I often write on Quora.com, where I am the most viewed writer on financial matters, with over 672.8 million views in recent years.
In the answers below I focused on the following topics and issues:
- Would you invest in Africa?
- Will interest rates go down in 2023?
- Is this the beginning of the end of China’s economic dominance?
- What city will be the next Dubai?
If you want me to answer any questions on Quora or YouTube, or you are looking to invest, don’t hesitate to contact me, email (firstname.lastname@example.org) or use the WhatsApp function below.
Some of the links and videos referred to might only be available on the original answers.
Why do rich countries invest in poor countries?
Jim Rogers was George Soros’ former business partner.
He made a fascinating comment recently.
He said countries that have just gone through a civil war or other issues often offer excellent investment opportunities.
Recent examples include Cambodia, China and Colombia, all of which relatively recently (meaning in the last fifty years) had wars, famines, cultural revolutions and other serious issues.
The time to invest in China was probably the 1980s and 1990s when very few people thought China would “take over the world”.
The time not to invest in China was when she was already a middle-income country and more people were bullish.
It is a different variant of Buffett’s famous quote about being greedy when others are fearful and fearful when others are greedy.
Moreover, this is often something individuals can take advantage of, not just companies and countries.
Therefore, we shouldn’t be surprised that many want to invest in Africa.
Will interest rates go down in 2023?
Not in 2023.
For 2024, Nobody knows for sure.
I don’t know anybody who expected interest rates to fall to zero in 2008, and stay there (in many countries) for well over a decade.
What we do know is:
- Inflation has fallen in most advanced countries
- Interest rates have been held steady by the Federal Reserve and Bank of England at the last meeting
- Historically, interest rates fall about eight months after an interest rate pause
- There are reasons why, long-term, interest rates will stay higher for longer than expected. There are also reasons why interest rates will fall.
- We are seeing partial deglobalization. Supply chains are being affected. That is a reason for interest rates to stay higher for longer. It also tends to take some time for inflation to deflate.
- Against that we have the following deflationary forces:
- There is probably going to be a massive move towards AI and technology in the next decade. It is cheaper to produce products and services if more things can be automated
- We are getting older in most parts of the world. Many countries are even seeing declining populations, including Japan, China and South Korea. You could argue that could be inflationary as it could push up the price of labour due to shortages, but older people consume less as a generalization.
Long-term, it seems more likely that long-term interest rates will be lower than they are today.
Would you invest in Africa?
Yes and no.
If you are a business, investing in Africa can make a lot of sense, depending on your industry.
Africa was our second biggest market in 2021.
I wouldn’t jump to rush into African stocks, though.
That is because there isn’t a strong correlation between economic growth and stock market performance.
Look at the MSCI Emerging Markets index vs the US S&P500.
Many of the emerging markets outperformed in the 1990s and 2000s.
Subsequently, they have underperformed.
Even ultra long-term, they have underperformed.
That is partly because many emerging market players have listed on the New York Stock Exchange, and big US corporations like Apple have benefitted a lot from that GDP Growth.
The same thing could happen with Africa. There is a chance that global corporations will benefit the most from the growth.
What city will be the next Dubai?
Almost everybody I have met has spoken very highly of Rwanda.
This picture from the Rwanda Inspire and X says it all:
Be careful about calling places the next Dubai or the next Singapore, though.
Nobody knows in advance which places will become success stories.
People spoke about Russia, Brazil, South Africa and Turkey until recently.
Is this the beginning of the end of China’s economic dominance?
China has never been economically dominant in our lifetime.
Some facts about China:
- GDP per capita is about a 1/6 of what it is in the United States and many developed nations
- A high percentage of China’s population (200 million or one in seven) live off $5 or less a day
- In the grand scheme of things, Mainland China’s GDP per capita is still playing catch up with Hong Kong and Taiwan:
- Their nominal GDP is about 40% lower than the US despite having a population four times the size
- GDP growth has been gradually converging with the US since 2007. So, even before Covid, the gap was narrowing
- The way they calculate GDP is different. Larry Summers, Michael Pettis, Paul Krugman and others have all referred to this.
“A report published by the Brookings Institution in 2019 suggested that China had been overstating its economic growth by about 2% every year, making its economy 12% smaller than official figures then claimed.
So, even before the recent troubles, they weren’t flying, unlike the 1990s and 2000s.
The issue now is multi-fold:
- A falling population and a lack of willingness to use immigration to fill the gap. So, unlike Europe and the US, which has the same issue, it seems that China will lose hundreds of millions of people.
- Worse relationships with some key trading partners
- An overheating property market. Just like with GDP growth, we don’t know what is going on. The official stats might be making the true issue.
So, it seems inevitable that average Chinese GDP growth will drop in the decades ahead.
Mind you, because Chinese GDP is already bigger than before, even 1%-3% average growth will compound.
Look at the US. In 2000, the US had a GDP of 10 trillion. It is now about 26 trillion, despite lower average growth than before.
So, more GDP has been added since 2000 than in the previous years because relatively small growth on a huge pot is a lot of money.
The big question with China is if they maintain some growth indefinitely during our lifetime, and therefore they see the ie growing, or things get terrible.
Only time will tell, and nobody can predict the future with certainty.
After all, in 1960, people thought the USSR was the future. In the 1980s, it was Japan’s turn. More recently, “everybody” thought China was the future.
In 2008, people seemed to think wealth was traveling to the east and south, and since then, Latin America and many parts of the emerging Middle East have struggled.
Few people thought any European country would do well, and in the meantime, the Republic of Ireland, which was written off, has outgrown almost every country on earth!
It should teach people not to listen to every grand economic narrative of the time.
Pained by financial indecision? Want to invest with Adam?
Adam is an internationally recognised author on financial matters, with over 694.5 million answer views on Quora.com, a widely sold book on Amazon, and a contributor on Forbes.