The news is great in emerging markets...India's growing middle class can now afford servants.
The boost in Brazil's currency makes the country's treasury bonds more attractive than ever.
And Russia, China, India, Malaysia, South Korea and Brazil still look like great bargains compared to the U.S.
Is this all easy money ripe for the pickin'?
Not exactly...with oil jumping $11 last Friday, inflation running rampant on forecasts of $5 gas and Wall Street's banks sinking deeper into the abyss investors are grinding their teeth figuring what to do next.
The mental horsepower needed to extract profits from these storm-tossed markets has never been greater. That's why I was truly dismayed to read a front-page story in our hometown Baltimore Sun about American teenagers who will be our future business leaders.
The story once again showed me that America is on the decline and that emerging markets look brighter to me every day. You have to understand: I'm not against the American ideals of democracy, individualism and free enterprise. But I do believe that we have fallen victim to our own success -- that we drank the KOOL-AIDE -- and there is no turning back.
This deep underlying belief has supported an investment thesis I've been developing called the Myth of Empowerment. It's a qualitative approach to investing based on my 15 years in Silicon Valley. The myth is that the more technology available to you, the stronger your competitive advantage.
On the surface this makes a world of sense. But when you sit in business meetings in Silicon Valley start-ups, you can see it's really a heap of bunk. Nothing replaces thoughtfulness, creativity and patience in forging new markets, whether they are high tech or emerging economies. Sure enough, when the tech bubble exploded I came up with the Myth of Empowerment. This Sun article proved to me that the Myth of Empowerment could be a truly debilitating condition as America struggles to find it's place in a global economy.
The Sun article is titled "Plugged in, zoned out -- As teens' reliance on technology soars, parents and teachers scramble to limit usage"
Armed with a cadre of electronics, kids are having difficulty focusing on any one subject as they jump between text messaging, social web sites, cell phones, music and whatever else they have in their backpacks.
The implications of this digital addiction are staggering...
The article says that college professors and high school teachers see smart students who can't write long papers very well. These students are having trouble paying attention in longer class periods.
"They are constantly jumping from one thing to another. They can't sit still long enough," said Ilona McGuiness, dean of first-year students and academic services at Loyola College told the Sun reporter. "You can't think through problems. You can't process. You can't develop the deep thinking skills."
The article quotes a 10th grader who texts with her friend 50 times a day.
Recent brain research conducted by Marcel Just at Carnegie Mellon University showed that multitasking might be more difficult than we think.
Carnegie-Mellon's Center for Cognitive Brain Imaging said research indicates that it is difficult for the human brain to operate at maximum effectiveness while doing several tasks. The distracting task, he said, draws away power, creating something like a brownout in the brain.
One professor at Loyola College said she began seeing a change in students about five years ago. She and other teachers say the students seem to become fidgety when they are out of communication with their friends. When she walks down the halls today, she said, she sees students rush out of class and immediately flip open their phones. "They are in the habit of doing things in short bursts," she said.
Joanne Cavanaugh Simpson, a Johns Hopkins University lecturer who wrote an article for the Johns Hopkins Magazine on the subject of multitasking, said she saw the problem surface about two years ago, particularly in her larger classes of 20 and 30 students who were trying to use technology secretly.
The attention span of these students has been reduced to a split second -- or an Internet pop-up ad, as the article says.
While that's not bad enough, teachers are forced to give in to their students. A teacher at Northeast High School in Maryland's Anne Arundel County told the Sun reporter "I almost end up teaching them Oprah-style."
So it's the Myth of Empowerment. Kids thinking that they more the can access simultaneously, the smarter they become. But not true.
The reporter interviewed Rick Robb, a 12th-grade English teacher. He said "I have some of the brightest in the country," but they don't have the same ability to analyze literature. What they lack, he said, "is the patience for delving into the multilevels of the text."
So what does the Myth of Empowerment have to do with emerging markets? In a word "everything."
Would you want to invest in a company with a management team that had the attention span of a gnat? The answer is no. Then why would you take a long-term position in a country whose future business leaders can't analyze long-term problems?
My concern is shared with high-tech entrepreneur Robert A. Compton. He produced a new documentary that reached a similar conclusion. His movie "Two Million Minutes: A Global Examination" shows that American students spend less time on their studies than their counterparts in China and India.
Compton's documentary follows six students (two from the U.S., India and China) to show the difference in the way they use their roughly "two million minutes" in high school as they complete their senior years.
The students from China and India studied much longer hours, including on weekends. They are shown pouring their energies into science, mathematics, and computer programming as well as the arts.
Vivek Wadhwa, is an adjunct professor and "executive in residence" at Duke University's engineering school and a fellow at the Harvard Law School was interviewed in the film. He said he thought the documentary was "excellent."
Wadhwa explained the documentary showed that the upper-middle class in India and China is evolving very rapidly, and striving to improve their intellectual capabilities. "You are dealing with very smart, very motivated people who work a lot harder than Americans," he said.
As an investor, chances are you will never hear about the Myth of Empowerment. But now that you have, you can see why I'm so bullish on the long-term potential of emerging markets.
It's great to analyze stats to make a compelling investment argument. But stats alone will never work. You need a vision -- an understanding of how the past led to the present and will impact the future.
--Irwin Greenstein
