Every computer comes with one...a reset button. Its only purpose is to reboot the cpu when something has gone wrong...it reloads the programming language as the developer had intended and starts right at the beginning. When one pushes that button, fingers are crossed, hoping that whatever screwed up the system in the first place is easily fixed with the reset.
Now take that notion and apply it to human society. Once in a while there are periods that require the proverbial 'reset' button to be pushed. Things have gotten so bad that people need to go back to the drawing board and devise laws and regulations that allow us to get back on track and avert certain disaster. When Hitler decided to invade much of Europe in hopes of world domination, it was time for a reset. After WWII, laws and regulations were set up to avoid future conflicts. Trading laws, economic policies, etc. were erected to make sure that the winners (US, UK) would benefit from the carving of the pie we call Earth.
This blog is not about the current state of affairs. Instead it is about what happens during these key times of change. Based on my understanding of the world, I believe that society goes back to the basics. Essentially, a 'reset' button is pushed and people literally go back to the basics.
The past few decades have been wrought with good fortune - sure we've had the inflationary 70's, the Cold War, and the Asian crisis...but for the most part there was always progress. This progress was based on the faith that someone somewhere was intelligent enough to keep the car on the road. I think we can all agree that the car has veered off a cliff in the last few months. Previously stable institutions like banks, governments, and automakers have suddenly become shells of their former selves. How did things fuck up so badly? No one really knows. What we do know is that this whole problem essentially sits on the philosophy of buy now pay later.
This philosophy was predominately financed by Americans borrowing savings from the Chinese and spending everything they had. The new piggy bank was the home equity (the value they thought their homes were). Now with real estate in shambles, it is time to pay up. This situation will be discussed in my next blog. For now I want to focus on the fact that things are fucked up and instead of a shit storm we're going to have a shit hurricane/typhoon/tsunami...so get your rain jackets out and stay away from any and all fans.
"Okay Shan, things are going to get worse - so what - stop being pessimistic!" I agree...I do hope I am wrong, but if I am right, here are the themes I expect to emerge:
Food: The food we eat these days are all processed. Everything we put into our mouths have been manufactured in one way shape or form. Fruits? Processed. Veggies? Processed. What will happen is that as companies cut back labour and capital, we will start to see more and more issues with our food supply. A 10 person shift becomes 7 people - what do you think will get reduced? Of course, instead of 4 wipe downs a day, they'll start cleaning the equipment maybe twice. Instead of 72 hour expiry dates, they'll extend to 84 to preserve inventory and so on and so forth. With the onset of food scares, society is going to run into the arms of farmers toiling their fields the old fashioned way. This will increase the prospects for basic agriculture companies and the food giants that own much of our food supply. i.e. Nestle, Unilever, and companies that manufacture raw inputs for farming (seeds, equipment, water treatment, etc.)
Security: When society becomes generally poorer, crime generally increases. Add to that the threat of terrorist attacks and online identity theft and cyber crime; we concoct a perfect market for security companies. I believe that firms providing online security, manned security, personal and commercial security, and security equipment/consulting will do well. Such names as G4S, GE, ADT, Norton, McAfee, Raytheon, General Dynamics, and other security firms in India/China (that I don't know about). I bet you their phones are ringing off the hook in Mumbai as I type. Makers of body armour, weapons, urban warfare, and military weapons will also benefit. Security will also increase as the need to protect farms, water, and other basic essentials will rise.
Health care: This theme goes in conjunction with the Food theme. As we get food scares and safety measures become more lax - we will have frequent outbreaks of diseases. Health care companies will benefit in such times, but they'll also do well due to the fact that one of the only clients spending money in the next decade will be the government. In Canada, the government will continue to spend large sums on health care - with the increase in usage (as more and more people become sick from stress and eating cheap food), the system will teeter to the point of collapse...enter private health care. I envision that in the next five years, private health care will become prominent in the Canadian landscape. This will be driven by long lines in the waiting rooms (we had long lines in good times, imagine during bad times). The wealthy will lobby the government for the right to open their own clinics. Of course Ottawa will oblige as it will be a tax revenue source in a dismal economy. The US will also spend more money on health care - people become relatively poorer (layoffs, smaller incomes) and so don't take as much care of themselves. The already sick will minimize health care bills and reduce pill intake or push doctor appointments further out - this will make them even more ill when their bodies retaliate and they end up in emergency. Drug companies with drugs in chronic illness and depression segments will benefit, as will equipment makers (Baxter, GE, Siemens), and raw inputs for hospitals (think insulin, and all those other items that are one time use only - syringes etc.)
Africa: Bottom line, things can't get any worse. It might seem like Armageddon is approaching the Western world - but it has been on Earth for the last few hundred years...in Africa. The continent was raped by the Europeans during colonization and sloppy seconds were divied up by Europe's mighty for more pillaging. Today, Africa is festering with AIDS, political unrest, poverty - among other things. Much of the population is destitute and the only place to go is up. For the first time (ever), drug companies will be investing more marketing in Africa than the US. The US has always been the biggest market, but drug companies see Africa as a future lucrative market. With firms seeing their usual markets implode, they will undoubtedly start looking to invest in places that are fresh and have the greatest potential for upside. Africa doesn't have a credit crunch because Africa doesn't have credit markets! Their problems are solvable, their problems are ones that we understand - these were the very same problems that Western society fixed earlier: political unrest (WWII, WWI, European revolutions), AIDS (epidemics such as plagues, and other illnesses), poverty (Europe, Russia). The current issues in Africa can be solved with a little know-how and money (both of which Asians, Americans, and Europeans have). The current economic problems in North America and Europe do not have a viable solution since no one knows what the hell is going on - it isn't a tangible issue that can be solved via round table discussions, medicines, or money. You will see that African investment will increase and first-movers will have the special honour of helping rebuild that continent into a large consumer based market that can replace the floundering Americans and their non-saving ways. The Americans built the US on the back of the African man, and now they will try to build the US (again) on the back of the African man - except this time it might help Africa prosper as well. The other benefit of Africa is the vast amounts of land they own which are currently being farmed with basic techniques -- add some technology, fertilizer, and operational efficiencies and a farm producing 1 tonne of corn may begin to produce 4 tonnes of corn. Recently, Daewoo (a large company in Korea) leased 1.3million acres of farmland in Madagascar. They will use this 99 year lease to produce corn for their country. Kuwait and Saudi Arabia are in similar talks with Sudan, Ethiopia, and South Africa.
Water: Often called 'blue gold'. I wrote at the beginning that society is going back to the basics - well nothing is more basic than water. To fuel a change in the way the world works one needs access to fresh clean water. Water will become a strategic asset for countries, an asset that they will protect as feverishly as oil and gold. While Canadians are in the enviable position of holding one of the largest reserves of fresh water - we have to be continuously diligent to protect it from being purchased by the Chinese, Americans, Indians, and Arabs.
The above is a quick glimpse into what I think will happen. Over the next twenty years we will see the world (as we know it) end and another begin. This world will have the balance of power slowly shift from America and towards multinational companies that morph into semi-government entities with HQs in Europe and vital offices in Africa, Asia, Latin America, and maybe even the US ;).
Stay tuned...
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