Ted Bauman is aware that everyone is talking about international trade. China and the United States have the biggest economies in the world, so they are receiving most of the attention. A year ago, President Trump started to negotiate with the Chinese government, but things have not gotten better. As a matter of fact, they got worse last week. That’s because President Trump applied new tariffs to China’s goods, and China did the same.
There are deficits between China and the United States, and President Trump wants to eliminate them. Some people on Trump’s team would also like to get rid of unfair trade practices that China has been taking advantage of lately. One of these practices is China’s habit of stealing U.S. intellectual property, and the other is giving exporters government subsidies. The actions of China and the U.S. and the reaction that the markets are having would make anyone think that the only thing that is going on is the trade war.
This isn’t true.
A total of 58 percent of the global gross domestic product is comprised of trade between all the world’s countries. That is equal to $45.1 trillion. The trade between the United States and China is worth approximately $660 billion every year. This means that this number is 1.46 percent of global trade by value. All the other countries in the world make up the other 98.54 percent.
Things are going to start happening with the 98.54 percent in the years to come, and Ted Bauman says that it is time to get into these positions so that you can take advantage of it.
Mr. Bauman’s expertise is in asset protection and low-risk investment strategies, and he offers his advice in his daily newsletter. He has a background in research and wrote several publications about international development. He was also a consultant, and this gave him a tremendous amount of experience researching and writing about international development.
Mr. Bauman advises you not to worry about the bickering between the U.S. and China. That’s not where the future is going to be.
Trade was dominated by the European Union, Canada and the United States at a rate of 62 percent 20 years ago. Today, it is down to 47 percent because the emerging markets are coming into their own. In addition to that, trade between the emerging markets is up tenfold over the past 20 years. Examples are trade between South Africa and India and between China and Vietnam. Also, at least one emerging market is present within 53 percent of all bilateral trade, and around 45 percent of all countries are trading with an emerging market.
Global trade is changing, and the following four things are the biggest drivers of that change:
- Agriculture: Latin America sold 6 percent of its agricultural products to China 30 years ago, but today, it sells 30 percent.
- Minerals: South Africa sent 68 percent of its mineral exports to developed countries 20 years ago. South Africa is exporting 55 percent of these goods to other emerging markets like India and China today.
- Oil: Developed countries received 89 percent of the crude oil exports 30 years ago. Today, developed countries are only obtaining 55 percent of these exports because India and China increased their consumption considerably.
- Electronics: Much of the products in U.S.-China trade are electronic. Starting in 1989, China began to export electronics to other Asian countries at a rate of approximately 20,000 percent.
When emerging markets are involved in increasing trade, the following two things happen:
- Countries in emerging markets grow and become wealthier now, so people stop wanting to buy things that weren’t made in their own countries.
An example of this is Vietnam. This country has been in the process of becoming industrialized by producing products for Chinese manufacturers. Over the past 10 years, Vietnam’s GDP has grown every year at a rate between 6 and 8 percent. The increase in Vietnamese salaries led to the desire to purchase electronics and other products from China that were made with components made in Vietnam.
- The population stops growing in developed countries, and when this happens, the population reaches single digits in older, emerging markets. Latin America is one example. At the same time, young markets begin to consume more of the commodities, including oil, gems, precious metals, agricultural products and coffee.
This means that as the demographics change, they drive more trade to the emerging markets.
Ted Bauman says that markets that are just beginning to increase their consumption will form most global trade in the next 20 years. He has been instrumental in helping people in emerging markets receive the resources that they need to live better lives. As he did this, he ensured that these people would be free of government intervention and corporate greed.
While Mr. Bauman was living in South Africa, he became a senior executive for several nonprofit agencies. He even founded his own and gave it the name “Slum Dwellers.” This organization assisted more than 14 million people in 35 separate countries.
The Current China
China’s market happens to be slowing down. Third quarter growth fell to 6.5 percent. This is the slowest it has been since 2009. People aren’t buying as many cars as they were in the past 20 years. In addition to that, iPhone sales are decreasing.
President Trump’s tariffs are taking their toll on China’s goods. The country isn’t importing nearly as many goods as it had been, and this is showing us that China’s economy is slowing down. For this reason, China started to negotiate with President Trump recently.
Ted Bauman doesn’t believe that an end to the trade war will mean that China’s problems will be over. The problem is in how China is structured financially. It is doubtful that China can accomplish the structural transformation that it needs to create an economy that can be one of the most advanced. It also remains to be seen whether China will be an example of global growth or something standing in the way of financial stability in the world.
Finally, Ted Bauman says that China’s financial crisis is unlike those of the United States. China’s crisis will move along very slowly, and people aren’t really going to notice it until it becomes obvious. Then, the pain is going to be as bad or even worse than the traditional crises we are used to seeing.
When an asset’s price drops for what appears to be no reason, good investors know that this is an opportunity to purchase this stock as it reaches its lowest levels. They hold these financial products and sell them for a nice profit.
Emerging markets are having just as many difficulties as everyone else with the trade war going on, but they are also suffering from the fact that people want to get into the U.S. market because it is going up and interest rates are so low. This means that emerging markets are lower than they have ever been when you compare them to other markets.
Investors started fleeing the emerging markets in the days after September 11, 2001, and the market is looking the way it did then right now. This is making assets in the emerging markets extremely cheap.
How do we know that these assets will rise again so that we can make a profit on them?
Ted Bauman knows, and he believes that the emerging markets are going to dwarf more established markets and those of the United States by double digits over the next 10 years.
A case in point is the population of Africa. It is growing so much that its GDP will grow faster than any other continent’s economy into the distant future. We still have the United States, but its markets don’t have a lot of room to grow.
Successful investors are starting to diversify their portfolios into emerging markets now that they are cheap, and they are going to hold on. Mr. Bauman suggests that you do the same.