Jim Jubak at MSN Money describes the trends that will influence investments in the long term.
Source: Turn short-term fear into long-term profit - MSN Money
The developing world is growing richer
Oh, not all of it. But countries such as China, India and Vietnam -- more than 2 billion people just in those three, and many more in other developing nations -- are growing their economies at rates double or triple the 3% growth rate for the developed world projected by the Organisation for Economic Co-operation and Development. That will add hundreds of millions of consumers to the global middle class who will demand middle-class products and services such as life insurance, home mortgages, hotel rooms and cars.
Demand for commodities will continue to exceed supply
A fast-growing developing world has created demand for commodities that global commodity producers in industries from oil to copper to coal to iron (and don't forget water) are having a tough time meeting. That has produced what some Wall Street investment houses are calling a "supercycle" boom in commodities prices.
We've seen the low in the inflation cycle
Although it will be a very odd kind of inflation, higher energy and commodity prices will bleed through into the core inflation rate. "Loose money" policies in China and the United States and the need to recycle petrodollars will keep the globe awash in cash, although not as much as at the peak in 2005-2006. However, thanks to the surplus production capacity added to the global economy from China, India, et. al., the prices of manufactured goods aren't likely to climb very fast.
The dollar will continue to slide
Probably not as fast as the doomsayers now predict because Japan and the European Union have their own problems that will keep pressure on the yen and euro. But thanks to our huge trade deficit and the utterly feckless fiscal policy in Washington, the world isn't exactly clamoring to hold more U.S. dollars.
Baby boomers will be retiring
The U.S., with its combination of great wealth and relatively high rate of population increase (thanks to a relatively high birth rate and relatively open immigration policy), might be best positioned to muddle through. But it will require the baby boomers to cash in real estate by downsizing to cheaper geographies, and require that those boomers admit that the country can't afford to spend every last cent on prolonging their lives.
Best bet on the demographics of U.S. real estate: banks and land companies in low-cost retirement areas such as the Carolinas, Georgia, Arkansas and parts of Texas. And if you're cynical about any attempts to control health-care costs, as I am, look to companies that profit from the chronic diseases of old age.
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