Shake Hands With China
Fighting Global City Hall is a Tough LivingâProbably best to play themes that follow the money. Shake Hands With China. Developing economies will be spending about $2.25 trillion annually for the next several years to meet their infrastructure needs. They have the money and the political control to make it happen, regardless of whatâs going on in our part of the world. China alone will increase its urbanization rate from 46% to 58%, adding 210 million urban residents in 70 million households. They need a lot of stuff to urbanize 20 million people a year, and we want to be long the guys who will be selling it to them.
We like commodities and the commodity nations in the G-20 and even Africa, both fundamentally and as a currency debasement hedge. But the challenge is how to create the exposure to withstand short term volatility. Do this with junior mining companies that own big assets close to their customers. These will often start out trading at discounts as much as 90% to their cash flow potential, and often show less downside beta than large caps. Buy them and play the financing and execution events that unlock their value. We've owned names like Fortesque Metals Group, Riversdale, Legend and OGX over the years, giving us exposure to huge iron ore, met coal, fertilizer and oil assets, early in their life cycle to markets.
