The "Peak Growth" Myth Is Wrong (and Dangerous for Your Money)

New reports from the likes of the IMF and McKinsey hypothesize that global growth rates will drop by 40% or more over the next half century. The growth-killers they point to are an overabundance of debt, unequal wealth distribution, and an aging population.

Don't fall for it.

For one thing, people have been calling for the end of things since, well, the beginning of things. The Internet and mass media merely magnify the rhetoric and give the legion of doomsayers a platform and make them harder for individual investors to ignore.

While we're at it, let me remind you that this is the same crowd calling for the end of the financial universe as we knew it in March 2009... right before the S&P 500 took off on a 180% run higher. I sure hope none of you decided to sit that one out.

peak growthFor another thing, every great crisis is, in fact, a realignment of opportunity. Weaker players get weeded out, stronger players consolidate their market share, and profits mount.

This is especially true when you understand why AND what one of the single most powerful Unstoppable Trends of all means for your money - Technology.

We're going to talk about that today and share my take on an $8 stock with the potential to set you up for profits perfectly.

First, here's the secret growth "engine" the doom-and-gloomers are missing.

The Naysayers Have a Terrible Track Record

The alarmists sure are convincing.

A new McKinsey Global Institute Report is particularly grim. According to the world class consultancy, global growth will falter, bringing with it a roughly 20% decrease in GDP per capita over the next 50 years due a nasty combination of shifty global finances and an aging population.

To hear McKinsey tell it, the great century-long run we've enjoyed is over and the 1.8% average growth rate the world has enjoyed is done. You may as well hang up your spurs and go home.

The argument reminds me a lot of Peak Oil...

In case you're not familiar with Peak Oil, it's a theory based on M. King Hubbert's theory that the maximum rate of petroleum extraction was reached around the year 2000 and that we're supposedly entering an age of terminal decline. Once held sacrosanct, it's now widely regarded as wrong.

The fracking boom and technological advances have made a mockery of almost every apocalyptic energy-related projection out there. (That's the Technology Trend at work). Hubbert himself projected peak oil in 1995. When that didn't happen, geophysicist Kenneth Deffeyes noted that he was 99% confident Peak Oil would happen in 2004. Even T. Boone Pickens, arguably one of the most famous oil men of all time, said that we will "never again" pump more than 82 million barrels a day in 2004.

Yet the world produced 94 million barrels per day in the last quarter of 2014, according to the IEA.

The growth in U.S. production of more than 3.5 million barrels today has almost equaled the entire increase in world oil supplies, according to the Financial Times.

To paraphrase George Monbiot, who writes for The Guardian, "there's enough [oil] to fry us all."

Unfortunately for investors who bought in to Peak Oil, they stopped investing under circumstances very similar to today... and missed the 704% run up in oil to a peak of $142 a barrel in June 2008. Of course it's fallen back a lot, but the profit potential there was huge. It still is... but that's a story for another time.

My point is that, just as the doomsayers left technological improvement and extraction gains out of their original arguments, I believe the "global growth is dead" adherents are missing something equally big.

Remember, we're dealing with unstoppable trends here, and there are trillions of dollars on the move as a result.

Here's the key.

They're Leaving Productivity Out of the Equation

It's not well-known, but labor productivity in developed economies has been rising at an unbelievable pace. Here's how productivity in America's manufacturing sector has changed quarter-to-quarter since the Great Recession began:

Quarterly Percent Change in Productivity of the U.S. Manufacturing Sector, 2009-2014

peak growth chart
Click to enlarge

The above chart shows how the level of worker productivity of each quarter compares to that of the quarter immediately before it.

Contrary to what the headlines seem to portray, the U.S. is on a 13-quarter-and-counting streak of increased productivity in its manufacturing sector - and this at a time when the portion of the population aged 65 and older has climbed from 13.2% to 14.7%, according to Economix. That's a change that has resulted in more than 10,000 Baby Boomers retiring each day, to put the 1.5% increase in context.

Full data is not yet available for the rest of the world in 2014, but the trend through 2013 is a very positive sign that global productivity rates tracked this trend, too, for developed and developing economies alike. A report from the non-profit research firm The Conference Board notes that worldwide labor productivity grew by 1.7% worldwide in 2013.

Some countries like China, Brazil, India, and Mexico grew even faster. According to the same report, their productivity rates climbed by 3.3% on average in 2013.

I don't know about you, but that's yet another sign to me that these countries - which are in some cases growing far more quickly than the 5% growth rate that was celebrated in the U.S. last quarter - will be powering global growth for decades to come.

Critics charge that can't continue. I beg to differ.

Productivity and output have continued - each and every time humanity has seemingly hit a stumbling block. Productivity gains are firmly rooted in corresponding technology development. And, in each case, there's been a new, golden age of investing at hand because they have overwhelmed demographics shortcomings that would otherwise kill capitalism.

These productivity gains are firmly rooted in technological advances, mainly centering in communication. Ironically, the value of the Technology trend's role in increasing worker productivity was documented by none other than McKinsey itself.

In 2012 the firm noted that improved communication technology could cause labor productivity in factories and entire corporations to rise by 20% to 25%. The observation came only a year after MGI principal Michael Chui touted the firm's 2011 report that labeled big data the next frontier for increased productivity.

I know this is just one data set but I chose it to make a point - debt and aging populations just aren't the death knell to global growth they're reported to be.

Growth won't benefit all sectors equally, of course, but it will produce some major winners. Heck, they already have.

For example, medical supplies and healthcare have seen a surge in demand as populations get older, resulting in profits of more than 100% for Becton, Dickinson and Co. (NYSE: BDX) since I recommended it to Money Map Report readers. The booming populations have also created demand for companies dealing in infrastructure, fueling the 97% return subscribers enjoyed with American Water Works Co. Inc. (NYSE: AWK) since I recommended it in the Money Map Report. Even Raytheon, a defense contractor, is tied in, albeit via War, Terrorism & Ugliness, to the tune of 158% returns.

Each of the companies I've just mentioned remains a good, solid buy. But they're expensive at this point.

So I recommend considering another play that sits squarely at the nexus of Technology and Demographics. It has just as much profit potential, perhaps even more, considering it's only about $8 a share right now.

Your "Twofer" Stock to Play Construction and Agriculture

CNH Industrial NV (NYSE: CNHI) is a London-based company that was formed in 2013 as the result of a strategic merger. Combined from Fiat Industrial, a manufacturing company specializing in the production of tractors and cars, and CNH Global NV, a company that dealt in construction, it now offers a twofer: It designs and sells equipment to be used in both the construction and agriculture sectors.

Just as importantly, it has a global reach that will allow it to thrive with growing markets. As of January 2015, the company derived just 28% of its revenues from North America, with 42% stemming from Europe, Africa, and the Middle East. 11% came from the Asia/Pacific region, while the remaining 19% of revenues were made in Latin America.

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But CNHI is showing signs of diversifying its revenue stream even further. In July 2014 it announced the opening of its new manufacturing complex in Harbin, China. It's already the biggest agricultural equipment manufacturing plant in northeast China, extending over 400,000 square meters.

The plant is a $100 million investment on the company's part, and in CEO Richard Tobin's own words, "an important milestone that marks our commitment to the development of agriculture in China."

CNHI now has 62 manufacturing facilities worldwide, up from just 38 facilities in early 2014, with a brand network that's been established in more than 170 countries.

It was one of the rare companies this earnings season to meet the expectations Wall Street set up for it, posting the earnings per share of $0.12 that analysts predicted. But it surprised in a good way on revenue, bringing in $8.37 billion for the quarter, $160 million more than analysts had foreseen.

There was also one nugget in its Q4/2014 report last January that analysts ignored, but that I love to see. The company has been sharply reducing its merger-related debt. In Q4/2014 alone, the company whittled down its net debt by $1.2 billion - and it did this while devoting $1 billion to capital expenditures and paying out $400 million in dividends to shareholders over the year.

In a year that was challenging for construction companies, those are very impressive feats - and a sign of very shrewd management.

The stock is also cheap, trading around $7.60/share with a P/E ratio of just 11.2. Throw in the 3.60% dividend yield, and you have a very solid growth and income opportunity.

I expect CHNI to have a good 2015 and an even better long-term performance. After all, people have to eat, and they have to have a place to live.

Editor's Note: Keith expects CNHI to have a very good 2015 -and he's focused on stocks behind Trends that are still more powerful. That's why his very first recommendation to Total Wealth readers saw a 100% gain within six weeks - and it's still got plenty of upside over the months and years to come. For a full and free report on the company, including its ticker symbol, sign up for Total Wealth here - it's free!

About the Author

Keith is a seasoned market analyst and professional trader with more than 37 years of global experience. He is one of very few experts to correctly see both the dot.bomb crisis and the ongoing financial crisis coming ahead of time - and one of even fewer to help millions of investors around the world successfully navigate them both. Forbes hailed him as a "Market Visionary." He is a regular on FOX Business News and Yahoo! Finance, and his observations have been featured in Bloomberg, The Wall Street Journal, WIRED, and MarketWatch. Keith previously led The Money Map Report, Money Map's flagship newsletter, as Chief Investment Strategist, from 20007 to 2020. Keith holds a BS in management and finance from Skidmore College and an MS in international finance (with a focus on Japanese business science) from Chaminade University. He regularly travels the world in search of investment opportunities others don't yet see or understand.

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