If you take all of the countries in the world and break them down into categories based on active stock markets / public corporations, you get four categories:
- The Developed Markets Countries (DMC)
- The Emerging Markets Countries (EMC)
- The Frontier Markets Countries (FMC)
- The “Lost” Countries (LC)
The DMC’s are the predictable ones: USA, Japan, Germany, France, and Britain being the primary, i.e. “biggest” members, measured by Gross Domestic Product, (GDP). GDP is the market value of all final goods and services made within the borders of a country in a year. These countries dominated the World in the nineteenth and twentieth centuries. As the twentieth century was ending, there was the rise of the EMC’s. I have spoken of these counties in the past in the Symmetric Advisor, and you have made a lot of money in the Prism Grid from investing in them over the last several years. The primary EMC’s are the BRIC’s! Brazil, Russia, India, and China. They have very large populations:
- China: 1.4 Billion
- India: 1.15 Billion
- Brazil: 200 Million
- Russia: 142 Million
- Total: 2.892 Billion
Wow! Compare them to the DMC’s…
- USA: 306 Million
- Japan: 127 Million
- Germany: 82 Million
- France: 65 Million
- Britain: 61 Million
- Total: 640 Million
Here is the major truth in WORLD ECONOMICS: THE CONSUMER DRIVES THE ENTIRE WORLD ECONOMY!
In the last two centuries, the “Middle Class” of consumers bought the bulk of the goods and services, i.e. drove the GDP of the DMC’s. Percentages vary, but the good guesstimate is 50% of the Population is defined as the “Middle Class”. Think how the WORLD evolved from 1800 to 2000. The middle class of the DMC’s were responsible for that! Put in 2010 population terms, that number would be 320 Million people in the DMC’s. For the 2000 to 2100 period, or the 21st Century, 50% of the EMC’s equals 1.446 Billion people. This is almost 500% GREATER THAN THE DMC’s!!!! 500% more middle class people will be powering the world economies from now on. 500% more competitors for all the finite worlds’ resources. The investment opportunities will be fantastic. The other two categories: The FMC’s and the Lost Countries, currently do not have risk parameters that make them good Prism Grid candidates, though the Private Pool, IIS Pool One, LLC, has benefited greatly last year and this year from the FMC’s!
I am explaining this because a common question from clients recently is “How can the Prism Grid make money if the US economy is doing so poorly?” The simple answer is that the majority of the money in the Prism Grid Program is not invested in companies that depend on the economy in the US to do well . Right now 80% of the Prism Grid is invested in companies that derive over 75% of the profit from NONUSA sources. Only our Real Estate investment derives almost 100% of its growth from US based companies specializing in US based investments, and through 11/04/2010 it has returns around +16% for the year for the Prism Grid investors.
Our primary drivers of profit in the Prism Grid in 2009 were:
- Latin America: 128%
- Natural Resources: 62%
- Russia: 58%
- China: 57%
Our combined average Prism Grid return for 2009 was 36.09%. This year it took the markets and the Prism Grid 9 months to digest the 2009 return. The Prism Grid, as you will see in the accompanying Quarterly Review of your accounts, only just broke even by the end of the 3rd Quarter. While you should all know by now, the crystal ball that sits in our conference room is cloudy all the time, but my guess on return through the end of 2010 is POSITIVE!
With 500% more “Middle Class” consumers in this century, and limited supplies of many things, there will always be an investment going up in value somewhere in the world. We will be buying some of “IT” and making you a decent profit on it.
For the trailing 5 years, ending 09/30/2010, the Prism grid average return per year was +7.55%. For our benchmark, the Vanguard 500 Index Fund, the average return per year for the same period was +.56%. There is a mathematical formula known as the “Rule of 72s”. Loosely, it states if you divide 72 by your return, the result is the number of years it will take for your money to double. 72 / 7.55 = 9.54 years. The other one: 72 / .56 = 128.57 years. The Prism Grid wins!!
I would like to thank all of the clients who have sent in NEW money or asked to have us consolidate their “Other” brokerage accounts into the Fidelity accounts recently. Our business of gathering assets under management is increasing nicely!
That’s All For Now Folks!
Symmetric Advisors, Inc.