Tuesday, June 24, 2008

Future History - an oxymoron? Consequences

Apologies to all as this was posted out of sequence with the last article.

Recent events in Ireland, in rejecting the Lisbon Treaty, set me thinking about the events that have happened and could happen in the future and the implications for investors.

First to past events:-

The Millennium Bug was anticipated with dread in that the year 2000 was going to bring about the failure of all computer systems worldwide with consequent impact on all our lives.

The consequence
– Replacement of old systems by worldwide businesses to the benefit of computer manufacturers and the sector in general.
- Businesses increased their capacity to do business and control outsourced work to the cheaper Far East with loss of jobs in the West
- A total collapse of the technology sector in early 2000 with huge loss to investors and the demise of 1000’s of computer related companies.
- Some 8 years later the technology sector is still trying the recover

Some 20/30 years ago China adopted a one child policy

The consequence
- Currently in the under 25 age bracket a ratio of 118 male to 100 female
- Now a liberation of women in education to make up for the shortfall
- A potential shortage of wives in certain social strata in China
- The next generation of leaders of government and business will have a totally different outlook, as single males growing up, with no way of calculating the fall out.

Cheap energy for decades

The consequence
- Enormous growth in western economies and the rise of US influence in all spheres of industry and finance
- The inevitable backlash by oil producers who wanted more for their precious product
- The accumulation of gigantic US$ holdings by the oil producers and the necessity to recycle outside of their own economies.
- The delight of bankers to deal with task and to invent even more esoteric methods of deploying the $.
- The financial bubble that resulted and the subsequent bursting of that bubble

The stockmarket in 1972/74

The consequence
- A collapse of the UK Index from 500+ to 146 at end 1974
- A foreseen collapse of the wealthy class in Britain
- Jim Slater (a leading investor guru at the time) suggesting that all you needed to survive the apocalypse was – tinned beans, gold Krugerrands and a gun!
- A robust recovery when the depth of gloom was inevitably
reached and this is the lesson for investors – buy when all others are

China census 1990: IIASA figures
How bearish is the FTSE?
Jim Slater's recommendations in 2006.

Robert Mooney, is a contributor to Zignals.com the free stock alerts, market alerts, and stock charts website