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John Polomny
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John Polomny is an individual investor and speculator seeking unique, overlooked, and well researched opportunities and speculations from all over the world.
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  • Long Term Investing Is Not Dead At Least Not In Frontier Markets 0 comments
    May 8, 2012 7:46 PM | about stocks: VCVOF

    Decent article from Marketwatch:

    The Citi report, "Global Growth Generators: Moving Beyond 'Emerging Markets' and 'BRIC,'" by Willem Buiter and Ebrahim Rahbari, begins with a forecast that might elicit smirks from anyone who has noticed how difficult it is for economists to even guess what tomorrow's data will bring: "We expect strong growth in the world economy until 2050."

    Smirk-worthy or not, the report projects global growth to average 4.6% annually until 2030 and 3.8% for 20 years after that. Then it names 11 economies whose growth rates the authors foresee to be particularly strong.

    What are the economies Citi sees having particularly strong growth? China, Egypt, India, Indonesia and the Philippines are pretty well known but the last six are more frontier markets I have been talking about, some which for several years, Bangladesh; Iraq; Mongolia; Nigeria; Sri Lanka and Vietnam. What are the common denominators for success?

    For fast growth to become productive growth for investors, there needs to be a catalyst, such as a change in economic or political policy that enhances productivity. What history also teaches, however, is that by the time a catalyst comes along and its importance is recognized, the most vigorous initial stage of a market advance is likely to be over. For instance, the time to invest in Brazil, one of an earlier generation of frontier economies to make good, was before inflation had been brought under control in the 1990s, not after.

    It may make more sense, therefore, to be early than late into these markets, but beware: The time spent waiting for a big score can be long and difficult on the nerves. Economic, political and market conditions can be turbulent before share prices catapult higher, and even after.

    If this sounds familiar it is because I and others like Jon Springer have been saying the same things right here on SA long before Citi even knew where these places were. The key for me is to get involved in these places before the big money like Citi finds out. I want to ride the wave of liquidity when these guys eventually figure out what is going on and show up.

    Stocks: VCVOF
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