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Invest locally in order to make money in the coming economic ‘ice age’

posted Sep 3, 2015, 1:29 PM by David Khorram   [ updated Sep 3, 2015, 3:25 PM ]
In lieu of current economic climate, we get lost of excused and how, what , who and when and not much about why .

"Industrial age" and "information"  age financing and banking  have created  a failing ecosystem that its symptoms are as follow  ;
  1. National debt ( US , Europe, Japan and now China) 
  2. Personal debt among 98% group 
  3. Devaluation of many currencies 
  4. Painful volatility and declines of stocks worldwide
  5. Deflationary trends in developed markets
Seems the overall equation is set to be an insolvable for all  expect few banking and financing institution  ( 2%)  at the present time.

Then if above is  relevant and correct , what could be the solution.

Our research within last four years indicates that once Local Entrepreneurs deploy " Knowledge age " technique, techniques and tools , then new wealth will be created .

Looking at recent entrepreneurs generating billion of dollars and employees hundreds of thousands people is a testament to this fact. ( of course , there are exception since we are not complete moved to  " Knowledge age " yet) 


We advocate networking  Entrepreneurs, 1st locally then globally will help all of us. Even banking and financial institutions since if the 98% are  in red , they will stop practicing old techniques such as investing in stock market with no control.

We have started deploying a simple local solution as a place to start  and start finding and networking entrepreneurs. If you need to get more information. Please contact us .    

We also found this article  very helpful and educational 

How to make money in the coming economic ‘ice age’ by  Philip van Doorn

A huge increase in overall debt, combined with currency devaluation in emerging markets, is likely to lead to a Japan-like period of deflation in the U.S. and weak returns for most stocks, according to Société Générale analysts.

Every day there are headlines about slowing economic growth in China, and the country’s currency devaluation last month was a catalyst for painful volatility and declines of stocks worldwide. But these events may point to a longer-term problem that U.S. investors have to consider.

Overall debt in the United States has continued to grow and is now at an all-time high, and debt has also shot up in Europe, Japan and now China. “Combined with adverse demographics, an excessive debt burden erodes disposable income of people who have to finance the debt,” according to Société Générale analyst Robbert van Batenburg.

Meanwhile, “devaluation of many currencies in emerging markets particularly has been driving deflationary trends in developed markets,” van Batenburg said during an interview on Wednesday.

It makes plenty of sense for exporters of manufactured goods, worried about their own economies, to go through competitive rounds of devaluation in order to boost their exports to developed countries.

The good news for people in developed countries is the continued flow of cheaper goods. But there’s a price.

Société Générale

“While investors have already talked about the eurozone looking similar to Japan, a deflationary recession also beckons for the U.S.,” Société Générale strategist Albert Edwards said in a report on July 30.

Building on this thesis, analysts from the bank said last week that this economic “ice age” will lead to higher risk and lower returns for stocks.

“We’ve had this deflationary environment in Japan three times, in 1994 to 1996, 1999 to 2007 and 2012 to 2014. We have seen an overall market in Japan that has led to bonds outperforming stocks,” van Batenburg said.

This chart illustrates just how terribly Japan’s Nikkei 225 Index NIK, +0.48% has performed, on a price basis, against the S&P 500 Index SPX, +0.12% since the end of 1989:
FactSet

Since 1989, the Nikkei 225 index is down 53% on a price basis, while the S&P 500 is up 451%.

The aging of the U.S. population will place a further drag on the economy, with an increasing percentage of people “relying on government support and entitlement programs, which in turn will push up overall debt,” van Batenburg said. “The result of all this is a relentless compression of growth and eventually declining earnings expectations,” he added.
What to do about it

Considering van Batenburg’s comment about government bonds outperforming equities in Japan, investors fearing a long-term weak trend for the U.S. stock market might want to consider an income strategy. During last week’s market turmoil we discussed various aspects of income investing and ways to limit volatility risk.

Of course, long-term institutional investors will still be holding stock. If you still want to go for long-term growth during an economic ice age, Société Générale has recommended focusing on quality stocks, that meet these criteria, outlined by van Batenburg:

• Stable and sustainable profits

• Strong balance sheet

• Low debt

• Ability to fund operations internally

• In a market with high barriers to entry

• Strong competitive position

Société Générale incorporated the Piotroski Score, which is a model developed by Stanford University Associate Professor Joseph Piotroski.

The ice-age basket of equities recommended by Société Générale includes 43 companies, most of which are headquartered in the United States.

We can’t include the entire list, but here are the three largest ice-age basket companies recommended by Société Générale by market capitalization in each sector, or fewer if there are less than three in that sector.

We included five-year average returns on equity as a relative measure of performance, although it is not very useful to compare ROE across industries. We also included five-year total returns, even though they have no bearing on future performance.

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