I believe that life goes in big circles. Two of the keys to investing for me are i) anticipating long term trends which are likely to reverse, and ii) developing the relevant knowledge network to take advantage of the reversing trend. The downside of this approach is having to be prepared to spend long periods of time during which fellow investors view one's investing activities as a quaint distraction from how real investors think and act!
An example of the above was pawnbroking when I invested in Albemarle & Bond in 1988. I expressed the view to colleagues that there would be an increasing section of the population whose disposable income would shrink and to whom the clearing banks would become increasingly unwilling to lend. For many years, it was considered inconceivable that people would become poorer but today, regrettably, it is becoming only too apparent.
Turning to a more appealing trend reversal, readers will be aware that LCFR has had an unfashionable focus for years on UK manufacturers which are net exporters. The reason for mentioning this today is that I anticipate that the trend of shrinking UK manufacturing will start to reverse and I was encouraged by a speech given by Sir Philip Green at London Fashion Week rallying retailers to rebuild the UK's dwindling manufacturing capacity.
Many people would say that Sir Philip was responsible for a lot of textile manufacturing moving offshore in the first place. I think that this move was inevitable (with or without Sir Philip) because of trade becoming increasingly global and the huge pay differentials between UK workers and their counterparts in emerging economies. However, Sir Philip is nothing if not streetwise, and is, I imagine, motivated by the financial benefits to be derived from UK manufacturing through a combination of increasing wages in the emerging economies, the costs of managing a very distant supply chain, the challenge involved in achieving with Far East manufacturers the levels of quality required by the consumer, the emergence of manufacturing plant which facilitates personalised manufacturing at low cost, significant weakening of the pound, and increased availability of labour in the UK.
If the UK manufacturing bandwagon attracts supporters such as Sir Philip Green with the ability to get media exposure, then I believe that manufacturing may well become a larger component of the UK economy quicker than most forecasters would…
