India: Australia’s Next Big Ride

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Wow. Working at Amazon sure must be fun for some. The company just announced its latest unmanned aerial vehicle in Las Vegas.

It can carry packages up to 2.3 kilograms and travel for 24 kilometres.

How cool is this?

Amazon expects to be making delivery within months.

The US regulators have given it the all-clear to get going for real. It also begs the question: Which other companies are going to do the same thing?

That’s not all. Earlier this year, we heard that the world will have air taxis in the sky by 2025.

The future is just so ridiculously exciting that it’s absurd to pay any attention to the doom and gloomers over the long term.

Granted, there’ll be volatility. There’ll be dips and recession scares, and even a slowdown or two.

That’s the history of the world since the Industrial Revolution. You’re not waiting for everything to be perfect, are you? It never will be.

Australia is primed to benefit from this global rise in the standard of living. We can thank one country, in particular: India.

Shock! The RBA is on the money here

For once, I find myself in agreement with the Reserve Bank of Australia. One of the staff there just presented on this. The basic point is that India is primed to keep our resource exports in high gear.

The more India industrialises and urbanises, the more steel it will use. That means Australia can ship a lot of coking coal to meet this surge.

But a range of resources — gold, LNG and lithium, for example — are likely to benefit from a rising India.

We can expect there to be multiple bull markets in different resources over the next 10 years.

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Iron ore and gold are the only sectors that receive a lot of exploration and investment.

The others are withering away from lack of interest. The only reason you can’t tell is that prices remain subdued.

We can put this down to the general economy. It’s the United States that’s dragging things along for now.

But can you imagine what happens when Europe, Asia and the US all start firing at the same time?

I don’t know when that day is coming, but it is coming. I plan to make a lot of money from it. It’s going to send resources into a huge bull market.

History can be instructive here. If you read enough economic history, you’ll inevitably come across a reference to the bull market in US stocks from 1982-2000. It was the biggest surge of all time.

Here’s the problem. These writers often airbrush the facts more than a magazine editor and his latest cover girl.

The world is volatile and uncertain. Get used to it

For example, it wasn’t until 1991 that US stocks were well on their way to leaving the previous highs of 1987 behind. That messy economic and market period gets forgotten in the sweeping 1982-2000 narrative.

Imagine you got caught out in 1987 and took a bath in the panic at the time.

You would have seen the stock market slowly recover over the next two years…only to watch it collapse again in 1990!

Then it was a slow move up…with a bond crunch in 1995…the Asian financial crisis in 1997…and the collapse of Long-Term Capital Management in 1998.

And yet if you just bought and held US stocks from 1982 to 2000, you made a killing.

Pretty volatile and uncertain all the way, I’m sure you’d agree.

This is how I read the resource market. The dynamics behind the sector are powerful and long term. The 20th century saw most big resource bull markets last for around 18-20 years.

Commodities began rising around the year 2000. That would put 2020 in the spotlight for the end of the trend…except mining had a brutal bear patch from 2011 to 2016.

I saw it happen in real time. That killed sentiment and investment in the sector. You can think of this period as mining’s ‘1987-1991’ moment.

It’s not unreasonable to suggest that’s formed the base for another massive commodity run at some point. India and the rising Asian middle class will drive it back up.

The interesting thing here is that the guys who have been around natural resource markets for 40 years know this.

If you listen to men like Rick Rule and Jim Rogers, they keep pointing it out. The problem is that they’ve been saying it for so long that everybody has stopped listening. 

Natural resources are incredibly difficult to time. You can point to dwindling supply for years and still be surprised that the price goes down.

But this is what makes commodities so powerful on the way up. You can’t switch on a mine in a heartbeat. They take forever to get going. That means prices can stay high for a long time.

Point being: Australia is well placed overall to flourish as Asia urbanises.

Not only that, technology — like Amazon’s drone — will keep making day-to-day life ever more wondrous. Keep your eye on the long term. It’s going to be fun (and profitable!).

Best wishes,

Callum Newman Signature

Callum Newman,
Editor, Profit Watch

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