A Positive Future

This summer the stock market has been buffeted by scary headlines and volatility on relatively light trading volumes, as traders left for vacation and investors largely sat on the sidelines. If you took a break from looking at your portfolio and fretting over headlines, so much the better.

When you consider any life transition challenge—raising and educating children, moving from your 40s into and past retirement age, living out a comfortable retirement—we are talking about journeys of ten, twenty, or thirty years. How relevant are today’s headlines to sound multi-decade planning? Prudent planning and the development of an investment policy is not an exercise in market timing or prognostication.

We can, however, look beyond current headlines for the “back story.” Are there trends worthy of consideration?

In this election year, we hear a lot about “wealth.” Who has it? Who doesn’t have it?

 A report from Boston Consulting Group cited in onwallstreet magazine (July 2012) noted that wealth in North America in 2011 fell by 0.9%, while rising 10.7% in the Asia-Pacific region, in what BCG called a “two-speed world.” Wealth contracted in the Old World of North America, Western Europe, and Japan, while growing in the New World encompassing Asia Pacific ex-Japan, Eastern Europe, Latin America, the Middle East, and Africa.  Yet, reacting to headlines, investors have been yanking money out of international and global mutual funds in record amounts. A reverse strategy most likely is better suited to long-term planning.

Wealth creation in the New World heralds growth in a global middle and upper class, with increased financial capability to buy consumer goods and luxury items, like automobiles. Global multinational companies can ride this trend, along with smaller businesses that supply or provide support services to the big boys, including shipping. Increased consumption of raw materials and commodities can increase prices while providing investment opportunities in equities and alternative investments. The upgrading of infrastructure in the New World—airports, rail lines, roads, bridges, tunnels, energy distribution—is creating expanded opportunities.

With all of the grumbling about outsourcing, how often do we hear about “in sourcing”? Foreign-owned auto plants humming in the south; European-based Airbus building a plant in Mobile, Alabama, to manufacture A-320 150 seat passenger jets.

With growth in income and trade, as people are lifted out of poverty into a more comfortable and secure life, they become less interested in attacking neighbors and trade partners. At a recent conference for advisors hosted by Pershing in Florida, commentator Fareed Zakaria noted a decrease in violence worldwide. You don’t get that reading the headlines.

Wealth generation in the New World heralds growing demand for global equities, including U.S. stocks. This trend could offset some of the pressure engendered as aging boomers sell stocks to finance their retirement.

Private equity firms Carlyle Group, Blackstone Group, and First Reserve Corporation are “betting big on U.S. energy.” (Wall Street Journal, 7/3/12). The flood of oil and natural gas in America as fracking techniques open energy rich shale formations is producing opportunities in the purchase and upgrading of refineries, as well as investments in infrastructure such as pipelines, storage capacity, and related activities.

The U. S. has the technological capability to move toward greater levels of energy independence as we become a major exporter of liquefied natural gas. On February 29, 2012 USA Today reported that for the first time since 1949 the U.S. exported more gasoline, diesel fuel, and heating oil than we imported.

Former president Bill Clinton has called for letting U.S. corporations with billions in earnings stashed overseas bring the money back home tax free if some funds are paid into an “infrastructure bank” to fund projects and jobs. Look for this idea to bubble to the surface.

 All of this will produce winners and losers. That’s what diversification is about, combined with astute money management and a multi-decade vision.

     The Investment CoachTM 1994, Walker Capital Management Corp. Lewis Walker is President of Walker Capital Management Corp. and Walker Capital Advisory Services, Inc., a Registered Investment Advisor (R.I.A.) Securities and certain advisory services offered through The Strategic Financial Alliance, Inc. (SFA).  Lewis Walker is a registered representative of SFA which is otherwise unaffiliated with the Walker Capital Companies.  3930 East Jones Bridge Road ▪ Suite 150 ▪ Norcross, GA 30092 ▪ 770-441-2603 ▪