Part Two: Big Changes Will Produce Big Profits for Savvy Investors
Editor’s Note: Today’s column is a continuation of Keith’s 2017 Outlook, Part One of which can be found here.
[The Second of Two Parts] – We set the stage for 2017 in last week’s column with a look at the investing backdrop that will drive profits this year. And, as part of that, we talked briefly about the unseen mental challenge that will trip up most investors who don’t see it coming.
Today we’re going to dive deeper into the strategic implications driving each of our six Unstoppable Trends as well as their relative influence on our strategy in the months ahead.
For the simple reason that, in recorded history, more billionaires have been created around these six Unstoppable Trends than any other trend not on the list.
Frankly, I’m more excited than I have been in years.
Every Dollar You’ll Earn in Your Investing Lifetime Is on This List
I want you to step back for a moment and really think about what I’m about to say…
…for all the complicated stuff going on around us and as challenging as our future may be, the world is actually a pretty simple place.
I say that because, if you look through history and you study our past, it becomes very clear that humanity has always and will always be driven by six Unstoppable Trends. Of course, there are offshoots, sub trends and even counter trends, but pretty much every dollar you’ll make for the rest of your investing lifetime ties back to at least one of ’em. Perhaps several.
Play on the edges or on the fringes and you may get lucky. But build your core investments around these concepts and the companies that embody them, and odds are that you will do very, very well because each of these six things is propelled by trillions of dollars. They’re unstoppable and they’re global, which means the playing field is wide open.
That’s obviously a bold statement, which is why, as you might imagine, I’ve got loads of examples to back up what I’m saying and prove my point in the months ahead, just as we have since launching Total Wealth Research.
Never forget that capital is a creative force. It wants to grow. You just have to let it, by using the right combination of selection and risk management. Most investors don’t look at their money this way, but I find that’s often simply a matter of perspective.
Most investors consider themselves fortunate to ride one major trend in their investing lifetime. My goal is to teach you how to do that consistently with everything you own – and I promise not to tell anyone if you feel like laughing all the way to the bank either!
Starting with six Unstoppable Trends backed by trillions in spending that Wall Street cannot hijack, the Fed cannot derail, and Washington couldn’t stop if it tried:
Everything else is a sideshow. I’d come up with an acronym but DSMETW just somehow doesn’t cut it. Anyway, here’s a chart of their relative influence in 2017 versus how they played into our thinking in 2016.
As you can see, Demographics has dropped.
That’s hard to internalize given our aging planet, but very deliberate on my part simply because central bankers remain accommodative. And, as such, they’re going to ensure a constant supply of free or at least damn cheap money that otherwise negates demographic weakness associated with age, lower productivity, etc.
Which brings me to Scarcity & Allocation.
Here we’ve got the reverse. This, too, is counterintuitive but the large amount of money that’s overshadowing otherwise critical demographic changes is going to drive competition for everything… quality stocks, resources, technology, even money itself. This is not unlike the last egg in a grocery store; if there are 10,000 people who want to buy it, the price will skyrocket.
Medicine is similar, but here we’re beginning to tap into innovation so there’s some overlap which is always a bonus because it means multiple trillions of dollars are headed your way… not merely a trillion.
There is tremendous legislative pressure on health care systems, but the billions of dollars driving trillions in spending is money our planet’s population literally cannot live without.
According to the World Bank Group and the Institute for Health Metrics and Evaluation (IHME) at the University of Washington, global health spending will reach a staggering $18 trillion by 2040… the groundwork for which is being laid today.
Energy, though, drops.
Many investors don’t want to believe what I am about to say next, but energy independence is imminent and people like Tesla Motors Inc. (NasdaqGS:TSLA) CEO Elon Musk are among the very few who “get it.” Ask yourself what happens to the electric grid when he figures out solar power, local distribution, and obviates the need for traditional power.
See what I mean?
Technology is an increasingly important input driven primarily by cybercrime and artificial intelligence. People love to talk about the Internet of Things but in reality you’ve got to go up another step in the digital food chain to find the really big profits.
For example, there are now nearly 500,000 denial of service attacks a month, according to Arbor Networks, which represents a nearly 50% increase year-over-year. Businesses have to spend trillions to prevent going down in flames when increasingly bold hackers target them using everything from digital picture frames to baby monitors as their entre.
Artificial intelligence is also key. Wearable technology from Apple Watches to Snap Inc. (formerly known as Snapchat)’s much bally-hooed glasses are already passé. The real impact is the imminent arrival of sentient technology, or nearly sentient.
The Department of Defense, for example, just successfully tested the world’s largest micro-drone swarm, which involved using 103 Perdix drones dropped from three F-18 Super Hornets to engage a target.
I don’t know whether to be terrified or really fascinated. Probably both considering that these drones independently used collective decision-making, adaptive formation flying, and self-healing while sharing a single distributed brain.
Innovation doesn’t mean change for change’s sake. To profit you have to have both profits and relevance that will help you sort through Silicon Valley’s “fake it till you make it” IPO machine.
The Age of Unicorns (companies that go from zero to multi-billion dollar valuations) will come unceremoniously to an end sooner than people think.
And, last but unfortunately not least, War/Terrorism/Ugliness is a growth industry.
The latest figures show that governments around the world will spend an estimated $1.7 trillion or more this year on everything from billion dollar weapons platforms to $400 hammers. They have to simply because not spending this money potentially unleashes the unthinkable.
As I noted recently, the shift will be driven by an uneasy détente between Russia, China, and the United States that drives a resurgence in capital asset spending. Think big ships and weapons systems here as opposed to the counter-insurgency warfare of the past 20 years. President-elect Trump is, in fact, planning the single largest fleet expansion in decades with the goal of 355 capital ships up from only 274 deployable battle assets presently.
In closing, we’ve obviously covered a lot of ground today. Yet, our conversation is a long way from being over, because the markets are constantly balancing between relief, optimism, and occasionally, pure panic.
Which is why I want you to keep in mind that chaos always creates opportunity.
Let’s make 2017 the year you grab your share!
I’ll be with you every step of the way.