Posted: January 23rd, 2009 | Author: Cody | Filed under: Investing | Tags: Africa, global warming, mideconomics, predictive modeling | No Comments »
More and more as I write for this blog I realize that it is actually serving as a training ground for my understanding of an economic world. Everything is now filtering through my view of consequences and outcomes. Today I read a really interesting article about a project called the Global Soil Map which is being developed based on soil mapping in Africa. It’s supported by the Bill and Melinda Gates foundation (an $18 million dollar grant) and is hoping to be able to map the surface of Africa in order to educate farmers about the best places to grow, the areas most likely to erode, and what type of crops to grow in which areas. Read more at IRIN Africa.
Again this seems to be an area where a mideconomic view or a multi-year view could work perfectly along with good predictive analysis in order to develop a wonderful theory of commodity prices in Africa. If one were to use the global soil map and overlay it with annual weather pattern models, there is the possibility of being able to predict which products are going to be needed most in which areas. As an investor, that means that I would be able to either redirect resources there or bet against the resources that are heavily influenced by African imports.
It’s interesting to think about using predictive modeling in this way. The question in some senses becomes “if you can predict what’s going to be short, why would you try to make money off of it rather than fixing the problem?” I believe that trying to make money off of the situation is in fact fixing the situation. Think about it. If I find an inefficiency in the market, an accurate prediction of crop shortages, then I should announce my findings to the world. So what happens when two or three people have differing findings? Who decides what gets done? That’s where capitalism becomes the amazing voting machine. I vote with my dollars that the crop is going to be short this year. You vote that it’s not. The winner gets paid. And, by betting that the crop is going to be short this year, I am redirecting crops to the area that need them most because that is the singular area that I can make the most money from it. If demand is very high, price is as well. Price is simply a rationing tool that allows us to ensure that everything is distributed in as fair a manner as possible.
I say predict away. Place your bets and move resources to the places that need them the most. And really, the better capitalists and investors get at predicting things, the less money that gets made and the less crisis happen. Place your bets on investors, they usually steer you right (until they all start referencing each other hoping the other guy is right, then all bets are off.. good luck).
Posted: November 6th, 2008 | Author: Cody | Filed under: Investing | Tags: global warming, investments, jetlag, mideconomics, pine bark, solar | No Comments »
I believe in a lot of ways that business and investing are different sides of the same coin. In business, we’re always trying to approach the right set of customers with the right product at the right price. In investing, you’re trying to find the right industry, then the right company that is targeting the right customers with the right product at the right price, and then you have to try and buy that company at the right price for yourself.
I started investing in the stock market when I was twelve and did it all through high school. When I reached college I realized that I didn’t have time to really understand what was going on. That’s one of the tricks to making money consistently in the market in my view. You have to really understand mideconomics. Most people are split into macro or micro economics, but in my view both focus the attention on cycles that are too short. Microeconomics tries to guess which company is going to be best over the next quarter because of the customers they have tomorrow. It looks at internal company metrics and industry-wide comparisons. Don’t get me wrong, i believe each of these metrics are quite important, but they don’t tell the whole story. See, a huge part of being successful in investing is picking the right industry as I said before. if you have the best company in a bad industry, you have a bad stock. But if you have a marginal stock in a great industry, you have a good stock. Macroeconomics has a tendency to, amazingly, also become very shortsighted. People start looking at movements in the Fed as the holy grail for what to do tomorrow. The implication is that the macroeconomic decisions will affect us right now so we have to react or we’ll be left behind.The macroeconomic view also fails to really tell us which industry to invest in unless the industry we select is somehow tied directly to macroeconomic trends. Again, don’t ignore macroeconomic information, but don’t make it your main priority. Here’s a crazy stat to think about: we’re heading into a recession so our economy is going to drop somewhere between 1-5%. So we still have 95% of our economy. Why are so many people worried? Do we all believe we’re in the bad 5%? Business still has to get done and certain companies are going to take advantage of everyone else’s fears and nervousness.
This is where my idea of the mideconomic view has served me well. I try to take both the micro and macro economic views, but I also try to find one further view that few others seem to follow. I try to find where the game changing industries are going to be. It seems that the industries with the most innovation are the ones that tend to make it over the long term. That’s why, for example, I would recommend investing in solar eventually, once the market settles down a bit. There are absolutely amazing innovations being made that will cause solar to become a viable power alternative over the next few years. Here are a few examples: Rensselaer Polytechnic Institute Researchers found a way to make solar panels non-reflective and thus absorb sunlight from any angle, greatly increasing the light uptake and conversion. In Spain, researchers have found a way to make solar cells take up sunlight from either side, again decreasing the cost of harvesting sunlight. The real trick to investing by way of mideconomics is understanding that you are actually investing for 5 years or more out. It’s not long term investment in the traditional sense where you figure that a company will be around forever so they’re a good investment, but rather an educated bet on both an industry and then a company inside of that industry because of the macroeconomic, cyclical view of the future and the microeconomic, industry and company view. How does the individual company invest in the future, what kind of links do they have to established researchers, and how well do they manage their internal resources?
In other news and tidbits, here are some interesting links. “A new study published in the journal of Minerva Cardioangiologica reveals Pycnogenol, pine bark extract from the French maritime pine tree, reduces jetlag in passengers by nearly 50 percent… lowered symptoms of jetlag such as fatigue, headaches, insomnia and brain edema (swelling) in both healthy individuals and hypertensive patients”, read more here. Elsewhere, it appears that we can use rocks to solve global warming. Part of the techtonic plates, about 20 miles underground, react with CO2, so we could be piping CO2 from powerplants down there in the near future. Read more here.
