How to make lots of money in 2010

The world’s investment brains are predicting that the Chinese miracle will continue for another year at least. Although Chinese exports were hit by the global financial crisis, the government has moved to promote domestic consumption to sustain growth – not a bad tactic given the 1.4 billion residents. This will come in the form of tax rebates on expensive items such as cars and household appliances, sales of which suffered as real estate costs absorbed the majority of China’s middle class income. GDP is expected to grow by 9 per cent in 2010, with tightening monetary policy to rein in inflation. As long as investors are wary of the housing bubble, this is as safe a bet as an emerging market gets.

 

This sector has leaped ahead in the fourth quarter of 2009, largely based on increasing demand from manufacturers in China – which augurs well for both mining stocks and Chinese equities for the year ahead. Rio Tinto is the granddaddy of all mining concerns, and have seen their shares leap from £2.51 per share on the British FTSE index in early October to £3.34 per share by the end of the year. That’s 33 per cent. BHP Billiton is another big player here. You should tread carefully, however, with any concern that is too specific to one mineral – like copper producer Kazakhmys – since their fortunes could be volatile as the uncertainties about the global economy will emerge from the recession. “Molybdenum”, a key mineral in steel alloys, may be the magic word.

 

It really doesn’t look good for the UK economy. It looks like it will be the slowest of the European economies to emerge from recession, with growth static throughout 2010, mammoth government printing of money to support the banks looks set to create inflationary pressures from Q3 onwards. This means that the Pound, which was at $2 for much of 2007, looks set to dip to around $1.40 at some point in 2010. With a current pricing around $1.60, this should offer great positions through to the end of the year for global Forex trading – which is, of course, what helped Warren Buffett make a chunk 

of cash in the early 1990s.

 

Considering the DOW Jones Industrial Average opened the year at 6,470 and closed it at over 10,550, 2009 was a year in which a lot of people made a lot of money. Of course, much of the gains came on the back of cash pumped into the biceps of the American economy by the government – and as that money is pulled back, and with no job growth replacing it, the DOW will start to tail back towards 9,000 (or lower) by the 

year-end. April might be decision time. 

 

With 32 teams and their fans descending on South Africa in June for the 19th FIFA World Cup, and with the government spending billions in capital infrastructure projects, the early months of 2010 might be a decent time to back South African equities. It is probably no more than a short position until the full effects of the tournament are known, but tourism, media and financial services will benefit from visitor numbers and increased employment. Global investment journal Investor Trip sees Old Mutual Bank as well placed to take advantage.