There are at least three ways to make money from every trend.
Approach #1: Jump into trends early, when they first begin. The upside is, when you are right, that capital gains can be huge.
But there are downsides. Growth companies rarely pay income. This is a risky approach as well because the big trends are hard to see coming and the winning companies that serve these developments are often even harder to spot. For example Warren Buffet, one of this century's most astute investors, never invested heavily in the internet or software because he could never convince himself that he had identified any company with a clear competitive edge.
Approach #2: Invest in leading companies in the trend after they are well established. The upside here is that there is less risk and often big, successful companies pay some income.
Yet this approach has problems too. Prices for established leaders are often too high, such as recent valuations of companies like Microsoft, Amazon.com, etc.
Approach #3: Invest in the bounce. Humanity has a nostalgic element in its nature that creates a retro response to every big shift or world changing event. For example when technology perfected central heating, everyone had to have a fireplace. When paved roads were everywhere, sales of four wheel drive vehicles started to soar. When urban and suburban living became a matter of course, camping and events in nature became truly big business.
We can see this revolt against technology by some statistics recently provided in the August 21 USA Today front page article, entitled, “Tech's tyranny provokes revolt”.
This article points out that 108 million investors no longer desire to get onto the internet. 60% of consumers have stopped buying the latest high tech gadgets and devices. 42% of PC owners believe that technology is advancing too quickly. 40% of PC owners believe that technology is too complicated and that last year 29 million adults stopped using the net (double the number of 1998).
The article tells of one Silicon Valley executive who despite a big salary and Wharton MBA lives in a one bedroom apartment furnished only with history books and used TV. This executive drives a ten year old Nova and he and his wife sleeps on the floor on a comforter and two pillows. This family feels that technology is a tool to make things of lasting value, not something to enslave them. The article tells of another high tech employee who has cut back on T.V watching, stopped carrying his cell phone and shifted from auto commuting to riding his bike five miles to work each day.
As the world's pace quickens and multi-tasking overwhelms the majority, others are moving in the opposite way.
Simplicity is in. This fact is further confirmed by the creation of two magazines dedicated to simplicity.
We can see further signs of this in the August 28 article (front page of section D), “Techies unplug en masse to go for the burn.” This tells how high tech workers head each year for the Burning Man an annual, anarchic party on an isolated dry lake bed 120 miles north of Reno. Tickets are $250 and 28,000 are expected to attend. The high techies according to the article cannot wait for the quiet. One worker put it succinctly, “I work 60 hours a week, six days a week and sleep with my cell phone. I'm attracted to the physical isolation where there are no cell phone signals. I'm going with just water and sunscreen and just be me and survive.
The point? Even the high techies choose a remote isolated, simple place for their annual get together, not a sophisticated, high tech, wired resort.
I suppose that this is in part why Merri and I now live in isolated splendor here at our North Carolina farm and at our plantation in Ecuador. We have traded our BMWs, Audis, Rolls, Bentleys and Mercedez for a beat up 1987 farm truck and a 1952 “Dr. Livingston Special” Land Rover. Our million dollar beach house was nothing compared to the peace and quiet of our humble farm house. We have no TV, not even regular radio. At night the Milky Way and clear, bright stars replace the nonsense of the media and screen Their message is so much more clear!
Our water is pure, spring fed. No chlorine from these mountain springs guaranteed! Cell phones don't work up here, unless you climb the highest ridge. The most high tech thing we see or hear is a distant tractor.
After living in some of the fastest paced cities in the world, (Hong Kong, London and lastly Naples) this peace, quiet, green and purity is total glory. There are sirens though (once in the last two years) and most mornings our rooster Sergeant Pepper works much better than an alarm. The soothing sigh of the creek, crickets and frogs have been traded for the whine of traffic.
We take a gentle hike over the creek and through the woods to the office in lieu of commuting and road rage. Perhaps we scare up the Great Blue Heron that lives at the end of the creek.
Instead of waiting in long lines at the super market we stroll through the garden and pick up thick cucumbers, crisp, fresh lettuce and sweet ears of corn.
I can see why the revolt. We love this simplicity and bet (have bet and are betting) that a large chunk of the population will too.
So where to invest? I have some thoughts I will share, but the answer to this may be better be served with our network. Click onto the discussion forum and learn what our many advisors and members have to say about investing in the retro bounce. I'll add my comments along the way. And have good investing!
Join Merri and me at the farm! I will conduct an entire session on “Investing in the Dream Society” which addresses this issue at my upcoming Oct. 13-15 course here on the farm. For more details go to https://garyascott.com/courses/