Have you ever thought about how investing will change over the next century? What will the investment landscape look like in 2110, or even in 2080?
I have to admit, I don’t think I’ve ever thought about this specific question before. But it occurred to me when I heard an analyst from London talking about what all the new sovereign debt problems and currency tensions will mean for investors. This too, shall pass, they say. Then someone was tweeting around about the biggest bubbles and busts from prior centuries (you already know them – the tulip bubble, etc.). And I thought:
Is investing one big bubble? The whole idea of investing itself as we know it – putting our money into stocks, bonds, and mutual funds and ETFs?
Of course – investing in itself will never be a bubble – for as long as there has been international trade, at least, there have been investors. Just think of Columbus’ fateful trip over the ocean – he was backed by venture capitalists. And we know the history of famous wealthy families such as the Medicis.
Investing in the 22nd Century
There are a few trends in place already from which one can extrapolate and imagine where the logic will lead them over the next 100 years. This can’t be any actual prediction, of course, but it’s probably possible to hit on a general sense of at least how stock markets will be different if we can’t actually know in advance what investing in the 22nd century will actually be like.
This is the train you can hear two days before its arrival. Authors Cohen and DeLong have explained this well in their new book, The End of Influence: What Happens When Other Countries Have the Money (2010). What is still undetermined, though, is what kind of new role the U.S. will have internationally and economically, and specifically in its relation to China, who is the largest lender to the U.S. Will the U.S. have paid off its debts to China and Japan? Will it just try to export inflation? Will there be economic wars and massive new regulations that change the face of the global financial system?
On the other hand, @ajproc, an artist, believes that there will be “potential trouble with the Asian markets, especially China… its hyper market can’t sustain its growth.”
1. UN, IMF, World Bank open branches in Shanghai or Beijing.
2. Prestigious scholarship programs (like the Rhodes) develop in China, Taiwan.
3. A new global body (eg., the G20, etc.) is established and led by Beijing.
4. The USD is no longer the world reserve currency.
Nanotech, Biotech and Green Tech continue to lead
Tech trends always have indirect effects on the markets because they often lead to new innovations around which new companies and even new industries grow. Don’t forget about military technologies, either. In the U.S. this is still often the real, hidden Silicon Valley – many new technologies are first researched within the confines of the military. We will see some radical advances in energy technologies in particular. The long-researched “zero point energy” field is going to yield some results sooner or later – perhaps under another name.
@JoeTaxpayerBlog, who blogs about various financial topics, suggests that there will be “no flying cars. Advances in nanotechnology will revolutionize both health care and manufacturing. People will be healthier, with longer life expectancies past 100.”
@FreeFromBroke agrees, saying “ I think the future of investing lies in three areas: technology, healthcare and energy. Financial institutions will play their role too!”
1. Electric cars are a thing of the past, giving way to a new fuel technology.
2. Medical care and health trends boost lifespans to 120+
3. NASDAQ becomes the leading index, replacing the DJIA and S&P 500.
Commodities, materials, and energy will continue to be in high demand as the emerging markets develop and surpass the developed countries in both population and consumer demand. In 2009 already, China surpassed all other countries as the leading exporter of goods and became the world’s leading car manufacturer – which, we know, also takes a fair amount of platinum (and as they move into electric cars, will require more and more rare earth metals, too.)
@arohan, a finance and investment blogger, speculates that some of the best investments will be in India, Russia, South Africa, Turkey, Australia & Canada, due to their resources and demographics. Some of the worst investments, he thinks, could be the USD and gold. Concerning broader trends, the aging populations (US, Japan, Europe, China) will fare worse. Resource heavy countries (Australia, Canada, Russia) will do well, according to @arohan.
@Matt_SF of Steadfast Finances predicts that “natural water resources, like the Ogallala Aquifer, will become more valuable & restricted than Saudi oil fields.”
@EverydayFinance has a different, somewhat unusual take. He thinks that “not drilling oil now in US is one of the sole smart things we’ve done. Let the world deplete it and US will be the sole source in 2110.”
1. Shale drilling runs out of stream and peak oil becomes a reality.
2. Gold trades for $5000/oz., or is used as a global currency.
3. Fossil fuel energy rationing linked to individual networth or income.
4. Water becomes a prized asset and “access units” trade on exchanges.
The More Things Change, More They Stay the Same
Then of course there is the case for things being more or less the same as they are now. Perhaps change comes so gradually we never feel much of it until we look back 30, 40, 50 years. Just as we were all investing in the stock market in the early 1920’s, we will be largely doing the same thing in 2020, so why not also in 2110? Perhaps it will just look different.
The rise of high-frequency trading in 2009, where computers use algorithmic calculations to perform lightning-speed trading decisions and transactions, might trickle down to the average investor – increasing the speed and velocity of the markets considerably.
As @jeffrosecfp, a Certified Financial Planner, says, “ I think you’ll see the fundamentals hold up: be diversified, watch correlation, dollar cost average. Big change: buy and hold is dead.”
And my friend Tom @CanadianFinance, who writes the Canadian Finance Blog, says, “I would expect the trend towards index funds and ETFs to continue. Otherwise, still the same cycle of bubbles and crashes.”
1. Average investors leave their stock purchase programs on autopilot.
2. Barriers between local exchanges break down, or one large global exchange is set up.
3. Investing in options becomes commonplace and even necessary for profits.
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