For an investor, to say the world has merely changed over the last 40 years is somewhat akin to suggesting to Napoleon “It can get a bit cold,” prior to him invading Russia” – grossly understated, and failing to fully grasp the ramifications.
The world has certainly been morphing into a ‘globalised’ society. It has certainly moved to a much freer system of money, trade, and travel with a relatively cooperative co-existence of the ‘alpha’ countries.
Bringing down the Berlin wall followed by China’s entry into the World Trade Organisation would be regarded as probably the two main catalysts for this change. And I guess it doesn’t require a Ph.D. in Political Science to comprehend the major ideological changes required for these events to occur.
Add to this the incredibly rapid technological progress that has totally revolutionised both the commercial and social aspects of our daily lives. It seems that apart from a few Amazonian tribes eschewing external contact, the people of Earth are now connected.
You can’t stop the ‘circle of life’ – particularly as an Investor
But strangely these inconceivable events have not been enough to halt the ‘circle of life’ (thank you Elton) because right at this very moment, we are experiencing a completely different story.
To begin with, newly elected president Donald Trump has sent a clear signal to the rest of the world that his presidency is adopting an America first policy on everything from trade to defence. His aim is to bring back the America of old, no doubt in the hope of reliving the economic prosperity of days gone by, which is positive for investors.
Curiously, as part of this America first framework, Trump has little time for China, preferring Russia as his communist regime of choice. This 180-degree about-face from earlier US administrations will start many issues in the future.
It was China that replaced a lot of American based manufacturing or at least prompted US companies to move overseas to regions with much cheaper wage structures. As an investor, make sure you keep your eye on this closely.
And across the Atlantic
Now, across the Atlantic, Britain has decided to leave the EU. This appears to have started other members contemplating similar actions. A crumbling EU would have been unthinkable 5 years ago, even with the residual economic distress of the GFC. It appears that those northern members bailing out their economically frivolous southern ‘cousins’ has created some deep rifts. Again, all you investors take note.
Oddly, the British people are now against leaving the EU albeit far too late. No doubt the population have suddenly started to regret losing the free-flowing European borders and all this entails. Or maybe it’s losing the opportunity to buy a retirement villa on the Costa del Sol. Oh well, looks like its Bognor Regis for the annual holiday!
Along with economic issues, the EU also seems to be engulfed in a wave of nationalism. This has resulted in the rise of political parties whose policies would have been almost absurd just five years ago.
It seems to have mirrored Donald Trump’s more ‘redneck’ policy utterances and has opened a Pandora’s Box of narrow-minded viewpoints.
“I wouldn’t have thought that possible!”
Today’s world is unbelievable different from just a few years ago and most certainly, it was totally unpredictable.
As investors, there are many lessons we can take from this incredible reversal. Above all, you must never, ever, believe that things will stay the same. And never take any situation for granted. As incredible as this global shift in attitudes is, it was just about impossible to imagine happening. We have now entered a completely different investor environment as a result. Keep this global shift in mind when anyone says to you ‘that can’t happen’.
From an investment perspective, investors are already positioning themselves to take advantage of any upswing in the US economy. This will, in turn, fuel share values. (yahhhhhh!)
And any reasonable shift of US consumers towards domestic manufactured goods will severely impact on China’s low price manufacturing strategy.
If this occurs, watch for any negative flow on effects experienced by those companies relying on continued Chinese mega growth. You don’t need to look far to find examples of similar events. Try the poor investors in equipment services companies during the recent Australian mining boom and bust.
Nothing stays the same
Remember, nothing is ever going to stay the same particularly for the investor. Be ready, and always stay in touch with investment markets. Long-term investors never set and forget. Rather they look for opportunities and avoid pitfalls. And that means buying into new companies and importantly, getting rid of the ‘also-rans’. Standing still, is not an option, as a long-term investor.
These days even the impossible can become possible and eventually be the downright common. What do you think? Let me know your thoughts in the comments section.
Thanks for visiting, see you next time.
