Today is the final day of the Frontier Investing week.
Of course, it was actually a fortnight of frontier investing.
We hope you got something out of it.
We ran it in conjunction with the launch of the new premium investment advisory, New Frontier Investor.
But perhaps you may wonder about the exact location of the frontier. That’s the thing about this frontier. It’s a frontier without borders. This frontier is everywhere…
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This isn’t the first time that the frontier has been everywhere.
As Frederick Jackson Turner wrote in The Significance of the Frontier in American History, quoting from the Superintendent of the US Census for 1890:
‘Up to and including 1880 the country had a frontier of settlement, but at present the unsettled area has been so broken into by isolated bodies that there can hardly be said to be a frontier line. In the discussion of its extent, its westward movement, etc., it can not, therefore, any longer have a place in the census reports.’
But just because the Census Bureau could no longer mark a clear frontier on the map, didn’t mean the frontier had gone.
From that point on it was just more of a mental frontier. Without getting too pretentious, it was a state of mind.
Well, the same thing is happening now.
The frontier of the mind
No one can really point to the exact spot of the frontier.
You can’t grab a map, draw a circle and say, ‘There it is.’
Some say that China is the investing frontier.
Others will say it’s the less developed Southeast Asian economies.
Others still will say that places such as Antarctica or Alaska are the frontier. And what about Mongolia and Myanmar?
But still we haven’t exhausted the list. According to the Financial Times, there are two more frontiers. These are apparently the ‘final frontier’ of Africa and the Middle East.
According to the Financial Times:
‘Ford plans to launch 25 new vehicles or model upgrades into Africa and the Middle East over the next two years as the US carmaker looks to tap into the region’s expanding economies and growing middle class.’
As we’ve explained in our reports on the New Frontier, the chance to profit from emerging markets and the growing middle class aren’t just in China.
There are many other ways to play this.
This is China’s market
It’s clear that car making giant Ford Motors [NYSE:F] can see that.
That’s why Ford’s investing in what it calls the ‘final frontier’ of Africa and the Middle East.
We’ll agree with Ford that Africa and the Middle East are frontier economies.
The really interesting part of this is whether Ford and other Western car companies will be the firms to profit from this frontier opportunity.
Maybe there are other car firms from another part of the ‘frontier’ that are in a better position to sell cars to this part of the frontier.
Remember that China has spent the past 10 years helping to fund and build infrastructure in Africa and the Middle East.
While Western institutions insisted on political and economic reform in return for aid and financing, the Chinese government just insisted on trade deals. China would hand over big wads of cash as long as they got natural resources in return.
It was a pretty good deal.
So it makes sense that as these frontier economies begin to grow (and boy, they’re gonna grow), China is in the box seat to benefit.
It doesn’t mean Chinese firms will get all the deals. The growing middle class in the emerging nations will crave big Western brands. We know that because Chinese consumers crave Western brands too.
And what tin pot African dictator doesn’t enjoy cruising around in style in a Mercedes-Benz S Class?
This is a carbon copy of American growth
This isn’t just about car makers.
This is about entire economies. It’s about what happens when an economy starts to move from underdeveloped to developing and finally on to developed.
Certain things happen. In order for an economy to grow it has to develop in the right way.
That’s why we’ve looked at how the American economy developed from the 1890s onwards.
First it was a copycat economy. It ‘stole’ ideas from Europe. The growth of the US steel industry is a great example. To begin with, the US just copied the Bessemer Process developed in England.
But it didn’t take long before innovators in America came up with their own way of producing steel. Alexander L Holley developed a new method of steel making (one that’s still in use today). Industrialists like Andrew Carnegie provided the backing that led to a huge increase in demand and supply for steel.
It meant that in the 10 years from 1870 to 1880, US steel production increased from 69,000 tons to 1.2 million tons. That’s the power of innovation in a growing economy.
But that’s history. What relevance does it have today? The same things are happening right now. China is moving from a copycat economy to an innovating economy.
This is happening within China, and thanks to China’s influence elsewhere in the world, there will be a natural flow-on effect in other developing nations too.
Ford has made the right move. They’ve spotted a key market that’s set to boom.
But is buying Ford shares the best way to play it? It’s one way. But our bet is that the best way to play this trend is to invest directly in the emerging economies themselves, rather than in the Western companies trying to enter the market.
Cheers,
Kris+
The post Wrapping up our Frontier Investing Focus… appeared first on Stock Market News, Finance and Investments | Money Morning Australia.
