Rob Lutts, Cabot Money Management


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Rob Lutts, President and CIO of Cabot Money Management gives insights on emerging markets such as China, Brazil and India.

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Rob Lutts, Cabot Money Management

  1. 1. CAPITALIZING ON A CHANGING WORLD Emerging Market Opportunities ROBERT T. LUTTS PRESIDENT, CHIEF INVESTMENT OFFICER Salem State College Enterprise Center April 1, 2010
  2. 2. A CHANGING WORLD “ It is not the strongest of the species that survives, nor is it the most intelligent, it is the one that is the most adaptable to change.” – Charles Darwin
  3. 3. THREE CRITICAL GLOBAL CHANGES <ul><ul><li>Three Billion New Capitalists. Power and wealth is moving from West to East . Expect this trend to continue. We believe emerging middle class of China, India, Brazil offer great growth opportunities. </li></ul></ul><ul><ul><li>Competition for Energy – A new energy mandate. </li></ul></ul><ul><ul><li>New Wealth Developing – Profit building opportunities have never been better in these economies. </li></ul></ul>
  4. 4. EMERGING MIDDLE CLASS OF EMERGING MARKETS <ul><ul><li>Positive Trends – could last decades </li></ul></ul><ul><ul><li>Favorite Growth Sectors </li></ul></ul><ul><ul><ul><li>Automobiles </li></ul></ul></ul><ul><ul><ul><li>Financial Services / Insurance </li></ul></ul></ul><ul><ul><ul><li>Medical Use </li></ul></ul></ul><ul><ul><ul><li>Internet Use </li></ul></ul></ul><ul><ul><ul><li>Alternative Energy </li></ul></ul></ul>
  5. 5. HOW FAST IS CHINA GROWING? <ul><li>China Internet Growth – In 2002, China had 50 million internet users. In 2005, it passed 100 million users and now, only five years later, China has over 420 million internet users. China adds about 50 million internet users per year! </li></ul><ul><ul><li>Penetration Rate: 70% in USA (220 million of 300 million) versus only 32% (420 million of 1.3 Billion) in China. </li></ul></ul><ul><li>Mobile Cell phone users are signing up at a rate of 6 million new users a month. Today China has over 600 million mobile cell customers; up from only 10 million in 1997. China has the largest cell phone market in the world. </li></ul>
  6. 9. EXCEPTIONAL OPPORTUNITY IN EMERGING ECONOMIES Source: MacroMavens, June 2009 % of World Market Cap as a % of World GDP United Kingdom 2.59% United States 2.08% Japan 1.69% Emerging Economies 0.25%
  7. 10. Cabot Money Management, Inc. | 216 Essex Street | Salem, MA 01970 | 978.745.9233 |
  8. 11. THE CHINA OPPORTUNITY <ul><li>1995 </li></ul>2007 Shanghai, China
  9. 12. Cabot Money Management, Inc. | 216 Essex Street | Salem, MA 01970 | 978.745.9233 | By 2020, Asia is expected to have more than 1.2 billion population with a GDP per capita greater than $5,000 USD. This is five times the size of the US middle class!
  10. 13. CHINA: TOP SECTORS FOR GROWTH <ul><li>Financial Services </li></ul><ul><li>Property Development and Management </li></ul><ul><li>Internet Applications </li></ul><ul><li>Education </li></ul><ul><li>Infrastructure Growth </li></ul><ul><li>Consumer Spending, Travel, Advertising </li></ul>
  11. 14. CHINA: OPPORTUNITY AND RISK <ul><ul><ul><li>Where the USA was in 1940’s. </li></ul></ul></ul><ul><ul><ul><li>We expect Outperformance in China for many years. </li></ul></ul></ul><ul><ul><ul><li>2003 -2010 GDP Per Capita $1,000 to $3,000. We Expect 2010-2017 GDP per Capita will double again to $6,000. </li></ul></ul></ul><ul><ul><ul><li>Volatility – Will Continue to Be High. Skepticism among investors will be high as well. </li></ul></ul></ul>
  12. 22. Brazil <ul><ul><ul><li>Expected growth rates: 5-7% annually for coming decade </li></ul></ul></ul><ul><ul><ul><li>Inflation now under control : Approximately 4% range. (inflation of the 1990s was terrible – 15 years ago Brazil had inflation of 760 percent for five years) </li></ul></ul></ul><ul><ul><ul><li>Drivers of Brazil growth – Exports of energy, steel and mining resources, beef and poultry. China and other emerging and developed economies drive demand. </li></ul></ul></ul><ul><ul><ul><li>100 million middle class – Incomes in this segment have grown 9 percent per year. This is expected to continue. </li></ul></ul></ul>
  13. 23. Brazil: Challenges <ul><ul><ul><li>Infrastructure problems – inferior in many areas. Transportation, airports, highways all need significant improvements. </li></ul></ul></ul><ul><ul><ul><li>Corporate governances: improving, but still problematic. Electricity Co. in Rio – 42% loss rate (unbelievable!). </li></ul></ul></ul><ul><ul><ul><li>Taxation – problematic. Consumption taxes in some areas too high. </li></ul></ul></ul><ul><ul><ul><li>Top sectors: Homebuilding, banks, electric utility, energy. </li></ul></ul></ul>
  14. 24. Summary <ul><ul><ul><li>Emerging Economies – Opportunities are significant! </li></ul></ul></ul><ul><ul><ul><li>Risks are higher too: legal, business practices, corruption and bad faith dealing. </li></ul></ul></ul><ul><ul><ul><li>To protect yourself: Seek professional advice, legal and business partners with solid record of success. </li></ul></ul></ul><ul><ul><ul><li>Wealth and Power will continue to shift from the west to the east in the coming decades. </li></ul></ul></ul>
  15. 25. <ul><li>For copies of this presentation or information on Wealth Management Services contact: </li></ul><ul><li>Robert T. Lutts, President and Chief Investment Officer </li></ul><ul><li>Cabot Money Management, Inc. </li></ul><ul><li>216 Essex Street, Salem Massachusetts </li></ul><ul><li>225 Franklin Street, Boston, Massachusetts </li></ul><ul><li> </li></ul><ul><li>1-800-888-6468 </li></ul>
  16. 26. QUESTIONS Thank you for joining us today.