16 January 2016
We think this is the best future predictor we are aware of.
Turn on any kind of financial news at the moment and you’re likely to be bombarded with a lot of fear and negativity.
Yes, there are challenges in the world, there always are.
Markets are unpredictable, but they always have been.
Are things really that bad?
Struggling with this question I gave myself a short history lesson. What I found is something that I believe could help every investor spot opportunity in today’s markets, if applied with proper due diligence.
The media makes money by selling eye balls to advertisers.
They do this in a highly competitive space and have to rely on gaining your attention by following the old adage “If it bleeds it leads”. Simply put, bad news gets our attention more than good.
So let’s take a look at a generalised example of what they’re putting out there…
“This is one of the worst starts to a year in the markets since the Great Depression of the 1930’s.”
Fair enough, but we’re not in a ‘Great Depression’ on the scale of the 1930’s are we?
Back then the global economic downturn had a big impact on the UK. There was mass unemployment and widespread poverty, with people lining up just to get a meal…
There was huge pressure on the domestic economy, the government at the time cut spending on key areas of social support, and interest rates were reduced to 0.6% in 1933.
Sounds bad doesn’t it?
Yet what isn’t contained in this story is that, despite all this hardship, the latter part of the 1930’s saw a period of economic recovery. It didn’t happen in a straight line, nor did it happen equally in every part of the country. Like today, London and the South East saw a mini economic boom.
What factors contributed to the recovery, and how can you apply them and spot opportunities in the face of the difficult start to the financial markets in 2016?
The UK in the 1930’s was one of the first countries to leave the Gold Standard, meaning it avoided the extreme social and political difficulties seen in other European countries.
Today, our absence from the Euro and maintaining our currency sovereignty has had a similar impact. Unemployment levels have not been at the levels seen in countries such as Spain and Italy.
There was an increase in the speed of industrial and technological innovation and adaptation.
Improved industrial production lines and techniques pioneered by Henry Ford’s manufacturing of the Ford Model T from 1908 started to hit it’s ‘tipping point’ of exponential adaptation and use.
Add in the introduction of the re-armament program, and the eventual outbreak of WW2 (which effectively brought about full employment), this long tail effect of technology innovation meant that the world went through one of the most dramatic periods of change in the history of human kind.
Without minimising the atrocities and suffering that occurred during WW2, or acknowledging the immediate struggles following its conclusion, if this had not taken place we may not have developed some of the things that have led to the huge improvements in the standard of living that we have today in the developed world.
Computers, jet engines, Penicillin, radar and nylon…(Seriously!). Imagine a world without any of these, they were all developed just before or during WW2. Just consider the industries that have spawned from them, and the amount of wealth created as a result.
It was a disruptive event that required a different mind-set and strategy to get through.
I truly hope we will never see a global war to the scale seen by my Grandfather’s generation.
I hope the next disruptive event is not a war at all. I hope it is something that fundamentally changes the lives of every human being on the planet in a positive way. I’m an optimist!
Whatever it is, there will be some kind of event, innovation or change coming in the world that’s big enough to impact millions, if not billions of people. In doing so there is profit.
I’m not smart enough to come up with the answer. So I take short cuts. I look at what other people are doing. Not those that think the world is going to “Hell in a Hand Basket”.
Take notice of those that are looking to the future that ignore what media throws at us. Pay attention to those trying to improve the world, not keep it the way it is, or make it worse.
Look to people of influence. Visionary people that have a track record of success. Those that see trends and get in on them early, who have the ability and resources to improve or influence what’s driving the underlying demand for the technology, behaviour or change.
People like Bill Gates, Richard Branson, Jeff Bezos, Mark Zuckerberg, Elon Musk, Warren Buffet, just to name a few.
What are they focusing on? Where are they investing their own money? What major world problems are they trying to solve?
How can you piggy back on them?
As I mentioned above, I’m not smart enough to analyse or understand the detail. So I turn to someone I know that is…
Our Head Analyst, Ravi Lockyer has asked himself very similar questions to those I’ve posed above, and he’s come up with not only a sector that is quietly gaining momentum, but also a specific ETF that could be positioned as a major beneficiary of its growth.
I seriously urge you to find out what this is and read his research report by clicking the link below.
I hope it helps. I hope it gets you thinking. And I hope you have got something from my ‘Pop’ history lesson.
I’m sure I’ve misinterpreted or misrepresented a few things, I’ve tried to focus on the lessons contained it over the 100% historical accuracy!
Though I’m more than happy to be corrected in the comments below!
Thank you for reading!