By Liu-Yue (Louie) Lam, Global Investment Strategist, Oxstones Investment Club,
Everyone Loves a Comeback Story
George Washington once said – “These are times that try men’s souls”
The past five years were difficult times for many Americans. We experienced the greatest financial crisis in generations which included the biggest stock market crash and the largest real estate bust in over 80 years. Currently, the U.S. still suffers from a combination of high unemployment and slow economic growth which is compounded by the weight of historically high debt levels. The severe structural problems mentioned are more often associated with problems in emerging market economies. Many now call the USA and other developed economies in EU and Japan the new emerging markets.
But what goes down must eventually go up again. Everyone loves a comeback story and for America there’s light at the end of this dark tunnel. As a proud American, I want to take an opportunity to focus on what makes America’s future look so bright. One of the most attractive long term investment themes is the on-shoring trend in U.S. manufacturing. Made in the USA is helping to rebuild America again.
America’s Economic Moat
New advances in drilling technologies are allowing America to secure energy independence by unlocking unconventional energy resources such as shale oil and gas. This is providing one of the greatest competitive advantages to U.S. based manufacturers in the form of cheap energy costs. 3-D printing and robotic warehouse facilities provide additional competitive advantages to U.S. manufacturers. More importantly, America’s greatest competitive advantage is the entrepreneurial spirit of our workforce. We are a nation of change agents. The pioneering DNA inherent in all Americans is something that cannot be easily replicated. This entrepreneurial spirit drives us to re-invent ourselves and to create new industries and opportunities. The ability to innovate and accept risks are intangible traits that are the secret source of America’s enduring strength.
Government Needs to Help Build a Sustainable Economic Model
Unfortunately our economy will experience chaotic uncertainty once again this autumn as another ugly budget and debt ceiling battle begin in Washington, DC. Finding the right balance between business and government holds the key to our future prosperity.
The wild cards are whether politicians are ready to compromise and make the strategic decisions on monetary and fiscal policies in order to create a sustainable economic model around our competitive advantages. Strategic investments to update and modernize ports and transportation infrastructure can provide long term efficiencies to the manufacturing sector. New investments in energy pipelines, refineries, and export logistics will not only provide critical energy security but also allow us to export surplus energy resources to overseas markets.
The abundance of cheap energy resources will also attract patient long term capital (FDI) from foreign manufacturers. The allure of closer proximity to the world’s most attractive market, the availability of low cost inputs, the strong protection and enforcement of law, and access to our capital markets will prove to be an irresistible value proposition for any manufacturer.
How to Invest in America’s future?
Invest in America’s long term future by investing in our nation’s entrepreneurs.
You can either become an entrepreneur and build and grow your own start-up or invest in other entrepreneurs. The new JOBS Act is a game changer because it allows everyone not just accredited investors the opportunity to invest in private businesses. Investors can invest in America’s future and the next generation of innovation through multiple crowd funding platforms. It is risky since not everyone can properly evaluate start-ups so make sure to allocate only a small percentage of your portfolio to angel investing. But with so much volatility in the financial markets and a prolonged period of low interest rates; investors are seeking new opportunities. Unless you can stock pick like Warren Buffett it may be prudent in the long run to diversify by adding alternative investments that are uncorrelated with core holdings in order to minimize portfolio risk.
Old Formula for Success Has Not Changed
The inevitable global trade and foreign currency realignments will cause the currencies of many trade surplus nations to rise in value and lead to a rise in purchasing power. A return to a weak dollar policy will help lead a renaissance in U.S. manufacturing by leveling the global playing field so we can export competitively priced products to the new emerging middle class societies across the new Silk Road. A weaker dollar will also slowly inflate away some of the national debt issues. Our new energy resources will also help resolve our trade imbalances.
As the champion of free trade, America needs to take the leadership role and implement two important free trade pacts that are critical for a sustainable future in manufacturing and exporting. The FTAA (Free Trade Area of the Americas) will create a massive free trade dollar zone across Americas just when other regions in the world are beginning to use less dollars and trade more in other currencies. The Transatlantic Trade and Investment Partnership will combine USA and EU markets, and create a juggernaut free trade agreement that account for 50% of global GDP.
It’s time we take a few pages out of America’s old playbook (American entrepreneurial spirit, innovative workforce, infrastructure investments, manufacturing, export/trade, and weak dollar policy) to regain America’s former glory. The U.S. manufacturing revival is just getting started.
Your one of many American Entrepreneurial Investors,
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