Last Tuesday the 12th, I spent the morning at the Vistage All City meeting.  Our speaker was Brian Beaulieu, a respected economist from the Institute for Trend Research.  Brian’s talk, The Future is Your Decision, offered perspectives for CEOs and individual investors based on his trend research. 

I found his information useful and have summarized his thoughts below. 

Overview

There are 3 mega-trends to be considered when making decisions about your businesses or when investing:

  1. Demographics, the World and the US have increasing population. More people = economic growth
  2. Inflation, not hyperinflation, but easily 4.5% to 6%
  3. Taxes are going up

2011 and 2012 will be periods of modest growth, with continued high unemployment.  At the same time, it will be increasingly difficult to fill certain knowledge based positions because our workforce is a) immobile due to being unable to sell their existing homes and b) inadequately trained for the type of jobs available.

2013 and 2014 will likely be a modest recessionary period like the early 1990’s but not as deep as 2008. 

Commodity prices are on a temporary rest.  2012 will see increasing commodity prices on items such gold, copper, oil and agricultural products.

The US represents 26% of the world economy. While we are the largest economy in the world, our share of the pie is growing smaller and opportunities exist in emerging economies for investment and doing business.  Think Brazil, Australia, and India. 

There will be ongoing weakness of the US dollar.

Housing will no longer be  in recession but will not be  in recovery. Over the next 5 years people will rent and not buy.

Interest rates will remain low and may creep up in 2012 and 2013.  A 2014 recession may provide a temporary restraint on rates.   Currently we have the lowest rates we will see in our lifetime. Borrow long term, taking advantage of fixed rates now and repay with cheaper inflated dollars.

Remember that normal today is tomorrow’s abnormal.

For Businesses

Look for customers in these growth segments:

  • Exporters
  • Alternative Energy
  • Health care
  • Professional services such as law and accounting
  • Higher education
  • Overseas in India, Brazil and Australia

Inflation will hit the labor market in 2012.  You will need a strategy to employ a mobile workforce.  Training programs are more critical than ever, given that you may not be able to find the skill you want in the workforce.

This is a good time to buy other businesses.  If you have not positioned your business for sale, you likely do not have time to do so before the next recession.   The next good selling season will be 2017 and 2018.  Position now to be ready.

Do not let the pain of the past color your vision for the future.  Find a sector of your business that is entrepreneurial and expand that segment.

In periods of inflation, metrics and monitoring are critical.

If you cannot raise prices, sell that business unit.  Raise prices more frequently and in smaller increments. Think 1% to 1.5% per quarter instead of 4% a year.

For Individuals

The stock market will continue to be volatile thru 2011.  Brian is bullish on 2012 and then expects a lackluster market.  Position portfolios to take advantage of the 3 megatrends noted earlier.

Invest globally and position your portfolio to include commodities and other investments that do well in periods of rising interest rates and inflation.

Refinance your home if you have not already done so. If you are young and have equity in your home, consider borrowing the equity and investing it outside your home. 

Summary

Brian closed with a quote from Dr. W Edwards Deming. “It isn’t necessary to change, survival is optional.”

That sort of says it all.  If you can’t love change, at least accept it and position yourself for it.  As with any of these ideas, it is best to a) run the numbers for your personal situation and b) consider the impact based on your personal goals.

As your Wealth Advocate, we are here to guide you and your business thru the coming changes.  If you have questions or need our assistance, please contact me at Mackey@MackeyAdvisors.com or our team at 859-331-7755. 

May prosperity be yours,

Mackey