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Jim Jubak's Macro Trends

Below you will find an article from Jim Jubak as MSN detailing his view of the 10 macro trends that will make portfolios money over the next decade.

I am including it because if fairly closely mirrors my own view of how things are currently.

Here is a quote that accurately sums up what has happened in the last month: "In a bear market, everything goes down. Good and bad stocks plunge. In fact, during the latter stages of a bear market, good stocks fall hardest. They're the only things that have kept any value, and investors desperate to raise cash dump the best of what is left in their portfolios to head off doom. "

Here is a quote that accurately sums up what will happen once the crisis is past: "In the long term, you want to buy. Not everything, of course, but certainly the great stocks that have the best long-term prospects. You want to own the winners that have long-term, decade-long trends running in their favor. You want to hold on to those beneficiaries of long-term trends that you already own."

I know its hard, but by following that game plan we have detailed in this blog and in other commentaries to clients (our game plan is quite similar to his) portfolios will recover and profit handsomely in the long-term.

Mark

Jubak's Journal 10/21/2008 12:01 AM ET

10 trends for long-term gains

What's the fastest way to restore your wounded portfolio? Put money into stocks that give you exposure to these trends. And there are some changes to the 50 Best Stocks in the World.

By Jim Jubak

The short term and the long term are often at war in investing.

Especially in a bear market like the one that started last October and still keeps its jaws firmly clamped on our portfolios.

In the short term, you want to sell. Everything. And that's not an irrational desire. In a bear market, everything goes down. Good and bad stocks plunge. In fact, during the latter stages of a bear market, good stocks fall hardest. They're the only things that have kept any value, and investors desperate to raise cash dump the best of what is left in their portfolios to head off doom.

In the long term, you want to buy. Not everything, of course, but certainly the great stocks that have the best long-term prospects. You want to own the winners that have long-term, decade-long trends running in their favor. You want to hold on to those beneficiaries of long-term trends that you already own.

Perversely, the number of such stocks you want to hold is directly proportional to the hard work and foresight you've expended on your portfolio. The clearer your vision of the future, the more long-term winners you owned before the bear struck — and the greater the punishment you're taking now in your efforts to hold these positions.

There's no easy way to reconcile the short-term and long-term views at a time like this. The short-term losses are real, yet so are the long-term opportunities. The best we can do is to keep a clear eye on those long-term opportunities. The more exactly and dispassionately we can identify and value those long-term opportunities, the better the chance we have to figure out whether it's worth holding on through the short-term pain.

In today's column, I list the 10 biggest long-term trends I've been able to identify. Owning stocks that give you exposure to these trends is the best way I can think of to speed the recovery of your portfolio once this bear market is over.

The Jubak trends

These 10 trends — and the 50 stocks that give the best chance to profit from them — are the subject of my new book, "The Jubak Picks," due out from Crown Publishing Group in December. The approach has something in common with that of the 50 Best Stocks in the World portfolio I've kept on MSN Money for the past 10 years, and you'll recognize many of the stocks.

But the book goes a big step further: By giving you a full explanation of each of the 10 trends and then explaining how my picks fit into those trends, I think I've made the system a whole lot more transparent. You won't have to take my word for it anymore that these 50 stocks are the best in the world. Instead, you'll have a fully fleshed-out argument for why I believe they are — so you'll be able to agree or disagree.

Consider today a kind of down payment on the fuller arguments in my book. I'll give you the trends in capsule form, but you'll have to wait until the book comes out for the full argument — and its full list of 50 stocks. Attached to today's column you'll find my final update to the 50 Best Stocks in the World. In January, I'll replace that portfolio with the stocks in my book. The new portfolio will include some bells and whistles that will make it more useful to you and easier for me to update.

Enough of the preview. Now on with the show.

As we watch the value of our portfolios plunge, it feels like the world we once knew is being swept away. And it's true, to an extent. Icons of the economy vanish overnight. Companies such as Bear Stearns, Lehman Bros. (LEHMQ, news, msgs), Wachovia (WB, news, msgs) and Washington Mutual (WAMUQ, news, msgs) that were landmarks in the economic landscape are now just anecdotes in a tale of destruction.

But the extent of the destruction is smaller than it seems while we're in the middle of it. When the panic has passed and we can look out at the world with something like sanity again, what will be most striking is how much the global economy after the bear market resembles the global economy before the bear.

Oh, sure, thanks to the financial crisis and the bear market, money will be more expensive and harder to raise, and that will cut into company profit margins. Volatility will almost certainly be higher as the financial markets soar and plunge while the world's central banks try to figure out how to take excess cash out of the system without creating another crash. The recession will be painful and extended.

Video on MSN Money

Oil © Comstock/Corbis
Keys to the economic turnaround
Want to know where the global economy and sto
ck markets are headed? Watch China's GPD growth and OPEC's decision on how much less oil to pump, MSN Money's Jim Jubak says.

But the big trends driving the global economy will still be with us. For example, the world is still aging — rapidly. The bear market hasn't changed that. Nor has it diminished the need for retirement savings (although it has diminished the amount of retirement savings) or the profits to be made from managing that money.

The bear market is just a blip in the rise of the world's developing economies and the huge demand for everything from oil to sunglasses created by the growth of a middle class in China, India, Brazil and the rest of the gang. The bear market hasn't made oil or copper easier to find or cheaper to produce. In fact, by restricting capital, it may have guaranteed tighter supplies over the coming decade. (See my Oct. 17 column, "Be ready for the commodity comeback.") And it hasn't changed supply and demand in the agricultural sector, which promises higher food prices and increased demand for corn, wheat, pork and chicken.

Continued: 10 long-term trends

Here are the 10 long-term trends that I think will drive the global economy — and the profits in your portfolio — over the next decade and more. In my book, you'll find a chapter devoted to each:

  • Go where the growth is, and that means putting some money into the developing economies of China, India and Brazil.
  • The rise of the global blue chips. These companies are emerging from the world's developing economies to challenge Coca-Cola (KO, news, msgs), IBM (IBM, news, msgs) and Wal-Mart (WMT, news, msgs) on the global stage.
  • The world is getting wealthier and older at the same time. So who's going to manage all that retirement money?
  • Inflation is beginning a new era. After 20 years of low inflation, the world is headed for a decade of constantly rising prices.
  • The world may not be running out of oil — then again, it might be — but it sure has run out of cheap oil. How to make back in the stock market what you pay at the pump and more.
  • The commodity crunch. Developing economies are demanding more iron, more copper, more nickel, more coal — and that has set off a boom for mining companies and the companies that equip them.
  • Food is the new oil. It's turning out to be as hard to increase food supplies as it is to find new oil. We're looking at a decade of higher food prices driven by competition with biofuels and the fact that people in the developing world will eat more pigs, chickens and other sources of protein as their incomes rise.
  • We've delayed and dragged our feet, but environmental problems have become so pressing that it's time to save the world and make a buck.
  • The technology sector doesn't look anything like it used to, but fortunately the same rules still apply to what I call "hidden tech" stocks.
  • It used to be that stocks and bonds from the United States got a premium in the financial markets just for showing up. Investors were willing to pay more because the U.S. markets were so stable. They're still among the world's best in that category, but now they've got company from Canada, Australia and, of all places, Brazil.