Sunday, June 29, 2008

Focusing on the Macro Trends of Tomorrow

Volatility! Makes your head spin. Till recently the concensus was - the credit crisis is behind us, earnings are good, globalization works - the bulls run. Today, we are officially in bear territory, back to where we were in 2006 and it could get worse.

Who do you trust? Who do you listen to? What do you sell or buy? What actions do you take - if any? My take on this situation - forget the noise, instead focus on the trends. And the trends to monitor are

  • Energy: Oil at $140 may be a fluke but there is an energy trend in the works. The billions of new consumers all want their cars, fridges and fast food. Energy needs are growing exponentially while proven supply models are unsustainable. New energy sources, alternative fuels, conservation, consumption and behavior are all prone to change dramatically in the next decade.

  • Globalization: BRIC, emerging economies and Chindia are regular discussion topics in newspapers, TV and online media. The world economy with its global workforce, manufacturing capabilities and increasing buying power is not a fad. How the global socio-economic factors evolve is yet to be determined? Will the US retain its economic supremacy? How will the billions of consumers in India and China impact corporate profits & growth?

  • Technology: The Internet revolution has just begun. Compound that with telecommunications, wireless and mobile computing and you have a potent mix of change elements, which have the power to drastically change our life styles. How we communicate, live and shop are all subject to change.

  • Environment: Is the planet heating up? The artic ice cap is melting, weather patterns are changing, oceans are warming up and global warming is a proven fact. Fossil fuels, human waste, destruction of rain forests and pollution caused by human activities are all changing the earth. Some effects are apparant, some will manifest themselves in the years to come.

Investing has to be a long-term and holistic discipline. You have to account for the trends and changes shaping our world. Invest prudently in companies and ideas that are evolving because therein lies the huge returns of tomorrow.

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