I’m a big believer in perspective. I believe the right perspective influences how we interpret the world and is key to seeing all the opportunity around us.
These past few weeks we’ve been sharing some perspective on investor behavior and being a successful investor. I believe maintaining the right perspective is paramount. There are two things I try to remember: first, we live in a society of constant new noise, very little of which is positive. Second, the U.S. is only one small part of a much larger world.
Perspective can get derailed, as it has in 2012. It was a year of confusion and chaos. From the polarity of the election, the U.S. and European debt crises, the fiscal cliff, the debt ceiling, the list just goes on and on. Did you heard the one about the shadow of the “DOW 14,000” – What is this some sort of financial groundhog predicting the future direction of the market? Remember, according to the Mayans the world was even supposed to end!
But it didn’t.
When investors allow themselves to be influenced by moronic statements like these, they tend to be constantly jumping in and out of the market, usually at the wrong times. It only pulls investors off course, distracting them from their ultimate goals.
I believe 2013 will be a year of much greater clarity. We now know who our president will be for the next four years, what our tax policy is going to look like, have a better understanding of our economic environment, and even clarity about consumers both domestic and abroad. Now look beyond just the U.S. economy, and the opportunities get even more interesting.
A simple yet meaningful example is Starbucks in of all places, Vietnam. The demographics in Ho Chi Minh City are straightforward: 90 million people, 60 million under the age of 35. They notoriously love western brands. Women carry Louis Vuitton handbags while traveling around in BMW X6’s or Mercedes S class cars (and this is a communist country?) Didn’t we fight a war there a few decades ago?
In the past two years western companies such as Burger King, Carl’s Jr. and Subway have been making huge inroads. Domino’s Pizza has 14 locations in Ho Chi Minh City alone. The flagship Starbucks store will have 150 customer seats, anticipate over 700 customers per day, and generate an estimated $800,000 a year in revenues.1 That would likely exceed their best locations here.
In other developing countries, children are living lives their parents’ never dreamed of. Consider in Peru people are buying washing machines, flying in airplanes, and even calling others on smart phones. Millions of people are moving up the economic ladder toward a lifestyle considered impossible not long ago.
We do not believe this is neither a temporary trend nor short-term phenomenon; rather it’s a full-blown cycle. We call this ‘the rise of the global consumer’. It’s anticipated that the rate of people moving into the consumer class is at 350 million every five years right now. Consider that number: that’s more consumers than the population of the United States every five years.2
Another illustration from the book The New Global Middle Class: A Cross-Over from West to East, the chart below showing the wave of consumption of the middle class in the developing world.2
Often when we think of this move of consumers, we focus on China and India, the most heavily populated countries. If we simply look south of the border, consumer growth in Mexico, Brazil, and Chile is growing rapidly. Just look at the consumer spending illustrated below.2 The last 20 years, growth of the consumer has been explosive.
Consider the world’s top luxury brands and how they rushed to establish a presence in China. The chart below shows the total number retail stores in the variety of brands and top 10 most desired luxury brands mentioned.2
One final example: the World Air Traffic video on YouTube. It’s a beautiful demonstration of large aircraft traffic around the world. It is an incredible example of progress and innovation in our world today and every day. I cannot imagine anyone who sees this video and remains a pessimist about our future.
A good perspective is vital to being a successful investor. Sometimes it’s necessary to take a step back and remember that the U.S. only accounts for about 5% of the total population in the world. The right perspective can completely change how one views the future, the markets and the world.
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The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. The performance data given represents past performance and should not be considered indicative of future results. Indices such as the DJIA and the S&P 500 cannot be invested into directly. International and emerging market investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.
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Sources: Peter Pham, Vietnam Opening to Energize Starbucks – Seeking Alpha
American Funds – The Long View - January 2013/by Steve Booren
Hindsight is 20/20, but finding clarity in future uncertainty can be fuzzy. AT LPL RESEARCH, as we look forward to the year 2020 and a new decade, some key trends and market signals will be important to watch, including progress on U.S.-China trade discussions, an encouraging outlook from corporate America, and continued strength in consumer […]