Often it seems that we look backward in the mirror to move forward. With financial planning that often occurs with investments where people believe that what worked yesterday will work tomorrow. Often it does, but on occasion it does not. However, a properly diversified portfolio with someone persevering so they do not constantly change the plan should do well and history has rewarded the patient investor.
Looking back on 2014 and ahead to 2015 there are several trends that seem to be strengthening. First, the momentum of the US economy appears to be accelerating. The combination of the gridlocked political system looks to be contracting the federal deficit by just the right amount so that we are not thrown into a major recession similar to 2008 nor pushed into hyperinflation similar to what we experienced in the 1970s. Second, certain technological breakthroughs are finally showing productivity gains. Additive manufacturing which is better known as 3D printing, is saving manufacturers’ time in creating prototypes. The result is more innovation, better equipment and faster production. Soon the machines should present the same savings to commercial production. Third, radio controlled chips are enhancing the way we live. Wrist devices are assisting people with exercising more, eating less, monitoring blood levels and creating a smarter home. Drones are filling the sky and should soon bring packages to everyone and photograph anything that moves or is stationary.
Fourth, completing the genome helped us learn that RNA and microbes also contribute to a person’s health. We are now studying the concept that humans are comprised of 90% bacteria so indiscriminately killing bacteria may not be a good idea. We now understand that without certain bacteria humans cannot exist. Hopefully in the near future we will figure out the ratios and types of germs that are necessary for humans to thrive.
Fifth, we now know that meditation and exercise are important for human wellbeing. We understand that the brain changes as we age. New cells grow and old ones die out. That has led to better understanding of the human mind.
Sixth, the combination of private property mineral rights with horizontal drilling and fracking have been game changers for hydro carbons. The US passed Saudi Arabia in petroleum production in 2014. There are many countries, China, Poland, Brazil and Canada that have as much, if not greater shale formations but have yet to exploit the technology. In all of these countries, the government owns the mineral rights. So, we expect oil prices to be low for this decade and more countries to follow the US’s lead but it may be many years before those countries match the US for exploiting this resource.
With our binoculars we believe the trends in 2014 will continue in 2015. We expect, the US to bring positive returns for 2015 and so will the Global markets. Investors need to be patient and the returns will happen.
