2 Bold Predictions on The New Economy
During a call with a client the other day, I remarked at how exceptional his timing has been over the past 2 decades. He had over a million dollars in profit in stocks in 1999 when he walked into his broker’s office and told him to sell everything. The young shocked broker attempted to tell him he was crazy, but my client (being an intelligent man with a contrarian mindset) knew better than to follow the herd.
Dumping his high flying stocks when there was no sight of a crash, he switched everything to cash and municipal bonds, and not only avoided the crash but again made it big.
Finally, he moved his life savings into gold when it was selling between 400 – 800$ per ounce. At more than $1600 per oz., he thinks now is the time to move out of gold.
But the question remains, what comes next? Where are the next big trends coming?
The sign that emerging markets and commodities will really pick up will occur when there is a mass convergence on Africa. It is hard to say exactly when this will occur – but with China already investing in Africa, and
China and America will both try to seize control of land and resources in Africa, which has over 12% of the world’s arable land but 80% of it is not in use.
More and more I’m hearing rumblings about entering Africa and providing base level services. Private equity funds aren’t quite there, and it seems to be very difficult to find local partners on the ground who can be trusted. Many of my friends have grandiose plans for starting a recycling plant, or a carpark – but its extremely far away and difficult to get started. Compared to other places, the barriers to entry are enormous.
Simon Black told me how he thinks Africa will be the next big asset class but he is hesitant to go there because the timing is particularly difficult. It’s clear that things like carparks and hotels WILL be needed – the question is: When?
The speed at which you get your capital back is arguably just as important as the rate of return, and having your cash tied up in an African hotel does you no good unless there is a chance to make residual income/cash out; which requires a herd mentality to converge on Africa.
Douglas Clayton told me over drinks in Bangkok how the African continent is one of the few places overlooked by investors, and that he would love to be there – but is currently tied up in other emerging markets due to Leopard 1 and 2 funds, and his Haiti fund.
I know a guy in Myanmar who is trying to do ANYTHING to get traction with a business including:
- selling soaps and toilet paper supplies
- security and alarm systems
- chauffeur services
- pretty much anything you will pay him for
But he hasn’t yet addressed a need that people are willing to pay for on a consistent basis. Like many instances, the ones who clean up in the gold rush are the ones selling shovels. For instance, a hotel room in Yangon costs 500-1000$ per night, and the food at a local restaurant is ludicrously expensive.
That being said – there are still opportunities. For instance, the country is JUST NOW going through a trial run with ATM’s in the country. Up until now (and still now, because it is rare to find an ATM) you need to have crisp, pressed $100 bills with the proper serial numbers. Whoever said the dollar is losing its status as the worlds reserve currency has never been to Myanmar!
So it isn’t easy to start a business in Myanmar. It isn’t easy to start a business anywhere! Such is the life of an entrepreneur. You have to solve a problem. In a developed economy, but more so in an emerging market – you MUST find a problem that people are willing to pay to solve – until then you don’t have a business. Once you find a big enough problem that you have the answer to, the business will emerge.
So what is the biggest problem the world will face this century?
Clean Food and Water
The biggest wave of pain and profits will come when water and food become increasingly rare. This is slowly creeping upon us. For instance, the rates at which fish are being pulled from the oceans should be a cause for concern. Some estimate that there will be no edible fish left by 2030.
Many people provide the arguments for fish farms, or that technology will solve these issues. Or maybe technology won’t be able to fully replace clean water or healthy organic protein sources. Maybe natural is best in these instances, and whoever controls the supply of clean food and water will be able to dictate pricing to the increasing demand.
Increased Population + Increased Demand > Supply of Clean Water + Supply of Clean food = (The Price Must Go Up!)
The amount of potable water is decreasing at an alarming rate. In fact, the statistics for this seemingly abundant resource show it to be anything but abundant. Wars over water are extremely common in the most crowded places on earth. Take for instance India and Bangladesh, where a decade-long war has raged over water rights to the Ganges river which flows through both countries.
We oftentimes take for granted the fact that we have clean water (especially if we live in a 1st world society), but much of the world doesn’t even have clean running water.
As investors and entrepreneurs – if we can sense the changing of times and anticipate the coming waves of problems that will occur, we can position ourselves strategically to survive and thrive no matter what happens in the world. The future is nothing to fear unless you are unprepared. If you are prepared, it is a time for an opportunity where anything is possible. Trillions will be made and lost depending on who is able to capitalize on emerging economies, fresh food, and clean water.
By 2025, 1 800 million people will be living in countries or regions with absolute water scarcity, and two-thirds of the world population could be under stress conditions. Source: FAO
The key to success and survival in the future involves Internationalization through a foundation of Flag Theory and access to healthy food and clean water. I also see medical care as an extremely important trend, more on that next time.
If you are able to secure the aforementioned categorical objectives of flag theory, you have a good chance of surviving and thriving, no matter what happens to the world. As a final note, if you’d like to secure your future today, consider becoming a Flag Theory member, where I’ll be there to help you on that path to survival and profit, presenting opportunities for internationalization.