In April 2010 Brazil’s Eike Batista told the U.S. talk-show host Charlie Rose he would soon be the richest man in the world. As his vast oil discoveries came on stream, Batista said, his fortune would reach $100 billion, nearly double the $50 billion held by Bill Gates and Warren Buffet at the time. Three years later, after mostly dry wells, Batista’s oil company, OGX, filed for bankruptcy. Batista’s rise and fall is a good reminder of the ephemeral nature of great fortunes, particularly in the boom-to-bust conditions that characterize emerging markets. Huge wealth accumulation, particularly when it comes out of nowhere, is often a manifestation of extraordinary and temporary circumstances that have boosted asset prices to elevated levels. By looking at great wealth we can often identify where the greatest excesses are occurring in the markets. The chart below shows the ten-year evolution of the top ten richest individuals in the world, as compiled by Forbes magazine. Highlighted in red are the individuals who are based in emerging markets.
The first thing to note is the mercurial nature of the list. Only three names from 2008 remain on the list in 2018.
The changes in the list reflect economic and stock market cycles. Six out of the ten names in 2008 are from emerging markets, a consequence of the commodity-fueled liquidity boom that greatly boosted asset prices in EM between 2002-2008. India had an incredible four names on the list in 2008, the best possible indication of what has come to be known as the “billionaire Raj,” a process of enormous wealth accumulation and concentration based on “cozy” relations between business moguls and politicians. Since 2012, India has disappeared from the top ten, as some of the excesses of the system have been curtailed.
Supported by the elevated commodity prices and global liquidity caused by China’s unprecedented credit-fueled construction boom, emerging markets remained active on the list until 2013. Eike Batista appears as the 8th name on the list in 2010, the year of the Charlie Rose interview, and peaks at seventh place in 2012.
After 2013, Carlos Slim has been the only representative of EM on the list, and his standing has been steadily declining because of the weakness of the Mexican peso and the very poor performance of his publicly-traded companies (since year-end 2012, Slim’s main asset, AMX, has lost 35% of its value while the S&P 500 has risen 110%.
Since 2012, the strength of the U.S. dollar, the remarkable outperformance of U.S. assets relative to the rest of the world and the surge of valuations for the FANG (Facebook, Amazon, Netflix and Alphabet-Google) and other tech stocks has led to the near-total domination of the top 10 ranking by Americans. Bezos and Zuckerberg both appear on the list in 2016, and Bezos was crowned richest man in the world in 2018.
The most fascinating change of the past decade, the rise of China, is not done justice by the chart above. For this, we have to look at the top 100 names, as shown in the charts below.
There are many striking changes shown by these two charts, mainly driven by the end of the commodity/EM boom, the continued rise of China and the great rise of the QE-fueled U.S. bull market.
In 2018, China becomes the second largest contingent on the list with 19 names, compared to zero in 2008.
In 2018, 18 out of the top 30 are Americans and five are Chinese, compared to eight and zero, respectively, in 2008. Russia had seven names in the top 30 in 2008 but zero in 2018, and India goes from four to one.
The full list is shown below.
Macro Watch:
Trade Wars
- Henry Paulsen gets negative on China (WSJ)
- U.S. accuses Cina firm of stealing Micron secrets (Wired)
- Asia’s next trade agreement (Brookings
India Watch
- India electrification to impact copper demand (Gorozen
- Can the rupee become a hard currency? (Livemint)
- Can India become the next $10 trillion economy ?(Wharton)
- Apple is losing share in India to Chinese (Reuters)
China Watch:
- China’s infrastructure investments in Latin America (The Dialogue)
- China’s art-factory town is evolving (Artsy)
- China’s global infrastructure push (NYT)
- Kevin Rudd on China reforms (Caixing)
- 50 million empty homes in China (SCMP)
- China and Myanmar approve port project (Caixing)
- Four reasons to manage China’s rise (Lowy)
China Technology Watch
- China’s Electric Vehicle push (Bloomberg)
- The rise of Asia’s research universities (The Economist)
- China’s tech slowdown (Reuters)
- China fights back on IP theft accusations (scmp
- A graphic view on China’s tech progress (NYT)
Brazil Watch
- The rise of evangelicals in Latin America (AQ)
- Brazil’s new foreign minister says climate change is a marxist plot (The Guardian)
- Brazil’s new finance tsar (Bloomberg)
EM Investor Watch
- Russia’s new pipeline (Business Week)
- Indonesia’s elections (Lowy)
- Chile’s renewable energy boom (Wiley
Tech Watch
- The new industrial revolution (WSJ)
- Pathways for inclusive growth (BSG)
- Paraguay is a bitcoin powerhouse (The Guardian)
Investing
- The top 100 asset managers in the world (Thinking Ahead)
- Interview with William Eckhardt (Turtle Trader)
- Why momentum inveting works (Anderson)
- Learning from investment history (Forbes)
- The rise of “quantamentals” (FT
- Monish Pabrai’s ten commandments (Youtube)
- A profile of Paul Singer (New Yorker)