2020 Vision

31st of December, 2019

It is commonly said that HINDSIGHT is 20/20.

That we can see the past very clearly. We can learn from our mistakes and should we be presented with the same set of circumstances again we can call on our experiences and make better decisions the next time round.

I am not so sure that this is true? Especially in the world of finance.

2020 – can you believe it?

Now this blog is not going to be some New Year’s resolution call to action urging you to review your finances. I hope that you would do that anyway!

Nor is it to have a brag about the year that was for Calnan Flack.

For me it is 2020 that got me.

To refer to the year as 2020 is so very appropriate for the financial industry.

A new beginning? Or time to reflect on the past?

It is similar to the economic theory that assumes that humans will “behave in a rational manner”. Personally, I think that more than often people act in an irrational manner, especially when placed under stress.

Too few people learn from the past – especially the past of others. Instead of making new and better decisions when faced with similar circumstances – they instead allow their emotions to cloud their thinking, to distort their judgement and garble their logic.

At Calnan Flack we spend an enormous amount of time learning from history – to understand behavioural finance, our emotions and those of our fellow investors.

“Those who fail to learn from history are doomed to repeat it.”

Sir Winston Churchill.

Looking back to see forward

This is a pretty powerful statement when you think about it. Why, when a solution is presented to improving their decision making do so few people embrace it?

Now I do have a little soft spot for some of old Winston’s philosophies, being a Georgist and all, but this blog is not just about him. There is another VERY telling quote from Sir W. One which has had a very big impact on the investment approach of Calnan Flack, and that is:

“The further back you can look, the further forward you are likely to see.”

This statement underpins Calnan Flack’s investment approach. Learn from history because the future is nothing but a repeat of the past.

Sure, things will be different this time, they must be as they must reflect our time in history.

You can’t expect the motor car to have had an impact in the Napoleonic Wars or for Trading Companies to have had an influence in building the pyramids!

It is ridiculous to think that they could have. The British East India Company wasn’t founded until 1600 and it was 1886 when Karl Benz patented his Motorwagen….

The lesson is circumstances change but people don’t change. Our desires, emotions and responses – even our need for LAND hasn’t changed in 1,000’s of years.

It is why Trump and his trade wars, or the impact of a growing China, even the BREXIT debacle is nothing new to us. They are not something to be afraid of.

We seem to be petrified of the future – only seeing a dark ominous outlook. Robots are going to take our jobs. Facebook, the biggest data collector of them all is going to control the world.

We have seen it all before and somehow survived!

Facebook: the BIGGEST data hoarder of them all

Many people are frightened of globalisation. They are concerned that Facebook or Google will somehow take over the world and control their lives. That humans, as a species, will be doomed forever unable to prevent the collection of their data and their ultimate influence over us. Do we face a dire future with these tech companies having stolen our personal data and privacy from under our noses?

I mentioned the British East India Company (BEIC) deliberately. Did you know that at one point in history it controlled HALF OF THE WORLD’S TRADE and is thought to be the world’s most powerful company EVER!

The BEIC controlled governments, levied taxes, had its own army of over 250,000 personnel, and controlled over 2 million square kilometres including the Indian subcontinent and ruled over millions of people. In today’s dollars, it’s reputed to be worth more than twice that of Saudi Aramco!

It had a trading monopoly over most parts of the world and on many goods including opium. It was the centrepiece of the American revolution as it was a British East India Company ship that was involved in the Boston Tea Party.

This company traded, bartered, intimidated, took, stole, looted and waged war with whoever they wanted to get whatever they wanted throughout the world.

And with that wealth came ultimate power for those in charge.

It is amazing when you consider the ramifications of this power and control. It could not have been a great time for those who stood in the way of this massive bully or for those that were not bestowed by its privilege.

My point is that there have been times far worse than now and somehow, we have survived. Even improved our standard of living and social welfare services.

No matter what is happening around us today, there have been similar events throughout history.

Humans are the apex species because of our ability to adapt. Darwin taught us that and this has enabled us to flourish and make massive improvements to our lives.

I don’t really understand why people are so morbid when thinking about the future. In the immortal words of Timbuk 3 “The Future’s So Bright, I Gotta Wear Shades”.

If we combine the two Churchill quotes to become:

“Those who fail to learn from history are doomed to repeat it.”

However,

“The further back you can look, the further forward you are likely to see.”

Let me give you an example of this:

Winning Gold Medals

On September 7, 2013, the International Olympic Committee awarded the Games of the XXXII Olympiad in 2020 to Tokyo. It’s a wonderful thing for a country to host the Olympics filling its citizens with national pride.

2020 will place Tokyo on an international pedestal for them to showcase their country, their culture and traditions. It’s an enormous opportunity and responsibility.

In November 2016, at our Calnan Flack Forecasting Conference, we identified the Nikkei 225 as being the world index to watch. At that time, it had just had a pull back and we knew the consequences of the coming Games.

History shows us the importance of being awarded the hosting rights of the Olympics for a nation and it cannot be understated.

We knew that hosting the Olympics would bring forward a huge amount of infrastructure spending and history tells us that this will manifest back into the land price.

The appointment of Tokyo as the games host can’t be under stated.

We know that each cycle is Same, Same but Different.

Japan had a MASSIVE cycle during the 1980’s and an even bigger bust! The next cycle never got going as they did not deal with their overhanging credit disaster. Instead of letting banks, business and those who were over leveraged go bust the Japanese government took the opposite tack, placing their financial system on critical life support. By not allowing the excessive credit to be washed out of their system they created what became known as Zombie-Banks and their economy skipped an entire cycle.

That is not the case this cycle and Japan is off and running again and the Olympics will just ensure this continues.

This notion of looking back to look forward is what our Calnan Flack Economic Cycle Action Plan is built upon. It is built upon historical and market truths.

Our role is to identify just how it will manifest this cycle, like the identification of the Japanese index as an investment opportunity.

Our Calnan Flack 2020 Vision

At Calnan Flack we have many visions for 2020– different visions for different aspects of our business and private lives.

Like all of us the new year is a great time for reflection and setting goals.

We continue to be excited about the future both economically and for humanity. Sure, there are problems, but as humans we have a wonderful knack of solving problems when we really want to.

Brexit, Trump, China they will all soon be forgotten or simply confined to historical texts.

The medical and technological advancements we are currently seeing are mind blowing.

Sure, it’s different to previous cycles, but it is also just the same. So, don’t be frightened of the unknown and don’t be worried for the future.

Just know that that while our drivers remain in place, there will be a boom bust cycle so be excited about the future and continue to consult the Calnan Flack Economic Cycle Action Plan to help you navigate the future.

So far, this cycle has played out pretty well in Australia and throughout the world. History tells us to expect the Australian market to push higher in 2020, but once the rally starts in earnest, we need to be aware that the higher prices go, the closer we are getting to the expected midcycle top and correction.

However, DON’T be fooled by the “Henny Penny’s” waiting for the crash. In our opinion there is plenty of time and opportunity to come in the markets. The past tells us so much about what to expect from the future.

There is no reason to fear the year ahead. If you are unsure, then speak to us. We are here to help!