As the title above suggests, I am not a top down thinker when it comes to investments. I have found that efforts to understand the intricacies of the world economic system first before attempting the individual security analysis where the actual profits are reaped to be in vain, too difficult, unrewarding, basically just a waste of time. Buffett’s graveyard of macro investors await for the vast majority who undertake the top down approach, it is my firm belief. And now I am going to violate this firm belief by providing my thoughts, albeit reluctantly, from the top down.
The analysis begins with a simple pair of questions: what will the world look like in 5, 10, 25 years out (anything beyond this is silly and irrelevant)? What are the great, indisputable, no-brainer forces currently at work that are moving the world to these places? The answers, I believe, primarily center on:
a. Demographics
b. Technology
c. Preferences
Drilling down further, we find another set of more specific questions. How will people be living their lives? What will they be buying? What will they value? What will they be willing to pay for? How will people be spending their time?
Here are some of the specifics that I see:
Immigration into the USA, the growth of the USA
The rise of Hispanic needs and preferences
• Homes, maybe pre-fab
• Soccer
• Discount retail
• Wire transfers, money movement
• Christianity
Baby boomer retirement
• Health care
• Leisure time - travel, beer, and wine
• Entertainment, in general
• Homes / second homes
• Gambling
• Wellness: a generation that will deal proactively with their fear of death
• The Grandkids, spoiling them
• Financial services: a “guy” (aka broker) will be needed, more often than not, to secure them
• Online shopping, travel, news/information
• Reading books
• Restaurants: quick, healthy lunches, and reasonably-priced dinners
Developing World Consumer
• Cars
• Houses
• Brands: to make a statement, demonstrate new status
• Entertainment (movies, sports)
• Alcohol
• Appliances
• Stores, shopping
• Fast food
• Banking, sources of credit
• Gambling
The Internet
• Information
• News
• Shopping
• Travel
• Entertainment, leisure time
As hinted at the outset, the ultimate task of the investor is not just to answer these questions, but to gain use from their answers (i.e. to reap profits). My prescription for doing this is to identify the great, energetic companies that will be taking advantage of these forces or to identify the great, energetic companies that are out competing in their respective spaces (and both willing and capable of growing into related spaces), spaces which will be around and relatively unhindered in 5, 10, 25 years. What we are seeking to do, essentially, is to profit from the compounding, over great amounts of time, of profits that are driven by the great forces and/or simple operational excellence. While the above are just a few ideas too general to invest in without further work, not the least of which is identifying appropriate investable securities (and note that the price of any security, no matter how wonderful, always matters), my hope is that, if nothing else, one or more of these top down ideas may trigger a $-making connection as we go about the daily grind of bottom up treasure hunting.
The analysis begins with a simple pair of questions: what will the world look like in 5, 10, 25 years out (anything beyond this is silly and irrelevant)? What are the great, indisputable, no-brainer forces currently at work that are moving the world to these places? The answers, I believe, primarily center on:
a. Demographics
b. Technology
c. Preferences
Drilling down further, we find another set of more specific questions. How will people be living their lives? What will they be buying? What will they value? What will they be willing to pay for? How will people be spending their time?
Here are some of the specifics that I see:
Immigration into the USA, the growth of the USA
The rise of Hispanic needs and preferences
• Homes, maybe pre-fab
• Soccer
• Discount retail
• Wire transfers, money movement
• Christianity
Baby boomer retirement
• Health care
• Leisure time - travel, beer, and wine
• Entertainment, in general
• Homes / second homes
• Gambling
• Wellness: a generation that will deal proactively with their fear of death
• The Grandkids, spoiling them
• Financial services: a “guy” (aka broker) will be needed, more often than not, to secure them
• Online shopping, travel, news/information
• Reading books
• Restaurants: quick, healthy lunches, and reasonably-priced dinners
Developing World Consumer
• Cars
• Houses
• Brands: to make a statement, demonstrate new status
• Entertainment (movies, sports)
• Alcohol
• Appliances
• Stores, shopping
• Fast food
• Banking, sources of credit
• Gambling
The Internet
• Information
• News
• Shopping
• Travel
• Entertainment, leisure time
As hinted at the outset, the ultimate task of the investor is not just to answer these questions, but to gain use from their answers (i.e. to reap profits). My prescription for doing this is to identify the great, energetic companies that will be taking advantage of these forces or to identify the great, energetic companies that are out competing in their respective spaces (and both willing and capable of growing into related spaces), spaces which will be around and relatively unhindered in 5, 10, 25 years. What we are seeking to do, essentially, is to profit from the compounding, over great amounts of time, of profits that are driven by the great forces and/or simple operational excellence. While the above are just a few ideas too general to invest in without further work, not the least of which is identifying appropriate investable securities (and note that the price of any security, no matter how wonderful, always matters), my hope is that, if nothing else, one or more of these top down ideas may trigger a $-making connection as we go about the daily grind of bottom up treasure hunting.
