The Next Gold Rush: Emerging Markets?
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When you look at certain parts of our economy, you just have to realize that they're going to be more and more affected by things outside the United States. So if I'm right, in India's a major economy in 10 years, India's economy and China's economy is completely de-linked to the US dollar. They don't want to be.

part of the US dollar ecosystem at all, right? So that's all I'm saying. So there's going to be another global currency that people want to store value in, and one of those is gold.

I'm Mary Long, and that's Jan van Eck. He's the CEO of Van Eck, an investment management firm focused on mutual funds, ETFs, and more. They've got $100 billion in assets under management. My colleague, Ricky Mulvey, caught up with Jan about the multi-decade trends Jan's got his eyes on, government spending, de-dollarization, and a bit of a debate about the benefits of gold, plus what goes into Jan's hated things bucket.

So Jan, first question is I think a foolish question and something you like to focus on is multi-decade trends, not weekly or quarterly trends. And that's something we like to think about as being long-term investors holding on to stocks and investments for a minimum of three years and hopefully much, much longer. So as you're thinking about the markets, not even right now, but just in general, what are the multi-decade trends that you're paying close attention to that you think investors should watch?

Yeah, thank you. I mean, our firm's been around for 70 years, and we've been through so many different market cycles. And a lot of attention in the media and whatnot is focused on, well, what's happening today with interest rate cuts or tomorrow or next week or even this year. And one of the things I'd like to point out is there are actually some very long-term trends that should affect your portfolio thinking. And I'll just give you a couple examples. So, first of all, the rise of China.

Right. A major country moves towards capitalism. It creates a whole new asset class called emerging markets. Right. So that's something that you would want to have included in your portfolio is one example. So that's how I look at these longer term trends.

Taking a multi-decade view, I think when we're here in 10 years looking back, one thing that will strike us is that the U.S. government spending has been out of control. It's been at historic highs, never in U.S. history, never in almost 250 years.

have we spent this much more money than we're taking in in tax receipts? And I think that has implications for the markets. The second major trend that I'd like to look at going around the world is we have the emergence of a fourth major consumer market in the form of India. So India's growth rate's got the population, but it's got the pro-business policies that should make it as big as Europe in 10 years.

Meaning when we're sitting here in 10 years, we will be talking about the Indian economy a lot more than we do. And stocks are reflections of the value of companies. And companies are more likely to become valuable if they have a big consumer market. So we're going to go to a fourth. We have the U.S., we have China, we have Europe, and then we'll add India to that. And I think investors can take advantage of that now.

So we can stay on emerging markets for a minute. You mentioned China, and that's something that I'm going to push back on because you said that investors would have wanted to pay attention to it. I just looked up the iShares China ETF. And

And going back from 2011 to today, April 1st, 2011, about $53 for a share of the ETF. Today, it's $55. So there is maybe a benefit to staying within your circle of competence. And investors, there have been ups and downs with that. But those who have held on for a decade, which is well within the long-term thinking here, have not been rewarded for investing in China, particularly American investors. So I don't know.

I'll let you go there or we can go more emerging markets. No, no. I mean, listen, probably the most important component besides identifying those big factors is also getting the timing right. Right. So I was talking, if you look at China from the emergence into kind of, I would call it a market-based economy in the early 1990s, for the next 20 years, you made a lot more money than you made in the U.S. Now, you're absolutely right.

Politics matters. When I say the three things I look at outside the financial markets, politics, economics, and technology, are there major events in any of them? The politics in China changed dramatically about 10 years ago with Xi Jinping. And absolutely, China no longer has what I call an equity culture where shareholders can make a good return and corporate profitability grow.

Then we can talk about India then. I know you recently got back from a trip there, and this is a spot. I know you have a couple of ETFs focused on India, something for our listeners to be aware of. We always want to know where our biases are whenever you're listening to any piece of media, and that includes myself as I talk about stocks I own on the show, but we also have some ETFs. I know you have some different emerging markets ETFs, but give us the pitch. You got back from India. What did you see?

Well, actually, it's easier to talk about something far away than it is sometimes when you get close up, because when you actually go there, you realize how much you really don't know. But I did confirm, I would say, my major thesis about India. Its growth rate seems sustainable. So that's number one. And its political system, they've done a lot of economic reforms, like a lot of emerging markets,

They have now -- everyone is digitized. So, it used to be in your typical emerging markets country, only half or less of the population even had a bank account. Now, everyone's got a Huawei phone for $100, and you're seeing participation in the digital economy up to, like, 90% of a population, even in Peru, which I was in recently as well.

So India has created this digitized identity system. They've also reduced, eliminated taxes between different provinces. So you have a true national economy. And so you basically have a lot of infrastructure spending. You have all the ingredients for sustained long-term economic growth. So I met a lot of companies there that are profiting from it. There's a lot of failures as well. And so I just think

Also, as an ETF firm, VanEck thinks about indices very closely, and I just don't think international equity indices per se are how you should invest.

And so, I just think most things are noise and you want to ignore them. But I do think that the emergence of India will be something. And at some point, maybe in five years or 10 years, you want to kind of sell that position, right? I'm not saying it's a forever position, but I can't see their returns also, by the way, Ricky, since you're like poking me about China, massive.

match that of the United States. So if you look at the Indian stock market against the U.S. stock market over the last 10, 20, five years, we've actually matched. So I know we all feel burned by China, but India at least is different. And they have a lot of companies wanting to go public. They go about 200 to 400 companies a year go public in India.

I appreciate the transparency there. And also, you know, maybe looking for individual companies versus indices, something we talk a lot about on the show is the Lynchian style of investing. Look at where you spend money, look at the products that you use and use that as an entryway into the market. You might notice something that, to be frank, Wall Street or even asset managers may not notice. For Indian companies in particular, for international equities, that becomes tremendously more difficult for an average investor. So it

If they're not going to index, what are some of the screeners that an individual investor can do to start looking for Indian companies, that kind of thing? Two things I would say. Number one is, in a way, there has only been one big investment theme over the last 30 years. And we

We have the emergence of the Internet, and you wanted to own the companies that stand between the consumer and the Internet. That's effectively the Mag7, right? Some may be social networks, some may be streaming or whatever. In India, there are basically two companies that stand between the Indian consumer and the Internet, and those are the two mobile phone companies. Now, you may say, Jan, who cares?

They're selling handsets or subscriptions like Verizon. No, they're also in the streaming infrastructure. They get the game of how value was created in the United States. So, like Disney, for example, tried to go on their own, they couldn't. They had to do a deal with these phone companies. These phone companies have AI compute platforms. That is the way to, in my way, play the growth of the Indian consumer market as a simple shorthand in terms of equities.

One other way that we look at it, one of my colleagues looks at just the book value accretion. Why are Indian companies returning to shareholders the way the U.S. market has? Because their book value is growing, meaning they're making profits, they're reinvesting, and without magic dust, they are just saving more money over time, and actually their total returns

you know, kind of reflect very much their growth in overall book value. So, that's something that we look at as well, even though book value in the United States is kind of an outdated concept, right, because tech companies don't have the kind of manufacturing capital infrastructure that you would normally associate with book value. But in India, it's been a good shorthand so far.

So look for book value and also look for the dominant players. I know occasionally we get a lot of listeners who are driving in their car who might be working out. Some of them have their notebooks in front of them. Are you able to say what the two companies are you were referring to? One is nestled within a big conglomerate called Reliance. So it's Reliance Geo. And the other is BARTI, B-H-A-R-T-I, Airtel. But

But we have an Indian sort of tech economy, if you will, the K-Web of India. So they're both in big holdings in that ETF. The flip side of this is the United States. I know you've written about and thought quite a lot about the U.S. budget deficit. We have another budget coming out in the one big, beautiful bill, I believe we're calling it. I think this plays into de-dollarization. So why is the U.S. budget deficit a macro reality that investors need to face, you think?

Again, you know, if you look at the entirety of U.S. history, we've never spent this amount of money. And I think looking back over the last couple of years, it explains we talk about American exceptionalism. I don't know if you've heard of that phrase, but everyone's the U.S. equity market so great. The U.S. economy is so great. Well, it was only great because we were spending an unbelievable amount of money out of Washington, D.C. The analogy I put is we had two feet on the gas pedal.

And of course, politicians love to spend money. But, you know, at some point, the markets are just not going to accept it anymore.

I say a couple of framing things. Number one, we only really made hard political decisions the year after a presidential election. So that's number one. So we have 2025 to fix things, maybe 2029 before we actually default on our debt. And now people are saying that's crazy. That's like an emerging market banana republic. Well, no.

In 2033, Ricky, Social Security is going to go bankrupt. What that technically means is that they're going to reduce the payout to 80 cents on the dollar. And you hear no talk in 2025 about fixing Social Security. It has to be done on a bipartisan basis. So we are literally slow walking into a default of our government's obligations to

to elderly retired people, right? So now will that manifest in other ways in the markets? I just don't know. The choice effectively is go that path or cut the budget deficit. By cutting the budget deficit, I'll call it doge cubed.

that would cause a slowdown in the economy and a lot of turbulence. Now, I will say, I don't think there's anything investable out of this analysis. But what I do say is there's a real risk that the markets have even more indigestion than we saw with this tariff tantrum. And in

In that case, VanEck has been known for starting the first gold fund in the United States. There are not many assets that you want to own when the rest of your portfolio is sort of having trouble with that kind of risk. But gold, and I would argue Bitcoin as well, are two of those assets. I'd push back on a few of those things there. I mean, I think Social Security is a major problem. But as you said, if you're able to pay out 80% of your obligations, that's not bankrupt. That's not a complete...

inability to pay out any of your obligations. And yeah, they'll probably have to raise the retirement age, cut spending, or a mix of the two. And then the second thing that I want to double click on is I don't think it's just the spending environment that created American exceptionalism. It's also a regulatory environment.

It's also a history of capitalism. Great universities in this country that have allowed the Mag 7 to blossom. And while Tesla, for example, has benefited from a tremendous amount of government subsidies, I don't want to discount that. I don't know if it's necessarily fair to say if the entire Mag 7, for example, is only the beneficiary of

government spending. And even if things slow down, we still have some of the most dominant companies in the world by market cap, by power, and by consumer demand. Sorry, I'm not in any way arguing against the brilliance of the management and the technology of those companies. I'm just trying to say that market cycles depend on... I try to take the personality out of it. And I look at fiscal policy, how much money is the government spending?

and monetary policy. Is the Fed expanding money supply or shrinking money supply? Generally, right, with investors we say you just can't predict any of this kind of stuff. And our historical perspective reminds us that things can change super quickly in the markets and the markets are great discounting mechanism. But I do think if you're looking at sometimes fiscal policy and monetary policies are flashing warning signals.

And I'm just saying that the amount of spending that we're doing, if you compare us against other countries, those countries have not gone on to do well, meaning their equity markets have really underperformed. Now, I'm saying I'm not giving you that that's an outcome that is with any probability. Maybe it's a low probability like 10%. But when you put your portfolio together, you want to think about all the potential outcomes individually.

And to make sure that whatever your assessment is, that you're prepared for that. And that's what I'm saying. I'm saying be prepared for either an economic slowdown if they're able to slow down spending or some kind of turbulence with the 10-year interest rates if the market feels like spending is growing too fast.

Oh, that's completely fair. And as someone who is in his late 20s and pays taxes, the future of Social Security and government debt is heavily on my mind. I mean, I would fully expect taxes to increase in the future, and I would not expect the benefit that I've paid into Social Security to come out to me in my later years. Not that you want to worry about that in your late 20s, to be honest. I can't spend too much time worrying about my Social Security check.

Let's talk de-dollarization. But can I interrupt? I do think intergenerational equity is a really important issue here. It's really not okay for one generation to pile up an unbelievable amount of debt and then put the tax burden and reduced benefits on another generation. And I think, frankly, people in their 20s should be out there with pitchforks.

I'll vote, but- This is really unfair to you. You have not felt all the consequences yet of these policies, I would argue. I would completely agree. I'll vote, but I may leave my pitchfork in the garden shed. I don't know if I'm ready to quite grab that yet. And I appreciate you saying that. It's something that, yeah, I do think about. Let's talk about de-dollarization too. That's another big force. And

especially around Liberation Day, I kept seeing headlines and stories in the financial media about all of these asset managers. They're getting out of US stocks and they're going into international equities. And immediately after those stories, US equities bounced back up, which I always find curious. But I do think there's a broader story here, which is de-dollarization. I know you think that part of that is more people investing in physical assets like gold. But

But from your end in the institutional money realm, how are you seeing de-dollarization, this maybe lower demand across the globe for U.S. dollars play out?

Yeah, I mean, again, if you look at the world, the United States share of GDP is shrinking, which is fine, right? We're still growing, to your point, and doing fine. But when you look at certain parts of our economy, you just have to realize that they're going to be more and more affected by things outside the United States.

So if I'm right, and India is a major economy in 10 years, India's economy and China's economy is completely de-linked to the U.S. dollar. They don't want to be part of the U.S. dollar ecosystem at all. Right. So that's all I'm saying. So there's got to be another global currency that people want to store value in. And one of those is gold.

So, foreign central banks and investors around the world, there really is no other kind of fallback reserve currency. It's not the Euro, because growth is not high enough in Europe, it's not the Japanese Yen, it's not the renminbi for political reasons, and it's not going to be the Indian rupee, they don't even aspire to that. So, how is that investable for your listener? It's just another cause of persistent secular demand for gold.

that you haven't seen as much over the past couple of decades because people were happy to live in a more US dollar dominant ecosystem.

Are you, so just to clarify your question, are you saying that, you know, there's trillions of dollars, I think a day that are transacted in dollars outside of the United States. Are you presenting the case that more of those will be like transacted in gold or Bitcoin? I understand them as stores of value, but both of those have tremendous issues as actual currency.

No, absolutely. That's not really the argument that I'm making. I agree that the dollar is still very dominant in trade and probably will continue to be. But even if you look over the last 50 years, the dollar hasn't always been strong. The dollar was strong recently because our economic growth was high relative to China, which basically went through a recession, and Europe, which went through a war and recession.

I'm just saying that the value of the dollar declined pretty strongly against European currencies. That's why we had to get off the gold link in 1971. It's just not that the U.S., because we're a big economy, has a right to a strong currency. I'm just saying if you're a U.S. investor...

It has hurt to be invested outside the United States because your non-U.S. investments have gone down because the dollar has been so strong. Now, if you look at your portfolio, you're going to be smiling when you look at your international holdings more likely. And you're going to be smiling if you own any gold. So one of the cases to own gold and Bitcoin is the fact that there's a finite supply of it.

And one of the knocks against it is that these are investments that don't generate necessarily cash flow. So it's more of a store of value than an investment. An investment we think of as a instrument that is tied to a entity that has the potential to generate cash value. It could be a company or it could even be your home, which potentially you could rent out. So when I think about this as well, how about also the case, and sorry if this is from Les Field, equities are

stocks that are heavily buying back shares. To me, that seems to fulfill both of the things that you're talking about, which is you have a restricted number of things, which is a company that's responsibly handling its share count. And it's also tied to an entity that is able to generate cash flow either today or in the future, probably today if they're buying back shares.

Yeah, a couple of things. First of all, absolutely, there are the Warren Buffett investing approach, which is equities are the only asset class you want to own, right? Now, I will just say, if you look at the, I'll call it three most major macro asset classes, equities, bonds, and gold, it just surprises most people that gold has outperformed bonds over a multi-decade time period, because most Americans don't really think of

a store of value investment like gold or Bitcoin. I think

The reason one would add it into your portfolio is that it doesn't hurt that much in terms of your total return, and it gives you some kind of protection or smooths out your overall ride in portfolios if you look at history. Now, we don't know what the market cycles are going to be, but in the 1970s, the equity market was not a fun place to be, and gold really saved people's, especially gold shares, really saved people's portfolios.

right? During the Depression, obviously, many bonds defaulted and a lot of stocks lost value. Gold actually kind of held its value. So, you know, listen, I'm not calling for depression or necessarily a long-term recession, but we do have the capacity to have economic slowdowns in our economy. I agree they won't be as dramatic as when we were in an agricultural economy or more of a manufacturing economy. But I think

when people look at their portfolios, they don't like seeing a 401 statement that's down 15%. I mean, you referenced April and that wasn't even that dramatic a stock decline. So, for those investors that don't like those huge shocks, that's when you want to add to store value with limited supply, to your point.

But I think the problem with gold right now is you are playing a price game. And over the past couple of years, gold has shot up tremendously. But there's periods of five, 10 years where the value of it stays flat. So I mean, I wasn't even going to say for an investor like me, for me personally, I look at gold and think, wow, that's not really an asset I want to own after it shoots up in value, especially if I am on a longer term time horizon. What say you to that, Jan?

A lot of people miss the best investments because they're worried that something has gone up too much.

Fair enough. I get it. What I try to do again, Ricky, is say, just remember, India is growing at 6% to 8% a year. The U.S. is becoming less important in the world, if I'm right. Therefore, the demand for dollars in the world ecosystem is going to be a little bit less.

Maybe if you don't like my argument about gold, which I can hear, maybe you'll believe that maybe the dollar won't be as strong as it has been. So you'll be a little bit happier owning tech companies and other great growth companies outside the United States.

So to be clear, it's not that I like it or don't like it. I like being able to test out ideas with people who really know their stuff. It's something I'm considering. And anytime you're buying something, especially for the listeners, you know that someone's selling that to you. And I think it's good to understand why. No, no, listen, I think it's a really good point. I myself...

in my second quarter outlook said, listen, gold has been a little frothy here. It declined, just so you know. So, I think it benefited a little bit, I'll call it artificially, from this tariff tantrum, Ricky. It did go down like 15% when that, you know, as the U.S. equity markets rebounded. So, I think some of the froth is off. We've seen a correction. So, maybe, you know, not to be too short term, but maybe you want to look at it again.

Let's talk about semiconductors, which have also kind of been in a correction. How do you see the semiconductor landscape right now? So short answer, I like it as one of the growth plays. Just to take a step back,

Last summer, at the sort of, I'll call it the height of NVIDIA frenzy, we did publish research that said, basically, get out. And the reason was, if you looked at large cap growth stocks versus large cap value stocks, again, over a multi-decade time period, the only time they had been so out of balance was in 1999, at the peak of the internet boom.

So growth stocks were sending what I would say sell strong sell signals or at least don't overweight signals in June and July of last year. NVIDIA was selling, if you recall,

50 times revenue, which is just a sentence that should not be said on polite podcasts. Okay, valuations have come down dramatically. It is a good company. It's got a lot of demand trajectory. And I think the last I looked at the PE ratio forward PE was something in the 20s. That's not crazy for a strongly growing company. So I feel much more comfortable having it in portfolios.

A top dog, if you will. And as we wrap up, I know that you have a bucket in your portfolio for hated things, assets that are just hated by the market. And that's a good place for investors to look. I'm going to paraphrase it, but Morgan Housel, who wrote The Psychology of Money, says, you make money as a contrarian investor, but the problem is the crowd is usually right.

So what is in your bucket of hated things right now that you think the market is despising, spitting on, kicking?

So I will answer your question in a second. So the thing that people hated last year was China, which you've already brought up, which investors, it'll take another five years for us to forget how much we absolutely hated China last summer. And if you look at like a chart of Alibaba, right, it was just completely flatlined. So my definition of hated is China

dead and forgotten, right? Like you don't even want to talk about it. So I put Brazil in that category now.

It was a favorite of a lot of people a year ago because it had fallen so much. So, order of magnitude, their interest rates are like 12% and inflation is like 4%. So, you're getting this 8% real yield. So, emerging markets, bond investors and equity investors just loved Brazil. And what happened last year?

They lost more money. So, now they can't stand talking about it. It meets my condition as like, even a polite company, you don't want to talk about being overweight Brazil. So, that's something that's caught my attention. I think China is kind of emerging from that. So, I would put Brazil as the kind of most hated investment right now. Probably commodity investments generally, but they've been hated for so long.

it's kind of hard to identify a particular catalyst. But sometimes you buy these trash can kind of investments just because you don't think there's a lot of downside. Like some things I was looking at earlier today, alternative energy investments,

companies like Sunrun and Solar, and everyone thought that Trump was going to zero out the subsidies. I think if you look at those prices year to date, you're going to find they're not going to go any lower. You may not want to buy it as an investment, but I put that into the pretty much hated category as well. Good place to look. I've also cut my hands juggling fallen knives. We can end it talking about hated investments, but I really enjoyed the conversation. Jan Van Eck, appreciate your time, your insight. Thanks for joining us on Motley Fool Money. Thanks. Thanks.

As always, people on the program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. For The Motley Fool Money team, I'm Mary Long. Thanks for listening. We'll see you on Monday.