By Phin Upham
Analyzing investing from a global perspective can be challenging, which is why it helps to take a big step back, to see the entire forest instead of just the trees. This approach will help to see what other investors don’t see. What if there was a contest to see which experts can name the tallest tree in a forest 10 years from now? The contestants would include a botanist, an immunologist, a pedologist, and a layman. What would these very different people say? The botanist might select the fastest growing tree because he is an expert on tree species. The immunologist might select the tree that was resistant to the black rot that he noticed in the forest. An expert on soil, the pedologist, might select the tree in the most fertile ground. However, all these so-called experts might be wrong. The layman might have a better chance at winning the contest. He might step back and see the dry brush. He might consider that a forest fire could easily wipe away the entire forest, leaving one tree alone in the field. He might select that tree. Back to investing from a global perspective: what would happen if our current situation becomes a global problem? What is the most probable equal of a global forest fire?
The severity of the global recession and the fact that it depends on globalization might mean that this global recession isn’t going anywhere anytime soon. In fact, it might take some ugly changes before anything gets better. The Great Depression was lifted with WWII, not by FDR. The war effort was responsible for employing nearly every man (and many women) and using up nearly every factory. If the Great Depression was lifted by a world war, could the outcome of our global recession be another war?
There are many problems around the world that have the potential to ignite a third world war. There is the growing tension between near-nuclear Iran and Israel. What will the repercussions of this battle be? The former soviet and Baltic states continue to express their discontent; even Moscow experience violent protests. The protests in China have also been intensifying with the economic slowdown. Even though the Communist government covers up the numbers, people who know the truth say it is very serious.
A global “fire” could also easily ignite out of the totalitarian countries that are oil exporters with high marginal costs. Since the Middle East has a marginal cost of oil around $12, they are out of the picture. The same is true for rich countries such as Canada. However, the countries of concern include Venezuela, Russia, and Iran.
This article was written by By Phin Upham. Phin Upham has attended Harvard University and the University of Pennsylvania’s Wharton School of Business. He has worked in macro and illiquid investing and currently works at a family office / hedge fund. For more info visit Phin Upham’s Website or Phin Upham’s twitter page.