Follow the ‘smart money'

Rich foreign governments control impressive amounts of capital today, running to several trillions, but they are relatively new to investing, observes Eric J. Weiner in ‘The Shadow Market: How sovereign wealth funds secretly dominate the global economy' (www.landmarkonthenet.com). Aware that they have to catch up with the most sophisticated players in the global financial markets, many investment officials for foreign governments eagerly follow the ‘smart money,' mimicking its moves and strategies, buying its expertise, and learning rapidly along the way, he adds.

‘Smart money' refers to the secretive managers of major private equity and hedge funds, generally considered to be the shrewdest investors in the world.

While, at its core, the emergence of the shadow market is the story of geopolitical power shifting from West to East, what that means to individual investors is to learn to follow the money, instructs the author.

“I'm not talking about mindless racing down a blind alley chasing the latest hot stock. In most cases, that's throwing good money after bad, and it's resulted in more than a few lost fortunes. No, I mean finding the smart money, determining which way the trends are heading, and capitalising on that insight,” he explains.

Urging investors to think on a global scale, and also to be patient with time horizons of five or even ten years to fully capitalise on these trends, Weiner recommends putting money in the commodity markets which are going to play an important role in turning countries like China and India into modern superpowers capable of challenging the US.

“We're talking about oil, coal, natural gas, copper, iron ore, lumber, even water. And we're talking about companies that produce necessary items such as energy generation equipment, construction and farming machinery, and green technologies like solar panels and wind turbines.”

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