Melting Pot

The Melting Pot of the Malacca Straits‘Crossroad’ areas generally provide some of the greatest opportunities for long term investing. While this is true, very few crossroads remain as such forever. Even the legendary city of Merv, once the largest on earth, no longer functions as much more than an interesting archeological stop. In its day, it was an epicenter of the famed Silk Road which spanned from China to Europe.

However, the Malacca Straits has been critical for as long as written records have been kept. The secret sauce in long lived crossroads seems to be a robust exchange of culture in addition to commerce.

The Malacca Straits has been a crucial trading center separating the ‘old west’ of Africa, Arabia, India and Persia, from the ‘old east’, China, various island nations and Japan. A primary reason for this is that the whole of the straits is blessed with shelter from typhoons, yet benefits from seasonal trade winds. It is also the shortest and safest shipping route between the old west and old east.

So it was that 80+ languages, major religions of Buddhism,  Christianity, Hinduism and Islam, and bare knuckled capitalism came together to create a conflagration of free trade. A myriad of goods including medicines, food stuffs, cookery, metals and slaves were exchanged via barter or using tin, silver or gold coin at various ports up and down the strait.

Map of Malacca Straits

The arrow showing the oil tanker path just south of Malaysia overlays the Malacca Straits.

Today, the Malacca Straits have regained importance. It is the crucial transit point for oil from Middle East fields to two of the five largest economies on earth; China and Japan. Equally important, as the price of oil itself continues to rise, shipping will become the necessary and preferred method of transportation – even ahead of the rail routes that are being connected across the mainland to the north. Also, and as has been mentioned in previous articles, farming and mining industries are booming. Supporting these industries are straits cities such as Kuala Lumpur and Singapore which are emerging as important centers in water as well as agriculture technologies. Capital is being reinvested. As a further sign of a developed economy, the region has even witnessed the rise of a locally centered environmental movement that counterbalances unsustainable, or unsafe, resource extraction. This is somewhat different than in the USA or Europe as most of what occurs here is grass roots and not self-aggrandizing. As such there appears to be a real effort to adopt the region’s tradition of finding the ‘middle road’.

In short, many facets of a thriving crossroads such as a critical trade route, reasonable taxation enabling consumption and additional savings as well as the local reinvestment of profit are present here. There are exceptional investment opportunities, both directly and indirectly related to the crossroads status. We have already acted on some, but are patiently waiting for the present global financial chicanery to past before entering others.