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The Future Will Blow Your Mind. How Can You Take Advantage Of It?


  • Global GDP has quadrupled in the last 35 years and will probably do so again in the next 35 years.
  • By 2050 it’s expected there will be 10 billion people on earth and most of them will be living a western lifestyle.
  • While the forecasts are pretty certain, the issue is that the way towards those forecasts will not be linear. Investors should be careful not to get excited and jump into bubbles.

Introduction 

Investing is both complicated and simple at the same time. Today we are going to show the simple side of investing by analyzing a few factors that are almost certain and that will have a huge influence on your investing returns. By analyzing a few global demographic and economic trends we can see where the world will be in the future and connect that with our investments pictures, a scenario that is actually mind-blowing. Keep reading…

Global Population & Economic Development

A number that is essential for investors is the following:

figure 1 global population
Source: Worldometers.

 

What is even more important is that the population is growing and will continue to grow. Global population is expected to reach 9.7 billion by 2050. The biggest expected growth is in Africa, followed by Oceania, the Americas and Asia.

figure 2 global population forecast
Figure 2: The World’s population. Source: The Economist.

 

This simply means that the global market for companies and global demand will be at least 31% larger in 34 years. On top of the increase in the global population, the economic structure and growth forecasts for the majority of the global population are astonishing.

The list below shows the current top 15 countries by population and their respective GDP per capita.

figure 3 data
Figure 3: Population and GDP per capita. Source: Worldometers, World Bank.

 

Of the 15 most populous countries, only the U.S. and Japan have a GDP per capita higher than $10,000. Countries like Indonesia, with 260 million people, have to grow 10 fold to reach the Japanese standard while India has to grow 20 fold. Thankfully, all of these currently underdeveloped countries are growing at amazing rates.

figure 4 global gdp growth
Figure 4: Global GDP growth. Source: The Economist.

 

If we look at where the global GDP per capita average was 35 years ago we can only imagine where the GDP will be in 35 years with the explosive growth in emerging markets.

figure 5 glboal GDP per capita
Figure 5: Global GDP per capital in current US$. Source: World Bank.

 

If GDP per capital quadruples in the next 35 years like it did in the last 35 years, in 2050 we will have an average global GDP per capita of $40,000, which is higher than what Japan currently has.

A higher GDP will make many things available that are currently unavailable. Many people will want a car and we can only imagine what will that do for the car industry. Of the 15 countries mentioned above, only the U.S. and Japan have reached a level of car per capita saturation.

figure 6 cars per capita
Figure 6: Global cars per capita. Source: Charts Bin.

 

Cars, homes, infrastructure, software, hardware, travel, fashion, medicine, food and who knows how many more things that we can’t even imagine at the moment will be a normal in 2050 for the majority of the global population.

How sure can we be that this will become a reality in the next 35 years? Facebook gives us a clue. Their data shows the fastest growth rates in the Rest of the World and Asia which means that people there are more and more informed about a western lifestyle which will encourage them to seek such a life.

figure 7 daily users
Figure 7: Facebook’s global growth in daily active users. Source: Facebook.

 

We can clearly conclude that the world will be a much different place in 35 years, especially when we look at how different the world is now compared to how it was 35 years ago. Just to gather the data I’ve listed above would have taken me a year or longer to gather 35 years ago, while today I can go online and have everything in front of me in an instant. Globalization, a larger population and inevitable economic development are the trends that will undoubtedly influence your investments in the next 35 years.

What Investors Should Do

If you’re in it for the long-term, you have nothing to worry about especially if you are well diversified and have made smart investments. What do we mean by smart investments? The global growth discussed above is pretty certain, but what is uncertain is the linearity of it. Going back to figure 5 we can see that from 1995 to 2002 there was very little improvement in global GDP.  Only after 2002 did it explode. This means that the road to quadrupling global GDP will not be smooth.

An investor has to be careful not to overpay for an investment. Many people see the above numbers and get very excited. This is what creates bubbles. As we will have many recessions in the next 35 years, it is wise not to get too excited about the numbers above but to invest at maximum pessimism. Currently there is excitement about healthcare, social networks, and consumer discretionary, and negativism in agriculture, food, energy, mining and shipping. With the growth described above, there is more certainty that demand will grow for commodities than for social networks which is a perfect example of how investors get carried away.

Charlie Munger, Buffett’s investment partner, continually restates that investing should be like watching paint dry and that if you want excitement, take $800 bucks and go to the casino. All the inevitable economic and demographic developments are pretty certain, but will slowly grow into the forecasted numbers. If your investment horizon is long you can afford to be invested in the sectors that will surely benefit from the structural trends and wait for the booms. What you should avoid is to be invested in bubbles because those are the destroyers of long-term returns.

For more specific information about a sector that we believe has just reached a point of maximum pessimism and is trading dirt cheap, but is sure to benefit from the massive future growth in global GDP, click here.

 

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