by Carl Delfeld, Investment U Senior Analyst
Thursday, December 8, 2011: Issue #1660
“My interest is in the future because I am going to spend the rest of my life there.”
- Charles Franklin Kettering
There’s a lot of pessimism out there amongst investors as they worry about growth…
But the fears about a no-growth economy are overdone and the financial media is only covering the problems.
It was much the same in the mid-1970s when stagflation was all people could talk about – except for the busy founders of Apple (Nasdaq: AAPL), Genentech, Southwest Airlines (NYSE: LUV) and Microsoft (Nasdaq: MSFT).
The big picture is that the next boom is already underway. Why am I so optimistic about a return to robust growth? Two reasons:
An ever-rising, more-affluent global population.
The fruits of steady innovation.
A Rising Population and Emerging Consumer Class
The world’s population just passed the seven billion mark, and by 2025, it will be close to eight billion.
By 2025, the United States will add 40 million new consumers, and this will mean higher economic growth compared to Russia, Europe and Japan, whose population is declining.
But the bulk of the world’s population growth will be in emerging countries, with the exception of China. The advancing lifestyles of urban consumers in emerging countries will greatly shape future growth and spending patterns. In America, 75 million aging Baby Boomers will require new and better services in the area of medical care and wealth management.
In youthful countries like India, Turkey and Indonesia, the under-30 crowd will dominate spending.
Emerging markets not only now contribute half of global economic growth, J.P. Morgan research show that they account for at least 30 percent of global consumption. This income growth in these countries is only beginning, and by 2050, 90 percent of the world’s middle class consumers will be from emerging nations. The Economist predicts that in 2012, emerging market imports will be larger than imports by developed countries.
A Wave of Innovation
This growing demand will continue to drive innovation. Innovation is anything that brings greater advantage, productivity, access, or lower costs to consumers.
As Peter Drucker so aptly put it: “Marketing and innovation are the only two factors that generate business. Everything else is an expense.”
A lot of innovation is happening below the radar of the media all over the world in areas such as communications, health care, nanotech, biotech, agriculture and consumer goods.
In his book, The Next Boom, Jack W. Plunkett outlines some of these new opportunities in mobile banking, advanced imaging, DNA mapping, gene therapy, housing, food, commodities and energy technology.
All of these areas offer investors tremendous opportunities. Let’s look at an example of one of these areas of development – energy.
Nuclear Not Dead Yet
The planet has an increasing and insatiable appetite for clean energy to fuel its growth.
Natural gas will play a key role going forward, but a nuclear power boom is already underway in emerging markets like India and China. Many developed countries such as Japan and France are already fairly dependent on nuclear energy.
In America, nuclear power is on the defensive over concerns about cost, safety and handling waste. The Fukushima debacle was a big set back for the industry but, as Bill Gates pointed out in a Wired interview, this plant was built with 1960s technology and “nuclear power is still safer than all other options.”
In this time of budget cuts, one huge challenge is to find the money for big $6-billion nuclear plants that also take years to build.
But today’s Investment U Plus pick is using an innovative, think-small-and-fast strategy to tackle this very issue head on.
Its low cost, air-cooled, high efficiency compact nuclear reactor could supply power for a few thousand homes or a large industrial complex. It could even be combined to power a small city. This company has a long history of building boilers and pressure vessels for the energy industry and for some time has built reactors for the U.S. Navy.
The company’s third quarter revenue was up 11.8 percent led by a 77-percent surge in nuclear energy segment revenues.
It’s important to look for situations like this that will drive the next great boom in the global economy, and to not get caught up in the doom and gloom of the mainstream press.