Keep your eye on the energy ball. It is the race for real assets which promises investors the best long-term security and gains. For instance, we read in a Bloomberg article that ABB (NYSE: ABB), “the world’s largest builder of electricity networks, may spend several billion dollars on acquisitions in the next twelve months…The Swiss company plans to expand unites that make transformers and power products, as well as drives, motors and automation systems,” the company’s CEO Fred Kindle said in an interview. “Emerging markets are very interesting,” Kindle says, especially Asia. “We are very profitable in China and in India…The growth there is enormous.”
Recall that in its recent annual World Energy Outlook, the International Energy Agency upped its estimate of global electricity investment needed from $17 to $20 trillion (in U.S. dollars.) So we put it to you straight: which do you think is a better bet in 2007: equity markets driven by debt and leverage or energy markets driven by demand, an ageing infrastructure and emergence of 3.2 billion new energy users on to the world economic stage?
You can probably tell where we stand, based on our focus on energy, infrastructure, and mining service markets. And we suppose we find ourselves agreeing with Geoff Kinney who writes in today’s Financial Review, “But while Russia’s actions to take back into Russian public ownership what it considers to be strategically vital resources, which were virtually given away after the collapse of the Soviet Union, has become a matter of concerned debate on the international political agenda, the Russian move appears to be consistent with the trend in emerging economies of seeking to gain a powerful stake in the fight for control of vital global commodities.”
“Russia sits on the world’s largest reserves of oil and gas. Its move to secure control of the ownership of these reserves is not defensive, as Europe’s quest for national champions would be. It is a move to use these reserves to gain huge leverage in the world economy-and a big voice in world affairs…China and India and Brazil are seeking to do a similar thing with their new-found wealth to acquire stakes in the developed economies. This is truly a new world order.”
For new orders to emerge, old ones must be destroyed.