Wednesday, February 08, 2006

Defensive investing required for the future

Douglas Mulhall'’s "“Our Molecular Future"” (2002) has lots of fun if not critically-grounded speculations about the possible states of the future. Implicit in these speculations is the impact for defensive long-term investing. No matter what different states of the future might show up, investors and others should be prepared for some of today'’s industries to completely disappear.

This is not a comprehensive investment primer on the future, but a few important defensive investing ideas:

Energy and Transportation Transforms
The Acceleration Studies Foundation's John Smart cites futurist Glen Hiemstra's point that we have progressed to new energy eras (like from coal to fossil fuels) not for scarcity of the former resource but for the advent of a better resource with greater energy efficiency. With the current build-up of alternative energy efforts in ethanol/biodiesel, solar, wind and underground maglev transportation networks, we are accelerating our progress to the next energy phase space.

The world's shifting away from dependence on oil, in addition to having some major changes to geopolitics including the return of cartoons to their appropriate stature, means the big oil production, refining and marketing companies could go away. BP may be devoting more than any of the other oil giants to alternative fuel R&D but it would be easy for the current energy industry, which comprises 7% of the US economy, to be blindsided by the phase shift to the next more efficient energy resource(s).

An investment that can be made right now is in food stocks. With the price of oil over $60, it becomes cheaper for some companies and countries to direct food stocks to fuel rather than food end products. Buyers for fuel end uses are already appearing at food stock markets bidding up the prices of grains and other raw inputs.

Manufacturing Disappears
The digital fabricators in process from Neil Gershenfeld (FabLab) and others (already popularized conceptually in Sci Fi literature as the Matter Compiler and other terms) could mean the in-home printing of all consumer and other goods and that manufacturing goes away. The implications for manufacturing, transport and logistics economies are dire, that is, after they manufacture and deliver the household digital fabricators, "A Digital Fabricator makes every pot" if not a chicken in every pot.

Security Grows
In the increasingly transparent society, security, of any and every current and new flavor explodes.

To invest defensively for the future, one must be prepared for some industries to completely disappear, and at a fairly quick rate. The low maintenance approach to future investing is to buy index funds, the directed approach is to be well-poised to read early warning exit signals in transforming industries, and even better, early warning entry signals for new and promising stocks!


Market Participant said...

The logical play on the increasing conversion of grain to fuel is Archer Daniels Midland (ADM). ADM is one of the larged commodity processors and ethanol converters in the US. Pays a good dividend too.