9/30/2011 11:24 AM ET|
Finding growth far off the grid
Don't let recent market machinations make you miss out on growth opportunities -- wherever you find them. Right now, Mongolia has the makings of a success story.
Given the mayhem in the markets recently -- or a few weeks ago, or a few months ago; take your pick -- I wouldn't blame anyone for feeling like they just wanted to crawl off into a cave and put a big "Wake me when it's over" sign on the entrance.
Thanks, I believe, in large part to the ascendance of computerized trading, volatility is off the charts. That's true even in the notoriously volatile precious-metals sector, which saw a stomach-churning decline a little over a week ago after a particularly strong showing of late. In times like these, the general feeling is that no matter what you do, it will be wrong.
Certainly the world is full of problems, and I have spilled more than my share of virtual ink discussing them: from our own economic and fiscal woes and relentlessly bad policy (monetary, political, you name it), to concerns about sovereign debt and the stability of various banking systems in Europe -- particularly Greece, Ireland, Italy, Portugal and Spain. And those are just the issues that have to do with money.
Believe it or not, however, investment opportunities are still out there. Exciting ones. Good ones. Possibly great ones. And while it may be tempting to bury one's head in the sand, I would encourage such behavior only if the sand in question is located somewhere in particular: namely, Mongolia (a country Sam Zell recently said was on its way to becoming a massive "sovereign wealth fund").
Not just deserts
For those who don't know, I am a director of Mongolia Growth Group, a Canada-based company with operations in Mongolia, which currently trades on the Canadian National Stock Exchange (YAK, American Depository Receipt symbol: MNGGF).
Founded last February, the company is focused primarily on real-estate investment and insurance.
The investment case for Mongolia relies on a number of key factors:
- It is new to capitalism (which essentially began there in 1991).
- The country has huge amounts of untapped natural resources, particularly minerals.
- Gross domestic product in 2010 was more than $5 billion spread over 2.7 million people.
- Just one large mining project there, Oyu Tolgoi, will require $6 billion and generate $7 billion a year in revenue at current metals prices.
- There are enough new mines and other projects that GDP could grow at double-digit rates for the next decade.
(For those who would like to know more about the country, see the current issue of National Geographic.)
Trying to invest from abroad, however, presents several obstacles, including:
- Only a few dozen companies trade on the country's stock exchange, and they do so infrequently. None trade in the U.S.
- Financial disclosure is not adequate in most cases.
Poised for growth
So while the Mongolian economy is poised for growth, and the country's unique history and characteristics serve to insulate it from many of the problems currently facing many "advanced" nations, it is almost impossible to seize the opportunity from afar. You have to be there, in person, on the ground, which is why Mongolia Growth Group was created and why I am involved in it.
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Bill, since Mongolia is "sitting on China's northern border, chock full of all the things China needs" I'd be a little concerned that we'd wake up tomorrow and find the "Peoples Liberation Army" in Ulan Bator.(For those of you who don't remember, China is still the same country who "liberated" Tibet for far less.)
Mongolia (actually Outer Mongolia) only survived as a buffer state between the USSR and China. China already claims "Inner Mongolia" as part of its territory, so there's no ethnic reason they wouldn't claim the rest. The only thing keeping them at bay would be Russia, and I'm not sure how seriously Russia takes it. They would certainly bluster, but would they fight?
Note the following:
"The second treaty signed in Beijing by China and Mongolia is an economic agreement. It virtually guarantees that Beijing will become not only Mongolia's most important trading partner, but will remain its largest direct foreign investor, thus paving the way for Beijing's gradual reassimilation of Mongolia. The 20-year term of the Chinese-Russian agreement implies that China will not attempt to take Mongolia outright during this period, but will instead limit herself to economic penetration."
It's sad, but I think Mongolia's future is going to be more like Czechoslovakia's in the 1930s--first infiltrated and then "assimilated". Unless of course they find a nuclear partner (like Russia) who would stand up for them. However, from Russia's history they are more likely to just require a portion of the spoils for themselves. It's tough to be situated between two un-repentant looter governments like that.
Bill, there is everything right about investing in growth anywhere in the world where the opportunity exists.
But we live here in America. We need progress. We need growth in good s and services that are now failing our consumers.
For example, we are at the dawn of a new industry in ground transportation. It would employ hundreds of thousands in well paid jobs. That industry replaces oil with natural gas for all internal combustion vehicles. That is only one industry that would blossom if we had progressives in the White House and congress . Government needs to get out of our way. Industry of all sorts will create the jobs
Mining in Mongolia? That's good for the environment. And I'm certain those Mongolian miners will cared for by their coporate masters.
Yes Bill, Mongolia has vast resources untapped ready for this hungry market. My portfolio is app. 30% into energy and materials. I also invested in gold six years ago and I am not looking back.
I am glad I read your postings over the years, especially those about the yellow stuff. I am looking to lock in my gains, as the current conditions seem off. We'll see!
KO vs. Mongolia. These are totally different ideas. KO is obviously an investment, and YAK is obviously speculative (i.e., riskier, as Bill points out). It is silly to compare them, and even more so to think you should pick one over the other. Unless you are approaching retirement you probably need to do both, especially given the state of the Western World.
"Conflict of interest": Like Louis CK says, everything is amazing and nobody's happy. Here you have a guy sharing an idea in which he has a personal stake, an idea that the whiners would have no clue about otherwise, and he TELLS you he is on the board, owns shares, and is BIASED. At least he's up front about it. I can just imagine how these same clowns would be crying in their beers if the guy only talked about Mongolia after he'd made all his money there. "Why didn't you tell us, Bill? Waaah! You keep all the good ideas to yourself. Boo hoo." You want in on the ground floor of one of the few ways to capitalize on a big growth story? This is what it looks like. Remember the day you heard about Mongolia and remember where you heard it.
Oh, hell, why do I bother...
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