ounce.
- Money Morning News Analysis: .
About the Author
Before he moved into the investment-research business in 2005, William (Bill) Patalon III spent 22 years as an award-winning financial reporter, columnist, and editor. Today he is the Executive Editor and Senior Research Analyst for Money Morning at Money Map Press. With his latest project, Private Briefing, Bill takes you "behind the scenes" of his established investment news website for a closer look at the action. Members get all the expert analysis and exclusive scoops he can't publish... and some of the most valuable picks that turn up in Bill's closed-door sessions with editors and experts.