This from Chris Mayer writing for the Daily Reckoning:

Of all the crazy events in 2008, seeing the Taj Mahal Palace hotel in flames on TV is one I’ll remember for a long time.

Last year, when I traveled throughout India, my first stop was Mumbai (or Bombay, as people still call it). I stayed at the Taj Mahal Palace. I remember what an oasis of calm that hotel was after spending a day in bustling Bombay. I remember its onyx columns and archways and domes, its hand-woven carpets and crystal chandeliers, its exceedingly polite staff and impressive Sikh doormen.

Built in 1903 by a Tata, the Taj was a place of grace and old-world charm. From the hotel, you got a panoramic view of the bay, where the fabled Elephanta Island is a short boat ride away. And the hotel was within sight of the historic Gateway of India, where the last of the British troops departed in 1947.

Poor India, the old stomping grounds of the great Hindu kings, the playground of the Mughal Empire, had a rough year in 2008. India has had such a good run – five years of nearly 9% economic growth and a booming stock market – that it had reason to feel it was Fate’s spoiled darling. But in a long and checkered life, a good many things come unstuck. And so India has.

In 2008, it stock market lost 60% of its value. The rupee lost 20% against the dollar. Foreign investors pulled out in record numbers. India’s best companies struggle. The global economic freeze walloped India hard.

So the question is should you buy India or forget it?

India is a place of staggering contradictions. On the one hand, there is “the Indian miracle.” There are the booming companies and spotless IT campuses. The many millionaires minted daily. Yet there is also awful poverty. The World Bank estimates some 420 million people live below the poverty line. That statistic doesn’t capture the awfulness of it at all.

I’ll never forget the train station in Agra. The mass of poor people lying on the ground in blankets, the beggars and human misery in that place. Yet it has been this way for eons. Mark Twain wrote about the squatters in Following the Equator (1897), about the crowds with their “humble bundles and baskets and small household gear.” Twain would probably still recognize the place.

In India, you’ll see a man in a suit chatting away on a cell phone and on the ground next to him a snake charmer. You’ll see elephants pottering down roads in Rajasthan alongside buses and scooters and hand-pulled carts. You’ll see beautiful buildings right next to absolute squalor.

In Paul Theroux’s new book Ghost Train to the Eastern Star, he retraces a route he took 33 years ago, when he was 33 years old. Part of that trip goes through India. And so Theroux, now 67, is in a good position to judge the changes in India. He is mostly unimpressed. “We drove through the streets of Mumbai, past the slums, the sidewalk sleepers, the lame and the halt. Was the miracle, I wonder, just an illusion?”

Theroux writes about the constant presence of the poor. “Unlike the poor in Europe or America or even China, the poor in India are a constant presence. Where else do people put up with plastic huts on the sidewalk of a main road – not one or two, but an entire subdivision of humpies and pup tents? They inhabit train stations, sleep in doorways, crouch under bridges and railway trestles.”

The biggest slum in all of Asia, Dharavi, lies right in the heart of India’s Manhattan, Bombay. Over some 520 acres live 600,000 people, with one public toilet per 800 people. It is a place of unbelievable filth.

Yet many people in India seem to ignore such slums. I remember sitting in a presentation in which some official from Bangalore showed us slides of new buildings and smooth, functioning roads – a modern city – as he talked up the investment potential of his rapidly changing city. Yet right outside was a completely contrary view: dusty, uneven roads; derelict buildings; and extreme poverty.

Yet there is a lot of good in India. These episodes recount how much more there is to do.

It doesn’t neglect all the progress. And the promise of India, even now, is still enormous.

Consider that even as growth forecasts come down from 9% to 5%, India is still one of the world’s fastest-growing economies. Its people are young and hungry for a better life, unlikely to unbutton the old waistcoat and put their feet up. Half of India’s population is under 25 years old. There are many English speakers. The savings rate is near China’s lofty levels. “The crowning reason for optimism,” opines The Economist “is the savings rate.” Unlike the U.S., India is a nation of savers.

And there are many needs and opportunities. India’s road network is the world’s second largest, but in need of further upgrades. Power outages are common in Indian cities, too. India plans to spend nearly $500 billion on infrastructure over the next five years. Power generation alone should increase 14% annually over that span.

On a more micro level, there are good companies here available on the cheap. The economic deepfreeze won’t last forever. If you can sit on Indian investments for a few years, my guess is you will be amply rewarded.

Source: India: Buy or Sell?

I remember what an oasis of calm that hotel was after spending a day in bustling Bombay. I remember its onyx columns and archways and domes, its hand-woven carpets and crystal chandeliers, its exceedingly polite staff and impressive Sikh doormen.

Poor India, the old stomping grounds of the great Hindu kings, the playground of the Mughal Empire, had a rough year in 2008. India has had such a good run – five years of nearly 9% economic growth and a booming stock market – that it had reason to feel it was Fate’s spoiled darling. But in a long and checkered life, a good many things come unstuck. And so India has.

In 2008, it stock market lost 60% of its value. The rupee lost 20% against the dollar. Foreign investors pulled out in record numbers. India’s best companies struggle. The global economic freeze walloped India hard.

So the question is should you buy India or forget it?

India is a place of staggering contradictions. On the one hand, there is “the Indian miracle.” There are the booming companies and spotless IT campuses. The many millionaires minted daily. Yet there is also awful poverty. The World Bank estimates some 420 million people live below the poverty line. That statistic doesn’t capture the awfulness of it at all.

I’ll never forget the train station in Agra. The mass of poor people lying on the ground in blankets, the beggars and human misery in that place. Yet it has been this way for eons. Mark Twain wrote about the squatters in Following the Equator (1897), about the crowds with their “humble bundles and baskets and small household gear.” Twain would probably still recognize the place.

In India, you’ll see a man in a suit chatting away on a cell phone and on the ground next to him a snake charmer. You’ll see elephants pottering down roads in Rajasthan alongside buses and scooters and hand-pulled carts. You’ll see beautiful buildings right next to absolute squalor.

In Paul Theroux’s new book Ghost Train to the Eastern Star, he retraces a route he took 33 years ago, when he was 33 years old. Part of that trip goes through India. And so Theroux, now 67, is in a good position to judge the changes in India. He is mostly unimpressed. “We drove through the streets of Mumbai, past the slums, the sidewalk sleepers, the lame and the halt. Was the miracle, I wonder, just an illusion?”

Theroux writes about the constant presence of the poor. “Unlike the poor in Europe or America or even China, the poor in India are a constant presence. Where else do people put up with plastic huts on the sidewalk of a main road – not one or two, but an entire subdivision of humpies and pup tents? They inhabit train stations, sleep in doorways, crouch under bridges and railway trestles.”

The biggest slum in all of Asia, Dharavi, lies right in the heart of India’s Manhattan, Bombay. Over some 520 acres live 600,000 people, with one public toilet per 800 people. It is a place of unbelievable filth.

Yet many people in India seem to ignore such slums. I remember sitting in a presentation in which some official from Bangalore showed us slides of new buildings and smooth, functioning roads – a modern city – as he talked up the investment potential of his rapidly changing city. Yet right outside was a completely contrary view: dusty, uneven roads; derelict buildings; and extreme poverty.

Yet there is a lot of good in India. These episodes recount how much more there is to do.

It doesn’t neglect all the progress. And the promise of India, even now, is still enormous.

Consider that even as growth forecasts come down from 9% to 5%, India is still one of the world’s fastest-growing economies. Its people are young and hungry for a better life, unlikely to unbutton the old waistcoat and put their feet up. Half of India’s population is under 25 years old. There are many English speakers. The savings rate is near China’s lofty levels. “The crowning reason for optimism,” opines The Economist “is the savings rate.” Unlike the U.S., India is a nation of savers.

What to Buy in India

And there are many needs and opportunities. India’s road network is the world’s second largest, but in need of further upgrades. Power outages are common in Indian cities, too. India plans to spend nearly $500 billion on infrastructure over the next five years. Power generation alone should increase 14% annually over that span.

There are good companies here available on the cheap. The economic deepfreeze won’t last forever. If you can sit on Indian investments for a few years, my guess is you will be amply rewarded.

If you believe in the long-term growth of India, as I do, then now is not the time to overlook it. The sun dipped behind some clouds in 2008. It won’t always look so dark. Stick with the survivors, build low-cost positions and be patient.

Source: Investing in India in 2009

This from Money Morning:

In a surprise to many, India’s central bank has cut its base-lending rate four times since October, going from 9% to its current rate of 5.5%. After all, isn’t India’s economy growing nearly as fast as China’s? And isn’t that growth already being fueled by an unprecedented level of middle-class spending?

The answer to both questions is a resounding “yes.”

But there’s a pesky asterisk here – and that’s the global financial crisis, the cash drought that has sapped nearly every country directly through their banking systems, or indirectly through fluctuations in exchange rates and gyrations in revenue received from key trading partners.

And the Reserve Bank of India’s rate cut proved two things:

First, its new governor, Duvvuri Subbarao, is less afraid of inflation than he is a global slowdown.

“A 100-basis-point cut is an indirect admission that not all is ‘hunky dory’ with the India growth story,” Nandkumar Surti, chief financial officer at JPMorgan Asset Management India Pvt. Bank in Mumbai (JPM), told Bloomberg News. “One way to look at it is that the global problem has begun to affect us.”

For years, India doggedly raised rates to keep widespread inflation in check. It even went as far as subsidizing food and forcing the state-owned oil companies to sell gasoline to domestic consumers below cost.

And second, Subbarao believes India should taper its economic growth outlook for 2009.

This installment of “Outlook 2009,” report will chart India’s growth next year – its headwinds, tailwinds and possible factors that could turn the direction of either.

It will also reveal the two best ways investors can ride along with India’s economic growth, and take home profits from India’s bullet-proof industries – and in the process, perhaps even offset some of the losses they’ve incurred here in the U.S. market.

India’s Headwinds

India’s economy logged an annual growth rate of 7.6% for the quarter ended Sept. 30 – its slowest rate of growth in nearly four years.

India’s farm sector employs about 60% of India’s 1.14 billion people. That was great during last year’s run-up in commodity prices, but those prices have subsequently fallen, and so has the ag sector’s rate of growth – 2.7% in the quarter ended Sept. 30, which is well below the 4.7% pace of a year ago, according to The Wall Street Journal.

Manufacturing – also a powerful economic engine – has also stopped chugging as hard. That sector advanced 5.0% in the last year, a significant drop from the 9.2% growth from the same period the year before.

The global deceleration bears much of the blame for those drop-offs, as the United States far and away, remains India’s top trading partner.

But India is now dealing with a major share of homegrown problems – issues that have become ever more glaring as India’s economy grows in size.

The biggest problem of all: India’s domestic infrastructure is sorely deficient.

The country’s roads and highway systems are a mess, and its power grid is grossly insufficient for an economy of India’s size and rate of growth. That’s an observation that Money Morning guest columnist and well-known India-investment expert Karim Rahemtulla observed firsthand in India last year, when he lead an investor’s field trip around the country.

And while India has a prosperous and growing middle class, more than 200 million people living there are living in poverty. The government has taken many measures in the past decade to reduce poverty, but Rahemtulla says that the nation’s poor are “mostly against reform because they see little benefit from it.”

In a way, that, too, is an infrastructure issue. India’s poor don’t feel any kind of real connection to the country’s financial system. Indeed, many work day-by-day in the thousands of farming villages. A wave of government reform won’t affect them because they are living at such a far distance – physically, socially and culturally – from the parts of India that would benefit from any changes, new programs, or financial-stimulus efforts.

Even with those obstacles, the World Economic Forum (WEF) and Confederation of Indian Industry predict India will grow 7.4% to 7.8% in the 2008-2009 fiscal year.

But not everyone agrees with that assessment.

“Not going to happen,” Rahemtulla said. “There will be positive growth because India will reduce rates and devalue the rupee in order to stave off economic contraction which it can ill afford.”

But Rahemtulla was just as quick to credit the Reserve Bank of India for taking action as the global financial crisis spread across the world.

“They have explicitly stated they will aggressively promote fiscal and monetary stimulus to promote growth,” Rahemtulla said.

India’s Tailwinds

No question, the global financial crisis has crippled economic growth around the world. But the malaise – combined with the significantly reduced inflation that’s resulted from the downturn – has opened up a straightaway into which India can shift its cautionary policies, refuel its economic engine, and ultimately re-accelerate growth.

“Taking note of the downturn in the inflation rate, RBI has lowered the policy rate as well as the reserve requirements. RBI’s policy is now biased towards stimulating growth,” India’s former finance minister, Palaniappan Chidambaram, said in reference to the steps taken by the Reserve Bank of India.

“If the rate of inflation continues to decline, the policy rates may also moderate and the bias in favor of growth may deepen,” he told economic editors during a meeting late last year, Reuters reported.

India’s annual inflation fell near a 10-year low of 6.38% in December, a dramatic drop from the 13% growth rate in August. The trend is expected to continue, with inflation slowing to 5% or less by March, Pronab Sen, secretary at the ministry of statistics and program implementation, told Reuters.

That could open a door for the Reserve Bank of India to cut interest rates further, encouraging banks to lend money. And though lower rates may weaken the rupee, Rahemtulla says that will make India’s exports more appealing – especially as countries around the world tighten their belts amid the global financial crisis.

Low inflation isn’t the only tailwind that’ll rebound India’s economy back to its high speed.

India’s overall economy sputtered, but a pair of critical sectors posted promising numbers: Construction is up 9.7% from a year earlier, while India’s service sector has advanced at a robust 10.8% in that same span.

Credit goes to India’s middle class, which, like China’s, is growing in both numbers and overall strength.

Also very promising: Only $1 billion of the Reserve Bank of India’s $510 billion loan portfolio is in toxic Western assets.

That explains why – at a time when the global turmoil has claimed several major U.S. banks – none of India’s banks have gone bust.

India is unmistakably frugal. And its monetary policy proves that it is willing to accept a reputation for being a stifler of growth – instead of being known as being clumsy, overzealous and even reckless, as many U.S. banks are now accused of being.

Two Ways to Play India… for Cheap

Like every major economy, India is falling short of previous economic forecasts in large part because of the global financial crisis.

But make no mistake: Next to China, India’s economy will grow four-to-five times faster than most of the world’s other major economies – many of which are stuck in recession.

For now, investors should target the companies in India that are internationally competitive and are active exporters. That’s because any budget or inflationary difficulties will probably be reflected in a weakening of the rupee, which will help countries exporting from India.

Infosys Technologies Ltd. (ADR:INFY) is India’s premier exporter of software. The company carries almost no debt, and its shares are trading at a current Price/Earnings (P/E) ratio of 12.6, with a dividend yield of 1.48%. That P/E is quite low for a company in a high-growth market such as software.

Dr. Reddy’s Laboratories Ltd. (ADR:RDY) is India’s premier manufacturer of generic pharmaceuticals, and is positioned to benefit in the 2008-2012 period as many popular drugs lose their patent protection and are opened to international competition. In the near term, too, as household and corporate budgets tighten around the world, people will more likely opt for generic prescription drugs, instead of high-price name brands.

Dr. Reddy’s has moderate debt (about 50% of equity), and is trading at 19 times forward earnings – not at all pricey, given the high promise of the generic-drug sector. The stock also features a modest dividend yield of right around 1.0%.

Both stocks are down nearly 50% from their 52-week highs, suggesting value.

This is the eleventh installment of Money Morning’s”Outlook 2009” series, which looks at the global investing outlook for the New Year.

Source: India’s Economy Standing Firm Amid the Growing Global Financial Crisis

The European Commission forecast on Monday that the 15-country Eurozone will grow a meager 0.1% next year – at best.

The global financial crisis has hit Europe like Hurricane Katrina flattened New Orleans. And we expect this is a clear indicator of how the U.S. will fare as we approach 2009.

What this means to investors is that the major emerging markets such as China and India may indeed be the place for their money. China and India are certainly down from the commodity supercycle heyday, but their growth far outstrips what we’re seeing (and can expect to see) in Western industrialized economies.

The European Commission said the Eurozone’s largest economies such as Italy, France and Germany will come to virtual standstill with the prospect of 0% growth.

At the same time, second-tier economies including Spain and Ireland will shrink.

And even though the U.K does not use the euro, the European Commission expects that economy to shrink by 1% – putting it in the same league as the struggling former Soviet satellites, Latvia and Estonia.

That was all the good news in a best-case scenario. The 27-member EU warned that the numbers could deteriorate if money gets even tighter – straining government coffers and virtually freezing consumer spending.

Worse, unemployment could reach 8.4% next year from a decade low of 7% at the end of 2007.

At the same time, government deficits could rise from 1.6% in 2008 to 2.3% in 2009. But some countries may suffer deficits of up to 3% including the U.K., Ireland, France, Latvia, Lithuania, Romania and Hungary.

The EU’s bleak future is characterized by unemployment, deficits and recession – the probable hallmarks of the American economy next year.

Sounding quite naïve (or stupid), Joaquín Almunia, the European commissioner for economic and monetary affairs, actually said that the EU’s interdependence of the global economy is “bigger than we thought, leading everybody to suffer.”

It almost makes the EU sound as though they still cling to the belief that that the world is flat.

While the EU’s forecast may not be a direct reflection of the U.S. economy in 2009, we do believe is provides an undistorted view into the impending future.

“I woke up this morning and everything was green – not the trees but the gains on my emerging market portfolio.”

Up, up, up, with the exception of the iShares MSCI Turkey Invest Mkt Index (NYSE:TUR), which was down 5.67%.

Some of the highlights include the HANG SENG INDEX (^HSI) up 12.82%. The RTSI INDEX (RTS.RS) jumped 18.2% after Putin approved nearly $10 billion in bailout loans – most of them going to his billionaire pals who made extremely bad bets on the markets.

The JAKARTA COMPOSITE INDEX (^JKSE) increased 5.41%. The TSEC weighted index (^TWII) was up 6.21%. And the IBOVESPA SAO PAULO (^BVSP) market gained 5.94% after taking a tremendous beating.

Does this mean it’s time to get back into emerging markets?

Probably not.

But it does indicate some rationalization between the skyrocketing prices during the so-called commodities supercycle and the new everyday reality of emerging nations facing a raw reality head-on.

Maybe you can call it sort of a fiscal post-pubescent coming of age, where enormous subsidies and reserves from natural resources will give away to the promise of responsible stewardship by business and government.

Of course, no one really enjoys being responsible for very long, and the whole stupendous spectacle will cycle up all over again.

That said, we should really be looking to China as the bellwether for a sustained emerging market rally. The country is now dealing with the backlash to a global credit crunch, post-Olympic slump and credit and currency problems.

Inevitably, China will pull itself up by the bootstraps and continue the march toward its own economic Manifest Destiny.

Naturally, an upswing in oil, natural gas and metals will also help determine an emerging-market recovery.

In the meantime, though, we have to follow the credit, because that’s what these countries need to normalize their economic progress.

The International Monetary Fund (IMF) will make available as much as $100 billion to countries battered by the financial crisis.

During the past few years, emerging markets have avoided the IMF because of restrictions that are imposed with the loans. These often include budget cuts and interest-rate increases. When these countries get in bed with the IMF, fiscal responsibility is the first order of business.

Countries such as Brazil, Mexico and countries of the former Soviet Union would be likely candidates for IMF infusions.

In the end, don’t get your hopes up high for any emerging market bubbles in the near term. On the other hand, if you’re looking for a return to long-term fiscal responsibility (and the inevitable bubble) keep on your eye on these up-and-comers.

Today, India is the seventh largest pharmaceutical market with revenues of about $12.2 billion. Despite projected growth of $17.8 billion by 2012, it could get eclipsed by its arch rival, China.

A recent report by PricewaterhouseCoopers suggests that China’s faster overall economic growth will propel its pharmaceutical segment ahead of India. It could China another 12 years to reach that goal, but investors should keep a sharp eye on Chinese pharma companies that could go public with a big bang as did Chinese Internet and solar IPOs.

China has several obstacles to overcome. With tainted food scandals, Beijing has suffered a black eye in terms trust and quality. In addition, intellectual property violations have also contributed to a culture of piracy that could put off major Western pharma companies from setting up shop in China.

Still, over the coming years China could easily crack down on violators with their eye on the pharma prize.

According to a PricewaterhouseCoopers report, “China would be the second or third biggest market in the world by 2020 and India might well be in the top 10.”

This growth will come with an increase in Western pharma companies establishing so-called contract manufacturing organizations (CMOs) in both countries.

In effect, CMOs serve as R&D and manufacturing facilities that provide cheaper scientists and operating expenses than in industrialized nations.

PricewaterhouseCoopers says that Asian companies provide a huge cost advantage that can range from 50 to 80% compared the manufacturing performed in the developed countries.

While cost is certainly a factor, manpower may be the true underlying impetus.

The PWC report notes: “The number of doctorates awarded in the natural sciences and engineering has leveled off or declined in the United States, United Kingdom and Germany since the late 1990s. Conversely, it has been rising steadily in Asia, such as Singapore, China and India.”

The legal systems of the West also favor Asian investments – despite current fears of patent infringement.

Impending patent expiration dates in the U.S. and Europe are about to given generic drug makers a big boost – in a way forcing the Big Pharma offshore into rapidly growing markets.

At this point, China may be too early for any investments. But it’s certainly not too early to start researching the sector now.

On Monday, authorities halted trading on Brazil’s Bovespa for 30 minutes after it tumbled 10%. Trading in Russia was frozen on several occasions in the last two weeks to prevent an all-out collapse of the market. And China’s CSI Index has lost 58% of its value so far this year.

Despite recent setbacks, however, Andrew Gordon reckons Brazil is the most likely of the pack to weather the current financial storm

This from Investor’s Daily Edge:

Are BRICs going to suffer the same as the U.S. and Europe? Or are they going to forge their own path and avoid the worst of the economic meltdown we are going through? Here’s what I believe…

1. Putin Painted into a Corner. The Russian economy has grown for nine straight years on the back of soaring oil and gas prices. But things have gotten so out-of-hand that Russia had to shut down trading a couple of weeks ago and pump $100 billion into its faltering banks.

Now oil prices and gas prices are down. Inflation is running at 15 percent. Its little incursion into Georgia helped spur over $55 billion of capital to flee its equity markets.

The verdict. Russia came back strong when it defaulted on its national debt in 1998. But where’s the growth to come from now? Oil output falling along with prices will prove a tough combination for Russia to overcome.

2. Chinese Leaders Hope Slowdown Is Temporary. Manufacturers in China are increasing profits at about half the pace as last year. And this is the fourth quarter in a row that economic growth has slowed. The government is now pushing growth over fighting inflation. It’s making it easier for banks to lend. And it won’t hesitate to make use of its $1.8 trillion dollar cash reserve to finance infrastructure projects – including a slew of them in western Sichuan Province where the earthquake hit last May. Is it enough to reignite growth?

Metal traders (not the speculators – these are the folks who trade the physical metals) tell me that demand for nickel has slipped but demand for other metals like copper and manganese is still running high.

The verdict. Every time you shop at Wal-Mart, you help pay for the salary of a Chinese factory worker. China has the means and motivation to keep economic growth around its current pace of 10.1 percent. But if you stop shopping, Chinese factories will go on a firing binge. And China’s economic growth spree could come to a screeching halt.

3. The Raj’s Rough Year. The Indian government has been treading a fine line between controlling inflation and keeping growth going. Inflation has slowed. But so has the economy which will be lucky to reach a rate of eight percent when the year is finished. It was expected to grow a half-to-a-percentage point faster.

With commodity prices falling and inflation at its lowest rate in five weeks, the government is once again throwing its weight behind growth. It’s expected to soon lower its prime interest rate. And that should help consumers buy cars and other big items.

The verdict. India’s high-tech low-wage English-speaking work force has a lot going for it. But its economy is closely tied to Western economies. Even though Indian banks aren’t in trouble like they are in the U.S., tight credit is squeezing a lot of growth out of the economy. Don’t be surprised to see India pulling up the rear among the BRICs.

4. Brazil Still Blazing. The government is looking at current-account deficits for the first time in several years. But that’s not the worst news. President Lula da Silva may be going soft on economic reform. It looks like labor, taxes, and social security are no longer on top of his agenda.

The economy is still going strong. Last quarter it grew over six percent. For the past 12 months it has grown 5.8 percent. For Brazil that’s fast. And unlike India and China, Brazil continues to raise interest rates to cool off inflation.

The verdict. Brazil’s vast offshore oil reserves should keep its economy going strong for the next ten years. But only if its state-controlled oil company – Petrobras – has access to global capital. The bailout could help Brazil almost as much as the U.S.

With all the hype on BRICs being the wave of the future, only Brazil could withstand the economic slowdown in the U.S. and Europe. As I said, it’s hard to talk about the BRICs as a whole. But this one thing is true. They’re not immune to the world’s economic problems. And even Brazil will suffer if the U.S. can’t solve the credit crisis.

Source: BRICs or Straw?

Chris Mayer says the next “megatrend” will be a $41 trillion global infrastructure boom. Urbanization on a massive scale in China and India requires huge construction projects. And this will create huge demand for building materials (like cement and steel) and basic commodities (iron ore, copper and nickel).

Chris says power-grid builder ABB (NYSE:ABB) and road-building equipment maker Astec Industries (NASDAQ:ASTE) are stocks to watch…

This from Whiskey and Gunpowder:

Investors are always on the lookout for the next big thing. You know the sort, a big-picture idea so powerful and long-lasting that you can confidently ride your investments through the ups and downs that market life presents. Frank Holmes, CEO of U.S. Global Investors, calls these “global megatrends” – “sustainable and substantial growth in capital expenditures in any country or sector.”

Holmes offered a couple of past examples. There was the massive growth of infrastructure in the ‘50s and ‘60s, which included the postwar rebuilding of Europe and the massive highway system build-out in the U.S. There was the 1990s megatrend, which led to massive growth in information technology and data communications. And there is the present megatrend: “Unprecedented change in global growth driven by globalization, urbanization and wealth creation, [which] leads to a global infrastructure boom on a massive, intractable scale.”

That’s quite a mouthful, but I believe Holmes is right. Holmes also cites numerous studies – one by Booz Allen Hamilton, as well as ones by World Energy Outlook, the U.S. Department of Transportation, the OECD and a host of other official-sounding places. But the total bill, give or take a few trillion, is about $41 trillion out to 2030 – for water, power, roads and bridges, as well as marine and seaports.

This is your next megatrend. Don’t miss it. We have some ideas at work here, but before we get too ahead of ourselves, let’s look again at some of the key points of the thesis.

First, some mega population shifts. By the end of 2008, half of the world’s people will live in urban areas. Leading the way are some 500 million Chinese and another 540 million Indians. The world’s cities are getting a lot bigger. Beijing alone grew from 12 million to 16 million in the past decade. Plus, there are a lot more souls on the orb than ever — 6 billion of us. Next year, the world’s total urban population alone will exceed the total world population in 1965.

This helps drive economic growth. Asia as a whole, for example, is building five times more homes than the U.S. Incredibly, China alone is constructing 80 percent of them. This, in turn, drives consumption of many commodities, including things you may not think of immediately – like cement. Asia, excluding Japan, uses about 14 times as much cement as the U.S. Asia ex-Japan has also overtaken the U.S. in steel production by a country mile. Asian steel production is more than six times the U.S.’ Electricity consumption is 32 percent more than the U.S.’

I could go on like this for pages…the stats are simply amazing. But I think you get the idea. The industrialization of Asia’s enormous populations has unleashed a torrent of demand for the basics.

There was a lot of discussion at the conference in Vancouver about just how much of Asia’s economic growth begins with U.S. consumers. The answer isn’t clear, as you might expect. But it is clear that trade routes in Asia are flourishing. I’ve talked about the New Silk Road before. It’s one of my favorite themes – the opening of old trade routes that stretch across the Middle East through India and into China. Holmes had a chart that showed that the Asian stretch of that old road is still healthy – despite an economic slowdown in the U.S.

Asian trade is ticking up, even as U.S. exports take a dip. It’s not the only data point, either. Asian retail sales are also trending higher as U.S. retail sales head lower. I think it’s a bit arrogant on the part of some analysts to say that China exists to satisfy our needs for rubber toys and cheap underwear. In their view, a U.S. slowdown dooms most of Asia’s export-driven economies. Plenty of evidence shows that’s not the case, at least not yet.

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How They Spotted Lehman and Merrill Lynch

As the markets were thrown into turmoil, many investors were able to spot the disaster before it happened. As most people try to figure out what went wrong, these guys are laughing all the way to the bank.

How did they see it coming when the rest of you couldn’t? Click here to find out…

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In fact, Asian demand is on the rise for a whole host of goods. In 2008, vehicle sales in Asia ex-Japan are set to exceed those in the U.S. First time that’s ever happened. Sometime in 2008, also for the first time ever, there will be more Internet subscribers in China than in the U.S. I suspect that’s one top spot that the U.S. will never claim again. There are also four times the number of mobile subscribers in Asia than in the U.S.

All of these points come from Holmes presentation, which I think painted an amazing panorama of the truly historic shifts in the global economy.

As fast as the Asian economies are growing, their demand for power is growing faster. You can also expect to see increasing use of aluminum, copper, iron ore, coal and nickel – all basic infrastructure materials.

Holmes offered that to satisfy the global demand for copper, the world would need to mine as much in the next 25 years as it has up to this point in history. These predictions may prove wildly inaccurate. But even if they are only directionally correct, it points to a long bull market in the basics.

I have recommended stocks that are deeply involved in the megatrend of infrastructure. Companies like ABB Ltd. (ABB:NYSE), the world’s largest builder of power grids, and Astec Industries (ASTE:NASDAQ), a leading manufacture of road-building equipment. Plus, I have also recommended companies that own the basic commodities the world will need – copper, oil, natural gas and more.

As we come to learn early in our investing careers, the market seldom moves in a straight line. Years can separate cause and effect. One of the great megatrends in the market today is this idea of infrastructure and all that it entails. So don’t let the recent volatility in the stock market blind you to long-term investment opportunities.

These are the moments to enter the fray, not to run from it.

Source: Where to Invest After the Collapse

This from Fleet Street Invest:

Asian markets got battered this morning.  In fact the regional MSCI Asia Pacific Index benchmark is now at its lowest point since November 2005.

The weakness in Asia’s stock markets this year is a short-term blip though. The region’s underlying growth story remains strong. So the current sell-offs offer a lot of opportunities for investors willing to take a slightly longer term view.

Yesterday the president of the Asian Development Bank predicted that the region would suffer less than expected from the global economic slowdown.

Long-term investment in the region is still strong. So is domestic demand. And Asia’s economies have also not been hit hard by the share market turmoil. Because most of these countries rely on banks to raise capital rather than on the financial markets, Asia is still in very good shape.

Of course the region can’t escape the global slowdown entirely. The ADB currently predicts that Asia’s developing economies will grow at 7.6% this year and 7.8% next year. But it is expected to revise that downward slightly in a report next week. But that compares very nicely with the EU’s predictions for Europe’s economy.

We seem headed for a recession by the end of the year here in Britain. That’s according to the EU’s Commissioner for Economic and Monetary Affairs. And so are Germany and Spain.

The key point here is that the economic growth in Asia remains strong. Fueling that growth will continue support demand for energy. 

This is a dirty business, but it is very profitable

Coal is a ghastly energy source. It is filthy and polluting. But there is also lots and lots of it. And it is cheap. So demand for it is growing fast.

Coal is already the world’s biggest source of energy for electricity production. And between now and 2030 it will be the second fastest growing source of energy after natural gas. A huge part of that growing demand is going to come from developing countries in Asia.

Just look at India. The country used 460 million tonnes of coal last year. But demand could hit 2 billion tonnes a year by 2031 to 2032. Coal is in a long-term bull market as long as the Asian economies keep growing.

P.S. Manraaj says he has a company on his investment watch list that is Asia’s biggest coal producer for power plants. It’s shares have been beaten down along with the rest of the regional market of late, but Manraaj is confident this play will yield huge returns when the short-term blip is over.

Source: How Asia’s Battered Markets Could Open a Massive Profit Opportunity

More from Rude Awakening:

The old-timers of commodity investing like to say the best time to buy commodity companies is when the industry is losing money. The old-timers have scar tissue to prove it. The idea is that miners will start to cut back on production, which gradually leads to a recovery in prices, profits and, ultimately, stock prices.

Such times come around every so often, as when the cost to produce nickel rises above the price at which you can sell nickel. Even the slow wits of the business see that you can’t make that up in volume. To keep digging under such prices is like digging your own financial grave.

So they shake their heads, lick the ends of their pencils and recheck the math. Then they order the mining to stop.

And so we see that nickel prices are down 30% this year and down 60% from mid-2007 highs. All the while, mining costs are rising. So Xstrata says it will shut down its 30,000-metric-ton nickel operation in the Dominican Republic. Russia’s Industrial Metallurgical Holding shuts down 30% of its nickel capacity. BHP Billiton (NYSE:BHP)’s  big Ravensthorpe mine, once a potential big moneymaker, looks as if it might never make any money. The industry shelves expansion projects. And new mines that looked promising suddenly look less so.

It’s not just the nickel industry that suddenly bleeds red ink. Zinc prices are also down more than 60% from their highs. OZ Minerals, one of the largest suppliers of zinc, reported a first-half loss last week in its zinc business.

In fact, it’s been a brutally tough summer all around in commodity land. Through June, commodities were sitting pretty. The first six months of 2008 were the best in 35 years, according to The Economist . In July, it was giveback time, and commodities posted their worst month in 10 years. The carnage has continued into August and September.

Commodity stock prices have fallen even further, as investors in the sector know too well. Many stocks have not merely stumbled, they’ve collapsed altogether.

But if you can’t buy commodity stocks now, you may never be able to pull the trigger.

The long-term thesis behind the names seems firmly in place. It has a lot to do with China and India and the rest of the emerging market crowd — but especially China.

For example, China represents almost all of the new growth in copper demand. Across the commodity spectrum, what happens in China makes big waves across the globe.

So far, industry has met that demand, which is why prices have been dropping. But challenges remain on the supply side — declines in the quality of mining seams, shortages of equipment and skilled people, power shortages and bottlenecks in distribution.

The conclusion of all this is not particularly novel, but sometimes forgotten. The fate of the commodity investors hinges largely on those rapidly growing emerging markets. China is the lead pony, though, and the main one to watch.

Stocks in the commodity sector might continue sliding for a while longer, but even so, long-term investors might want to consider dipping a non-essential digit into the water.

Source: Did You Notice – Buy When There’s Blood in the Mine