I want to give you some insights to some very valuable research and information I've been looking at recently.
Firstly, I believe what I'm going to reveal here is primarily why the Australian economy did not go into an official recession.
…and why this research could be the prelude to great prosperity and wealth for Australians in the next 10 years.
I can really sum it up with one word, however I know you're going to want more.
I'll tell you the word anyway… “CHINA”
For many there are no surprises there, however for a lot of everyday investors, I think they truly do not understand the potential and the opportunity for significant wealth.
There is a major shift in economic power from the west to the east.
The main reason for this is credit creation and investment. Whilst credit in the US and Europe is literally drying up, credit in China has been flowing and even accelerating.
Consider these mind-boggling stats for the first half of 2009…
In China, new lending by banks grew 201% to more than $1 trillion.
Capital investing by the government is also up by 34.4%.
The key difference here with the US is when the Chinese government pumps money into the banks, the banks pump that straight into the economy.
In China, the banks are owned by governments and if banks don't loan out the money they get fired.
In the US, the banks use the money to buy smaller banks and try to remedy their mistakes or to pay out big bonuses.
China figured out early in the piece that its stimulus package had to be focussed on domestic infrastructure. So they went berserk on developing highways, railroads, oil and gas distribution…
Right now there are 275,000 construction programs underway in China.
So far, the Chinese have spent $586 billion on stimulating their economy. They key here is that they paid it all in CASH, not debt.
Unlike the US, the Chinese don't have to borrow money, don't have to rack up budget deficits, they have their money in cold hard cash.
Their reserve holdings are still rising and has just hit $2.13 trillion… up $178 billion in the second quarter. That's evidence that the country is still profitable and going strong.
If you're an armchair economic expert, you might be surprised at these figures because you're thinking, “Isn't China a net-export country and the manufacturing powerhouse for US consumer goods?”
Yes, you'd be right in thinking that… but the Chinese realised this early in this down-turn and that's why they have focussed on their own domestic market.
They realised they could not rely on exports forever and the secret to their prosperity is domestic consumption. This is not a new phenomenon for them, in a lot of ways they saw the writing on the wall and have been actively promoting domestic consumption for years.
Here's another mind-numbing statistic…
Through June of this year, auto car sales increased a record 17.7% to 6.1 million vehicles.
China is now the largest car manufacturer, and this is another mega-trend with long-term growth potential.
There is only 1 car per every 100 people in China. Compare that to the US where there is 7.6 cars per every 100. Incredible upside.
Here's another reason that is going to push domestic growth through the roof…
Beijing recently enacted consumer loan reforms that allow credit card companies (local and foreign) to expand into financing durable goods purchases such as appliances and electronic goods.
You probably weren't aware of this, but until recently the Chinese could not buy an air conditioner, a stereo, or a flat screen TV on credit – now they can!
All of the above has incredible upside if you're an Australian.
As the domestic Chinese market matures over the next 10 years and Australia being a resource of raw materials, we will be swept along for the ride of our lives.
You can sit on the sidelines and be completely ignorant to what's going on – or you can participate by expanding your awareness and keeping in touch with this mega-trend that has already begun and hunt for profit opportunities.
What you have to do is think of all of the resources that the Chinese need, which companies in Australia supply them and simply and astutely invest in them for the long term. This has already happened with the likes of Rio Tinto and BHP. There are others of course.
I'm not just talking about the stock market… Property investors will make a fortune.
Also, you might consider where these companies are situated in regional centres within Australia and also invest in the real estate that surrounds those areas, where you'll get both positive cash flow and capital growth.
Here's another phenomenon that is currently happening that is really underpinning what the Chinese are up to.
The Chinese have a large war-chest of American dollars. With the demise of the US currency of late, that has given the Chinese a once in a lifetime opportunity to use the current financial crisis and the weakness in the dollar to conquer the world on the cheap.
They're doing this primarily by the acquisition of primary resources. This does two things for them. It gives them control over global commodities and it gives them a built-in hedge against a dollar-decline.
Here's what's really important – when the US dollar declines, the price of tangible assets… oil, copper, gold, iron, nickel all rise. Are there any companies in Australia that you know of that supply these raw materials?
Yes, we truly live in a lucky country and it's about to get a lot luckier.
I sometimes find it amusing when I meet people and they say they're either a property investor or a stock market investor… Personally myself, I follow the money and don't have a bias as long as I can control my investments and jump on board some significant mega-trends.
I'm a long-term investor with a 7-10 year horizon. Right now is a perfect time to build a substantial capital base that will set you and your family up for life.
Will you do it?
Signed with Success,
P.S. Yes, it would be easier if you could just invest in Chinese companies – but you can't. So you have to do some homework and figure out who will profit from this mega-trend in Australia and invest in those companies specifically.
P.P.S. You can also invest through specific managed funds with a heavy Chinese focus. I'm working at the moment with one group who is bringing a new concept together that is heavily focussed on Chinese growth opportunities. More about that at the end of the year.