The Future of Riches

New Economic Reality

The economic trend of the globe is moving towards the East, according to a recent report. By 2050, the global economic centre of gravity is poised to be in Asia, where top 4 countries out of 5 in terms of per capita income will be. The report predicts that within 40 years, Asia will boast more wealthier residents than any other continents.

Fastest Growing economies

Compiled by Citibank and a property consultancy named Knight Frank, it’s a lengthy analysis styled "The Wealth Report 2012," based partly on interviews with the super rich (people with more than $25 million in investable assets). The most interesting part of the study is that, it predicts that Singapore-the tiny Southeast Asian city-state will be the world’s richest nation by 2050, with an estimated per capita income of $137,710.By that they mean its per capita GDP at purchasing power parity (that is, it attempts to more accurately measure the average income by considering inflation, cost of living and exchange rates).

More interestingly, the report predicts that India, Bangladesh, Vietnam, the Philippines, Mongolia and Sri Lanka all make the fast-growing list. Of the top 10 fastest rising economies- all but three are in the region (Table-2).  By contrast, the western European countries as well as Japan will be the worst performing ones.

Shifting Centre of Gravity

LSE professor Danny Quah forecasts that by 2050 the world’s economic centre of gravity- a theoretical measure of the focal point of global economic activity based on GDP, will have shifted eastwards to lie somewhere between China and India. In 1980 it was in the middle of the Atlantic.

Apart from those who inherit wealth, most of the millionaires are business owners. To be able to amass such huge amounts of wealth, means there must be an alignment between opportunity and ability present in these economies. The sectors where most wealth are generated from are- natural resources, manufacturing and construction. Citi forecasts that the North American and Western European share of world real GDP will fall from 41% in 2010 to just 18% in 2050. Developing Asia’s share is expected to rise from 27% to 49% in 2050.

China will overtake the U.S. to become the world’s largest economy by 2020, which in turn will be overtaken by India in 2050. Russia or Brazil (part of so-called BRIC) do not make it on to Citi’s list of Global Growth Generators (“ 3G” countries). Instead Citi includes countries such as Bangladesh, Egypt, Indonesia, Iraq, Mongolia, Nigeria, Philippines, Sri Lanka and Vietnam on this list.

While these countries can expect rapid economic growth, much of the wealth already held in developed economies will be maintained, according to Citi.

Measuring a country’s affluence in terms of GDP per capita shows that Singapore currently tops the chart. By 2050, Singapore is expected still to be in the top spot, with Hong Kong and Taiwan moving up to take the second and third places. But the U.S., Canada, UK, Switzerland and Austria will all still be in the top 10, although the U.S. will have dropped down to fifth place in the overall rankings (table-3 ). And the U.S. is the only non-Asian nation to make it through top 5.

Canada, Switzerland and Austria will be able to maintain their berth into the top 10 list upto that time (2050). But old world economies will have the worst growth performance in the next 40 years, the report predicts. Spain, France, Italy and Germany are at the bottom of this list. But, Japan and its aging population will have the weakest projected growth of all economies, Knight Frank estimates.

Most of the countries coined as 3G are currently known as “emerging markets”. But this term is used to tag those countries that are considered likely to thrive in the globally integrated economy.

 

Table 1: THE WORLD’S LARGEST ECONOMIES

2010	Countries	GDP $tn	2050	Countries	GDP $tn
1	US	14.12	1	India	85.97
2	China	9.98	2	China	80.02
3	Japan	4.33	3	US	39.07
4	India	3.92	4	Indonesia	13.93
5	Germany	2.91	5	Brazil	11.58
6	Russia	2.20	6	Nigeria	9.51
7	Brazil	2.16	7	Russia	7.77
8	UK	2.16	8	Mexico	6.57
9	France	2.12	9	Japan	6.48
10	Italy	1.75	10	Egypt	6.02

·         GDP by purchasing power parity (PPP)

·         Source: Global Growth Watchers, Citi Investment Research and Analysis, 2011

Table 2: ECONOMIC GROWTH (3G) 2010-2050

	TOP 10	%	BOTTOM 10	%
1	Nigeria	8.5	Spain	2.0
2	India	8.0	France	2.0
3	Iraq	7.7	Sweden	1.9
4	Bangladesh	7.5	Belgium	1.9
5	Vietnam	7.5	Switzerland	1.9
6	Philippines	7.3	Austria	1.8
7	Mongolia	6.9	Netherlands	1.7
8	Indonesia	6.8	Italy	1.7
9	Sri Lanka	6.6	Germany	1.6
10	Egypt	6.4	Japan	1.0

·         GDP change year on year

Table 3: GDP PER CAPITA

2010	Countries	$US	2050	Countries	$US
1	Singapore	56,532	1	Singapore	137,710
2	Norway	51,226	2	Hong Kong	116,639
3	US	45,511	3	Taiwan	114,093
4	Hong Kong	45,301	4	South Korea	107,752
5	Switzerland	42,470	5	US	100,802
6	Netherlands	40,736	6	Saudi Arabia	98,311
7	Australia	40,525	7	Canada	96,375
8	Austria	39,073	8	UK	91,130
9	Canada	38,640	9	Switzerland	90,956
10	Sweden	36,438	10	Austria	90,158

·         2010 PPP US $

The report notes that tough economic times over the past few years have not affected the rise of centa-millionaires, people with more than $100 million in assets. Today there are 63,000, up 29 percent since 2006. However, rapidly rising GDP does not tell us much about the distribution of wealth. Many of the richest countries in the world today – Qatar, for example- have tremendous wealth gaps. “The distribution of that wealth will be dictated by political factors as much as the economic process itself,” noted Willem Buiter, Citi’s Chief Economist, in the report.

The Future?

CNN notes that some of the West’s super-rich are already crossing the Pacific, in anticipation of the “new Asian Century”. Facebook co-founder Eduardo Saverin, moved to Singapore in 2009 and renounced his US citizenship. Jim Rogers, the co-founder of the Quantum Fund with George Soros, did the same and is now teaching his daughters Mandarin. “I’m preparing them for the 21^st century by knowing Asia and by speaking perfect Mandarin”, he told CNN. “It’s easier to get rich in Asia than it is in America now. The wind is in your face. (The US) is the largest debtor nation in the history of the world,” Rogers added.

The report warns that the dissatisfaction with income inequality shown in the Occupy Wall Street demonstrations “will gain momentum, and that there could be a long-term recalibration between governments, businesses and society as a result.” No doubt, there could be phenomenal shake-up in global economic and political landscape during these times ahead, with massive scopes of wealth re-distribution. The ones who are well-informed and keen will definitely reap the benefits.

O Canada!

Canada has Resources

When someone considers Canada, the first things that pop up in the mind are- maple leaf, harsh winter, and….natural resources!

Canada has natural resources like Saudi Arabia has oil and South Africa has diamond. Its no surprise that Canadian economy is largely resource based. With 1.7 trillion barrels of oil and plenty of gold and timber, Canada’s resource sector is the backbone of its triple-A rated economy.

Not only extracting and utilizing these resources from Mother Nature, the Canadians have taken this resource expertise to global level. They haven’t been content to stay home and ply their trades domestically. They are more adventurous than that. “Canadian know-how” has left few areas of the earth unexplored. Presently Canadian mining companies operate in 350 off-shore mines in different parts of the globe. They search for silver in Mexico and South America, gold in China, platinum in South Africa, diamonds in Namibia, oil in Indonesia, Iron from Sweden…well you get the picture.

Abundance above and beneath the Earth

Natural Resources- categorized as forests, minerals and metals, energy- form the backbone of the economy. These sectors have been engine of economic growth and job creation for generations. In 2009 alone, the sectors generated 11 percent, or $133 billion, of Canada’s GDP and directly employed 759,000 people.

Canada’s considerable natural resources are spread across its varied regions. In British Columbia the forestry industry is of great importance, while oil and gas industry is important in Alberta and  Northern Ontario is home to a wide array of mines. Canada is a world leader in the production of many natural resources such as gold, nickel, uranium, diamond and lead. It also is endowed with mineral resources of coal, copper and iron ore. Several of Canada’s largest companies are based in natural resource industries, such as EnCana (TSX: ECA), Cameco (TSX:CCO), Goldcorp (TSX: G) and Barrick Gold (TSX: ABX).

Gold

Canada is the 8^th largest gold producer in the world. As per 2011 estimate, 101 MT or 3.6% of global production was made in Canada.

The west of township of Timmins, located in the famous Abitibi Greenstone belt in Ontario-Quebec border is the major center of gold play. So far, 180 million ounce of gold have been found and 70 million ounce have been mined. Another prospecful area is the Yukon Territory. Since the famous Klondike Gold Rush in 1897, a new episode of New Yukon Gold Rush is taking place. It’s mainly happening due to the placer gold, washed by water and gravity, originating from a distant source. It is estimated that the amount of placer gold would be around 160 to 180 million ounce range.

Minerals

Many minerals are found within ancient rocks of the Canadian Shield, which is located in Central and Eastern Canada. Canada leads the world in the production of uranium, which is the fuel for nuclear power stations. Modern energy-hungry world will be hell-bent to get access to this precious radioactive metal. Canada is also the leading producer of potash- used for making fertilizers- with 33 percent of world’s supply (in 2005).

Fossil Fuel Resources

A new source of oil- oil sands- is being exploited in places such as Fort McMurray in northern Alberta. This is a mixture of thick oil and sand that is dug up and heated, releasing the oil which is then piped off. Known as Athabasca oil sands, this vast reservoir in Alberta give Canada the world’s third largest reserves of oil after Saudi Arabia and Venezuela, according to USGS.

Canada currently ranks as the world’s sixth largest producer of crude oil after Saudi Arabia, Russia, U.S., China and Iran, according to U.S. Energy Information Administration. Resurging growth in Western Canadian oil production and new oil sands investments drive the positive outlook. Canadian oil production is poised to more than double to 6.2 million barrels per day by 2030, which will put Canada in the top three to four oil producers in the world.

Global Center for Resource Financing

Toronto, Canada’s largest city and commercial center, is generally viewed as the mining finance capital of the world. Toronto is home to the Toronto Stock Exchange (TSX), to more than 400 mining and exploration company offices, over 30 mining company head offices and several hundred mining suppliers, consulting firms and service providers. The TSX is the global destination for financing international projects. During the last five years, 32 percent of global mining capital and 82 percent of financing transactions were handled through the TSX.

Future of Resource Based Economy

Countries with treasure troves of natural resources ordinarily experience currency appreciation during commodity bull markets. It is evident from the U.S. dollar and the loonie (Canadian currency) being in parity right now. And considering the commodity super cycle we are currently in, we suggest the bull market in Canadian dollars still has many years to run. The stocks in TSX and TSX-Venture also have yielded explosive gains during these times. Especially the junior mining stocks have been showing valuable returns.

The Miracle Material

Some key materials have played central roles in the development of human civilization. The discovery of copper and spread of metallurgy heralded the “Bronze Age”. Then came the “Iron Age”, corresponding later to the “Steel Age”. The industrial revolution brought us the “Oil Age”. The later part of 20^th century saw the contribution of “Silicon Age”, brought about by discovery of microprocessor and changing the face of electronics.

Now, the first decade of 21^st century can be characterized by this “Miracle Material”. It is one material that would arguably change the face of technology forever. It is called “Graphene”, which is an allotrope (the atoms of an element bonding together in a different manner) of carbon (just like graphite is an allotrope of carbon, as well as diamond being an allotrope of carbon).

Discovery of Miracle Material

Graphene was first separated from flakes of graphite. It is made of single sheet of carbon one atom thick.  So, this is ONE ATOM THICK, making it the thinnest material ever discovered.  It turned out to be the strongest, most elastic and most conductive material on earth. It was such a major breakthrough that, the two researchers were awarded the Nobel Prize in Physics in 2010, just six years after its discovery. It turns out that, this material is 50,000X thinner than a human hair, 230X more powerful than silicon and 200X stronger than steel! And also, it is the most elastic substance on the planet. You can bend, twist or fold it into any shape you like.

No Intrinsic Limits

In February 2010, IBM announced that it had created the world’s tiniest transistor, made not from silicon, but from graphene. This “tiny” it really is- not larger than a grain of salt! Even more important, it is also the world’s fastest transistor, handling frequencies upto 155GHz. To put it into perspective, silicon can operate at a speed of “only” 40GHz! That is, just one tiny clump of graphene transmits electrical information 2.3 times faster than silicon wafer! So, no wonder IBM researcher, Dr. Yu-ming Lin says, “In terms of the speed of the transistor, we currently see no intrinsic limits into how fast it can go”.

Every area of modern technology is catapulted by the miracle properties of Graphene.

·        Electronics

·        Medical science

·        Oil exploration

·        Warfare

 Fun Electronics

Imagine you can roll up your iPhone and put it behind your ear….or watching movies on a television no thicker than wallpaper. Already Nokia and Samsung unveiled their own ultra-thin, flexible electronics (the Kinetic and Galaxy Skin) in 2011. This material conducts electronic information 230% faster than silicon, making it possible to download 3-D movies and charge your smartphone in just seconds. And forget about broadband- get yourself ready for extremeband, as huge chunks of data that once took you minutes (or hours) to download now arrive in just seconds.  And you can forget about waiting hours (or even minutes!) for your Blackberry to fully charge. With much higher frequencies, you will never have to worry about losing a call every time you enter an elevator or parking garage. That’s why BBC comments, “…(it) could spell the end for silicon and change the future computers and other devices forever”.

An artificial implant for the Brain

The new types of prosthetic devices made with graphene promise to be much superior in treating neurological disorders like Alzheimer’s, Parkinson’s, blindness, epilepsy, paralysis and others. These materials also beckon new medical performances like:

Ø  Killing Cancer cells, not healthy ones- New drug carrier made with Graphene oxide which greatly reduces side effects of cancer treatments by killing only the affected cells.

Ø  Synthetic blood- a new blood substitute made of graphene as an ingredient has proven to be effective in restoring hemoglobin that carries oxygen, to maintain blood flow and prevent clots from forming. It proves to be effective against trauma of losing blood.

Ø  Super Strong Tissue- By spinning densely-packed graphene nanoribbons into a tight yarn, researchers at UT Dallas created artificial muscle fibers that exert 100X the force of natural muscles and can rotate objects 2000X their own weight. Aside from staggering potential this technology holds for machines and artificial limbs, doctors also believe it could make possible nonorobots strong enough to propel throughout the bloodstream- delivering drugs, removing parasites and much more.

Ø  New Body Tissue- Researchers at the Air Force Laboratory in Ohio are using graphene to grow new human tissue after watching how cells proliferate when attached to surfaces coated with graphene oxide (one of the major element of our body cells is carbon and graphene is an allotrope of carbon). One researcher says “A material that allows faster and more efficient growth of cells would indeed find many applications in the fields of biomedicine and biotechnology such as tissue engineering or to grow structures that could help heal wounds.” And another researcher at Graphene Labs says he is now “exploring the possibility of using graphene as a membrane in the next generation of artificial kidneys”.

At this point, one might ask, if there’s  any stunning breakthrough graphene wouldn’t be responsible for bringing us!

New Era for Oil Exploration

Graphene could be a key component in uncovering large pockets of oil and gas hidden deep into the earth. One popular method of exploration uses small wireless sensors to wander deep into tiny cracks and crevices, from where they send data on any discoveries back to the surface. It’s a safe and cost-efficient technology. But, the problem is, sensors powered by conventional batteries can be made only so small. And that means the tiniest cracks and crevices are still off-limits for exploration.

Scientists in Rensselaer Polytechnic discovered that they could generate small amounts of electricity just by letting water and other fluids flow over materials coated with graphene. In fact, their tests demonstrated that one sheet of graphene just .03 mm by .015 mm can generate 85 nanowatts of power.  Which means that by using graphene as a “smart skin”, tiny, self-powered microsensors could soon find oil and gas in previously undiscovered locations. The oil and natural gas shale boom currently underway could go several times over, because of previously undetected reserves now able to be found with graphene technology.

Battlefield of the Future

Graphene presages to be the material used for making the impossible.  Scientists in UT Dallas have discovered that with sufficient electrical stimulation, a sheet of graphene heats up so much that the difference in temperature between it and the surrounding area causes light rays to bend, cloaking the object that is right behind the graphene. Imagine what this could mean for tomorrow’s battlefield…as invisible tanks and fighter jets quickly overwhelm their bewildered enemies. A company called Nanoflight has taken this discovery to the next level by creating a graphene aerogel for the Israeli army to “paint” on their missiles. In tests, they discovered this aerogel absorbs radio waves emitted from radar systems and scatters them as heat…making the missile invisible!

Industrial Demand

With such huge industrial applications of graphene, there is no doubt the future belongs to it. In fact, price of carbon-rich sources of graphite have gone up 300% during last five years, with price being in $2500-$3000 per ton now. That’s why, BCC research believes that commercial sales of graphite are set to explode from $67 million in 2015 to $675 million by 2020. And according to Futures Inc., demand for grahpene-based ink, photodiodes, high-frequency transistors and conductive coatings has already increased by 4,000% since 2010.

So, how can you position yourself to profit from this meteoric trend about to explode?

Actually, the answer is in graphite- because graphene is made from graphite. As mentioned above, the price of graphite is exploding during last few years, with the trend to continue in coming years.

So far, graphite has been mined in only five countries, with China currently controlling 70-80% of world’s graphite production.  That puts graphite in a rare earth materials-type position, in that China has a near stranglehold on the market, as graphite’s dominant future creeps upwards.

That’s what set off the rare earth boom in 2009 and 2010, sending any company with access to rare earths outside of China soaring thousands of percent. And its exactly what is happening with graphite right now. China’s production facilities and mines are old and may be nearing depletion. And they are trying to get top dollars for what they have left. And small supply that comes outside of China is typically used in full by the country where it is mined for traditional steel and automotive applications. The situation has become so alarming that, Britain, EU and U.S. have declared graphite a critical supply material.

As seen from the graph below, all of these have an impact on the carbon-rich sources of graphite:

So, this trend gives other companies outside of China bomb-shell opportunities to profit from soaring demand of graphite. In fact, some Canadian mining companies which are in development stage, are set to gear up huge growth potential with their mining resources. Their stock prices are to go up multiple times.

Futures Ahead

As quoted by analyst Larrain Vial, “the attributes of graphene- transparency, density, electric and thermal conductivity, elasticity, flexibility, hardness, resistance and capacity to generate chemical reactions with other substances- harbour the potential to unleash a new technological revolutions of more significant proportions than that ushered in by electricity in the 19^th century and the rise of the internet in the 1990s.”

What graphene-based technology has shown so far is just tip of the iceberg. We have only scratched the surface of how graphene will impact the electronics, medical science and energy industries. New elements of technological inventions will SURELY impact the world in times ahead.

Towards A New World Currency

We have seen an interesting digression in world monetary trend. China and Japan have announced last month (26^th December) that they are going to start trading with each other in their own currencies, OTHER THAN U.S. DOLLAR. So they have formed a powerful currency union.

Japan previously used its massive foreign currency reserve of U.S.  dollar to artificially devalue its currency- by pegging its currency to USD and expanding its money supply- thus undervaluing its currency and boosting its exports. China presently is doing the same. They currently hold world’s largest foreign currency reserves- China has about $3.2 trillion, while Japan holds $ 1.3 trillion- and any move to reconstitute the makeup of those holdings could change the global currency map.

Over the short run, the agreement is likely to lead to continued weakening of the dollar against the yuan (on the contrary, strengthening the yuan). That should help the U.S. to lessen the trade deficit with China, increasing American exports while weakening imports from China. On the other hand, the strategic advantage that the U.S. used to enjoy through the world dominance of its own currency, like getting all the products and commodities (mostly OIL) by importing in its own currency, would surely diminish. The seemingly unending American prosperity manufactured by way of manipulating its currency and money supply has started showing its diminishing returns.

The present fate of the dollar can be compared with the waning of the British Pound a century ago as the most prominent currency for international trade. And in all likelihood, the Chinese yuan will increasingly play an important role in Asia. So that U.S.  dollar would be less important as currency for transactions in Pacific Rim trade.

It would be interesting to observe the reaction of the U.S.  It has so far opposed every effort to deveiate away from dollar as world reserve and trading currency. Now that world's top 2 economic superpowers are going their own way, what the U.S. is going to do about it? It is already beleaguered with its own debt and other economic problems, and it counts so much on the economic strengths of these two giants! The global economy is taking on its inevitable course, with new players dominating the arena.