Macro Trader: Prediction 2033

This week I gave my Macro Trader readers a prediction. But that prediction wasn’t just for 2013…

Neil Armstrong said, “Science has not yet mastered prophecy. We predict too much for the next year and yet far too little for the next ten.”

Neil Armstrong died on Aug. 25, 2012, and closed a chapter in our great book of science and innovation. But this quote reaches into economic forecasting, too.

I told my readers:

For the past five years we’ve been worrying about the next quarter or two without a care in the world for what will happen in the next decade. As we head into the new year, we carry with us the threatening promise from our Federal Reserve to cheapen our dollar until unemployment falls to a “reasonable” level.

We carry with us the fear of impending economic disaster.

Will we be talking about the fiscal cliff in 10 years? Sure, but in the same context as the dot-com bubble, or the stock market crash in 1987.

We will have moved on.

And all those predictions for 2013 will have been a blip on the screen.

I’d rather talk about what the world will look like in 2023…

In 2023, emerging market middleweight cities will contribute more to global growth than the developed world and global mega-cities. Over the next 10 years, more than 230 million households will earn more than $20,000 in the developing world. That’s up from only 80 million in 2007. In other words, an extra $3.1 trillion worth of consumption will hit the markets in developing economies.

But through a combination of consumption and investment, emerging markets could contribute nearly 50% of the world’s GDP.

And many of these markets are already pulling wealth from Western developed countries and shifting it East… and South.

I’ve already picked out one country for my Macro Trader subscribers to watch, but it’s not the only one.

Let me give you the secret to finding out which countries will be game changers over the next decade.

It’s not just about money… It’s about people.

Demographics will play the biggest role in the economics of growth markets. The one segment we should be paying attention to is the number of people on the verge of the middle class.

The McKinsey Global Institute predicts that there will be more than 4 billion members of the “consumer class” by 2025, and half of them will live in emerging market cities.

Three cities with an annual income of $20,000 or more, with large numbers of working-age people are Mexico City, Istanbul and Cairo.

Of course, you’ve also got Mumbai, Shanghai, Beijing, Sao Paolo, and a couple other cities in well-known emerging markets. But Mexico City, Istanbul and Cairo might get you thinking about other areas of the world with growing demographics and climbing incomes.

One of my favorite companies in Mexico that we’re holding in Macro Trader is Empresas ICA, S.A.B de C.V. (ICA:NYSE). It’s a construction company that does a lot of civil works, like hydroelectric dams and airports, and also builds a lot of housing. Shares have climbed as high as $10.28 recently, and we’ve locked in gains of more than 24% since mid-September.

But shares have pulled back over the past week, and you might have a good chance to get in on this temporary move.

Another Mexican company that really takes advantage of demographics is FEMSA – Fomento Economico Mexicano S.A.B. de C.V. (FMX:NYSE), a beverage and beer company that holds the right to bottle Coke in Mexico and other Latin American countries, and is just getting into the drugstore business. But right now, this company is pretty expensive. It’s been on a fantastic run since the bottom of 2008.

Fomento Economico Mexicano
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The company put up some great numbers for its third quarter… double-digit growth in total revenue and income from operations across all three of its business segments.

This company’s key statistics aren’t that far out of line with others in the industry, but judging by the chart movements, I think you could probably get in at a better price if you wait a couple months. This would be a prudent move as we head into the new year anyway.

Mexico – though very different economically from the U.S. – has a strong sympathetic response to financial news here in the States. Check on this company again in late January or early February.

Happy Investing,


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