While the West is full of fear, Asia is full of hope.

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Introduction

A billion pople coming out poverty is extremely positive and uplifting.

As August 2009 blows in and most of Europe is on vacation, its becoming clear that Asian economies are recovering faster then elsewhere. Stock markets have surprised many (but not myself) on the upside. This, even while a month ago most many “experts” wrote and articulated of a new "imminent downturn"…to new lows. It was not to be.

It seems forever more fashionable to be negative on the outlook. We know the press strives on negativity and gloom and doom reports are everywhere, not the least the zillion of nouveau web sites predicting the end of the world as we know it. Where are they now?  One could say, to be negative benefits not only the press but the still powerful banks in general as well, as then savers leave their capital in that bank and/or buy their “conservative” funds.  Of course we all know where that ended in the just recent past, when huge global saving sums where invested in AAA US housing bonds, wasted away.

Quam in Hong Kong got it right as well by mid year, this by terminating one of its bearish oriented funds and firing its portfolio manager not long ago along with changing its view to an “upward bias”, regarding Asian equity markets. While we still gust out all the problems the western induced financial crisis brought on the world, there is a quieter voice in the making just now…it’s the voice of "Mr. Market", now advanced through higher stock prices.

I for one am proud here for having voiced all along this year to remain invested –even in the darkest times visiting companies and bringing new ideas to your attention. Or more like it, to revisit old ideas/companies and then pound on the table to stay with them and/or invest more.

Asia is very bullish in general for a number or well know and not so well known reasons. The brain gain,  vs. brain drain of the past, is now more then ever in full motion.  Many well educated Asians now living in EU or the US, are coming back here -for good reasons. Asia is clearly developing a sizeable advantage on its pool of PhD researchers.  In the past 5 years China alone has today awarded 3 times more doctorate degrees to its striving academic young people. On polls after polls, leading with the Chinese, the Asian population is on average far more hopeful and so positive about the future.  Just at a time when the opposite is happening in the US and even more so in the EU.  How does a society view its own population?  Are the poor a burden, or a potentially rich resource waiting to be tapped? Asia has already answered this question.

Generally most Asians today do not have to be convinced to be optimistic. Yet, compare this how many Western leaders begin their speeches by remarking how “dangerous” the world is becoming.  Exactly 2 years ago, then President Bush said “the American people need to know we live in a dangerous world”…and the French minister of foreign affairs (Michel Barnier) said in early 2005  “We have so many challenges to take up at the same time…in a world which is dangerous, unstable and in disarray”. *

Yet, during this same time more people in India and China have been brought out of poverty/misery then in any other period before. Nothing is more positive then to bring  half a billion people out of poverty.  Poor people whom are starting to do better for the first time and so see hope. These are the most optimistic of any group. Yet, there is a Western zeitgeist: the belief that the world is becoming every more dangerous. Maybe for them, as they are losing the third world war, economically speaking. 

Asia is rising, full of youth, hope and upbeat as millions are rising out of poverty. Nothing can be more positive then rising out of extreme poverty and despair….and this is now happening to more people here, then are living in the EU and US combined.  Freedom to the poor in Asia, means more then anything else making a living and getting out of poverty…so many with new internet connections and cheap mobile phones.

Perhaps the biggest sound coming out of East Asia, are the sounds not heard.  That is, the sound of silenced guns. Contrary to so many predictions of years past East Asia as been peaceful for more then 2 decades. The major stress test that could have triggered conflicts in the region was the Asian financial crisis of 1997-98, as then there were major implosions of several Asian economies.  History shows that the combination of a major financial crisis along with an ample pool of festering grievances, could make for a potential lethal cocktail.  Instead as we know, the opposite happened.

Yet, lets not forget, at the time major books were published by Western so called “expert” authors which predicted with alarm Asia’s deadly triangle, or axis or evil…with North Korea, Burma in the north and explosive turbulence coming out of the middle East…with China and Japan being labeled as old arch-enemies -and more.  I remember reading (and there were many more such in retro-spect "faux again" intelligence assessments) one exmaple is a well sold book in 1997, called  “Asia’s Deadly Triangle”, by Kent E. Calder. 

While the “Economist” magazine was full of praise about this book, yet the author was wrong as we today know.  Today, just as one fact: of all the legal nuclear powers, China keeps its nuclear weapons in the least operationally ready stage.  And, according the a 1998 Brookings Institute study called the Atomic –Audit, the US spent over 5.5 trillion US$ since 1944 on nuclear weapons systems. Yet, to this day the US spends around 7% of its annual by far globally gigantic defense budgets (500 bill US$ a year) on these weapon systems.  The most stupid thing China could do today is to squander its long rise by engaging in any kind of military conflict. *

SE Asia, China and India have many challenges ahead, far too numerous for a guy like me to review here. Yet, it has by far the enviable record on having lifted more people out of poverty then any other civilization of the past, or likely in the future. This in itself is extremely positive and uplifting.  And it reflects so in the hope and positive view of the future this region commands, by its people, as compared to the fearful and worrisome cultures of the West. But not Japan which has been marked in recent years of mediocrity and stagnation

Asia represents hope, the West is full of fear and Islam is set with humiliation.**.  In India as in China absolute poverty has decreased significantly…today, fewer then 10% of their population live in absolute poverty, as compared to 25% 2 decades ago.**

Stock prices rise and fall, and often do nothing by sitting still.  If a stock pays double the local bank deposit rate in yearly cash dividends, does one theoretically really worry much about price fluctuations?  Even most high school students understand the laws of exponential returns which shows that doubling the yearly return, triples the investment value so much faster.  Then in time, stock prices here invariably rise as well, perhaps allot, that is when the bull markets euphoria returns, which will happen sooner rather then later…in the Asian continent likely much sooner. 

In the meantime like many of us, I hear/read/assess daily all the problems the world now has; yet I mostly keep looking for good stocks to own here, not on assesing the continued decline of the West.

Best Regards to all members,

Paul A. Renaud.

www.thaistocks.com

*  From the excellent book:  "The New Asian Hemisphere.  The irresistible shift of global power to the East".By Professor Kishore Mahbubani (2008) Publisher is Public Affairs.  

This great book more then any other that I know of, points out the outdated arrogance of the EU and US, while at the same time in a balanced way shows how the world power is shifting to Asia, regardless of their holding back.

* *  Another great book: “The geopolitics of Emotion” by Dominque Moisi  (2009), page 47.