We know that the world has changed drastically to where it is today and will continue to do so in future. What kind of investment ideas can we generate and profit from then?
Population growth will increase at a rate not seen before - The United Nations forecast that by 2050, the global population will reach 9.6bn from the current 7bn now. (that's a lot of sexual tension going on!). When global population grows, food consumption will increase and hence we might face a serious shortage of food and water. In fact, I read an article by Jim Rogers recently claiming that he is bullish on agriculture in the long term and he mentioned that the best job to be in by then, would be a farmer! Basically its a demand supply theory as typically nobody wants to farm now as we do not see an immediate need nor the financial reward to do so. We all want to be bankers/lawyers/doctors - jobs that gives us more financial support. How many people that we know of are actually growing crops and profiting from it now? None I would say and hence this creates a supply demand imbalance and it will play out in the long run when the world needs more food and water. Pretty interesting I would say - to consider farming as a career. A solution to this could be the use of more sophisticated technology to increase productivity whereby we could do "double or triple cropping" which some parts of China and India are currently practicing.
Clean renewable energy will be the key energy source - this is not new as we are already exploring solar/wind/water whatever elements that can be harnessed will be converted to energy. In fact, I like the Tesla idea of a battery to supply the energy needed in our everyday lives. We might not be sure of how this will play out but recent developments have so far been positive and we are a step closer to reducing our reliance on crude oil and coal. With China and the United States starting to look into cleaner energy sources, OPEC and crude oil could soon be a thing of the past.
Artificial Intelligence - the rise of the machines to facilitate and aid in our daily lives could soon be a norm in the future. Companies that are dealing with AI could soon experience a boom in their products/technology/sector as machines have proved to be more reliable and could outperform humans both physically and intellectually. Low skilled workers could soon be replaced with robots and many will be left unemployed creating social unrest. As scary as that sounds, it could soon be a reality within the next 5-10 years.
The rise of Africa - Africa remains the world's largest untapped market and it is still in its infancy phase of urbanization. Infrastructure, energy, food and water as well as education are lacking in this continent. With its large land area and an abundance of natural resources, Africa has no reason not to grow as rapidly as China or India. What it lacks is stability to lure foreign investments into their continent. As volatile as it may seem, I am keeping a close watch on major developments in this continent as a whole to look for new investment ideas. Just take a look at how the BRICS have done over the past decade and Africa could be the last emerging market that we have missed.
Thursday, 21 May 2015
Wednesday, 6 May 2015
Recap - Irrational Exuberance - 25th April 2015
Remember this chart a few weeks ago? http://myalphafund.blogspot.sg/2015/04/irrational-exuberance.html
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Here's what is looks like today: a 7.5% fall from its peak...it might be a pullback but if the Shanghai Composite falls further, a bear is near........
20150506213513.png)
An Analogy of Gaming and Investing
We have all played computer games during our free time, every single one of us. The end objective is always the same with gaming - to clear stages and win as an individual/team. I would like to draw an analogy on how investing can be similar to playing a game. No disrespect to the market here but its more for an illustration purpose.
When we embark on a new game, normally your game character/avatar (or whatever you call it) will be just stark naked and without any real "power"/"skill". The same can be said for investing whereby as a novice, you often feel "lost" and lacking in technical/fundamental analysis (that's a skill).
As the game progresses, you will gain experience and level up to boost points to your character's stats. Games now are also MMORPG with players from across the globe and all games have their own "landscape". In the investing world, the "game" is played regardless of language, race, gender, religion or nationality. Your "landscape" is limitless where you can trade in any markets across the globe that has an exchange. As you gain more experience in your investing journey, you'll feel more accomplished and often add new set of skills to your "arsenal".
Games have clans - last I goggled, it means "a group of people with strong common interest". Clans are often powerful as they rule by the law of numbers. If your clan has a "good reputation", you will gain items that are deemed as rare/unique and your clan is your family in the gaming world, often helping you clear objectives and protecting you from other clans.
The term we use for "clans" in the investing world can be your hedge funds, asset management firms, private equity firms - the larger/reputable the firm, the ease of information and more sophisticated tools are used to find good companies to invest in. Of course, the so called better "clans" are your Goldman Sachs, JP Morgan and Morgan Stanley while good private equity firms would be your Blackstone Group, KKR and Carlyle Group. *Enough said about what they can do to global financial markets.
You can also choose which "class"/"type" of character you like to play the game with. Your "classes"/"type" will have different advantages/disadvantages in the game. With investing, we can choose different ways to do it - dividend investing, trading, value investing or growth investing. The different approaches taken by the investor will yield different results and not everyone will be interested in a specific approach. Some like to mix it up a little while others are purely following a strict strategy that yields them returns. Each and everyone of us possesses a different level of risk adversity and no matter what, as long as profits are made - everyone is happy.
All/Most games have an ending/last stage or whatnot whereby you're judged on how well you cleared the stage or how "decked out" your character is. People playing the same game as you will most likely be envious and respect you - some to the point of worshipping.
The difference in the investing world is that - you do not have an end game. We invest for as long as possible, to generate income passively/actively as much as possible. Every decision made will have an impact on how your returns/losses snowballs. There are no fixed rules to "play" this game and anyone can just walk out of it and never to return - (those who got badly scarred by the 2008 GFC).
However, more people are joining this "game" NOW. We are in a secular bull market for close to 6 years now and although this "game" does not state when it will "hang" due to server maintenance, we should be nimble and watch for signs of a change in trend/sentiment. Stay safe and remember to "save your game" (by taking profits)
When we embark on a new game, normally your game character/avatar (or whatever you call it) will be just stark naked and without any real "power"/"skill". The same can be said for investing whereby as a novice, you often feel "lost" and lacking in technical/fundamental analysis (that's a skill).
As the game progresses, you will gain experience and level up to boost points to your character's stats. Games now are also MMORPG with players from across the globe and all games have their own "landscape". In the investing world, the "game" is played regardless of language, race, gender, religion or nationality. Your "landscape" is limitless where you can trade in any markets across the globe that has an exchange. As you gain more experience in your investing journey, you'll feel more accomplished and often add new set of skills to your "arsenal".
Games have clans - last I goggled, it means "a group of people with strong common interest". Clans are often powerful as they rule by the law of numbers. If your clan has a "good reputation", you will gain items that are deemed as rare/unique and your clan is your family in the gaming world, often helping you clear objectives and protecting you from other clans.
The term we use for "clans" in the investing world can be your hedge funds, asset management firms, private equity firms - the larger/reputable the firm, the ease of information and more sophisticated tools are used to find good companies to invest in. Of course, the so called better "clans" are your Goldman Sachs, JP Morgan and Morgan Stanley while good private equity firms would be your Blackstone Group, KKR and Carlyle Group. *Enough said about what they can do to global financial markets.
You can also choose which "class"/"type" of character you like to play the game with. Your "classes"/"type" will have different advantages/disadvantages in the game. With investing, we can choose different ways to do it - dividend investing, trading, value investing or growth investing. The different approaches taken by the investor will yield different results and not everyone will be interested in a specific approach. Some like to mix it up a little while others are purely following a strict strategy that yields them returns. Each and everyone of us possesses a different level of risk adversity and no matter what, as long as profits are made - everyone is happy.
All/Most games have an ending/last stage or whatnot whereby you're judged on how well you cleared the stage or how "decked out" your character is. People playing the same game as you will most likely be envious and respect you - some to the point of worshipping.
The difference in the investing world is that - you do not have an end game. We invest for as long as possible, to generate income passively/actively as much as possible. Every decision made will have an impact on how your returns/losses snowballs. There are no fixed rules to "play" this game and anyone can just walk out of it and never to return - (those who got badly scarred by the 2008 GFC).
However, more people are joining this "game" NOW. We are in a secular bull market for close to 6 years now and although this "game" does not state when it will "hang" due to server maintenance, we should be nimble and watch for signs of a change in trend/sentiment. Stay safe and remember to "save your game" (by taking profits)
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