Wednesday, January 29, 2014

Forest Fire Investing

By Phin Upham

How does one analyze something as complex as investing from a global perspective? Sometimes it’s easier to see what others don’t see by looking at the forest instead of the trees. For instance, if there was a contest to see which professionals could predict what would be the tallest tree in the forest ten years from now, how would different professionals approach the competition? The botanist who specializes in tree species might select the fastest growing tree. An immunologist, someone who specializes in tree disease, might notice a certain disease in the forest and select the tree that was immune to it. An expert in soil, or a pedologist, might go for the tree planted in the most fertile land.

However, all of these “experts” might have shot off target. Is it possible that a layman might have a better picture? For example, a person without education in the field might think outside of the box – they might notice the dry brush and consider the chance of a forest fire destroying the entire forest. In this example, the layman might select the tree farthest away from the others. Going back to investing: If this problem spreads on a global scale, what is comparable to a global forest fire? It is possible that our global recession, or even depression, might not go away without some scary changes. For example, the Great Depression was lifted because of WWII. It was the war and not FDR that put to work every factory, man, and many women. It was the war that ultimately drove the economy. If there is anything to learn from the past, might it be that another world war could end our crisis too? Consider the following obvious hotspots: The tension between near-nuclear Iran and Israel seems to be getting worse. How will their problems with one another affect the economy? Because of weak currencies, the former soviet and Baltic states are experiencing discontent, and even Moscow has experienced violent protests. And it’s hard to bring up protests without thinking about China, and the increase in protests in recent years. You can also read this article in presentation format on Youtube and Slideshare.

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