From “black swans” to “snow leopards”: How can these trends impact your investment portfolio? [Wednesdays: The Independent Investor]
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The Independent Investor
Are you familiar with the term, “black swan?”
We’re not referring to its literal definition, though. We’re pertaining to the metaphor.
For those of you who haven’t heard about this before, a “black swan” is an unforeseen event that has a HUGE impact on the markets or the world in general. The term was popularized by statistician and former options trader Nassim Nicholas Taleb.
One example of a “black swan” event is the COVID-19 pandemic. Nobody could’ve predicted the health crisis in advance and been prepared.
… but did you know that in 2021, a new variation on the term emerged?
Industry experts call this new variation, “snow leopard.”
Photo from Altimetry
The History of the “Snow Leopard” Metaphor
In 1978, American novelist and naturalist Peter Matthiessen published “The Snow Leopard,” which detailed his quest to find the animal of the same name. Snow leopards are part of the “great cat” species that inhabit the forbidding heights of Central Asia.
According to Matthiessen’s work, these animals are so elusive they had only been seen twice in the previous quarter century! His tale is a moving and powerful read, and won two National Book Awards.
Using Matthiessen’s insights, Peter Engelke, a strategic foresight expert at the Washington think tank Atlantic Council, adopted “snow leopard” to describe a “known but underappreciated—perhaps even forgotten—phenomenon” that could potentially change the world.
He used this as a metaphor for an event that lurks in the background until it sneaks up and “reminds us that it vividly exists.”
Engelke also contrasts the term with the far better known “black swan,” noting that the “snow leopard” isn’t necessarily a single discrete event and its arrival is often preceded by ample information that is readily available if looked for.
Technological breakthroughs or new innovations are good examples of “snow leopards.” Oftentimes, these developments are known to the public but remain underappreciated while the work is still in progress. Then, once they’re finalized, they result in life-changing transformations.
Many of these events go hand-in-hand with various investment themes. Let’s look at how they intersect with one another and what that means for your investment portfolio.
The Atlantic Council’s Global Foresight in 2023
The Atlantic Council came up with 6 “snow leopards” to watch out for in 2023:
- Tightening algorithm regulation
- Corporate decoupling from China
- The battery revolution democratizing electric vehicles
- A platform worker-driven labor movement
- The potential of geoengineering
- Rapprochement between Japan and South Korea
According to Robert Spivey, Director of Research at Valens Research, each of these “snow leopards” has a lot in common with Altimetry Financial Research’s favorite investment themes.
For instance: Both corporate decoupling from China and the Japanese-South Korean rapprochement point to countries diversifying their supply chains away from China.
Spivey says this isn’t news to Altimetry. For months now, they’ve been pounding the table on the supply chain supercycle—the wave of investment in U.S. infrastructure as companies bring manufacturing back to American shores.
Additionally, these “snow leopards” brought the political differences between the U.S. and China front and center. As corporations rebuild their supply chains away from the latter, investors can expect stronger ties between America and its allies around trade.
On a similar note, the tech sector is changing… quickly, to be specific.
The Atlantic Council believes tightening algorithm regulations and the rise of tech-enabled, platform-based labor force will mean big changes for the industry.
… and Spivey agrees. He says tighter tech regulations may be just around the corner. In fact, it’s a sector he and his team at Altimetry are approaching with caution right now.
The world is moving towards greener energy recently. This means various industries will see a big leap in energy storage capabilities in the future.
In all of these “snow leopards,” it’s clear that the U.S. leads the way in innovation, research and development, investments, and technological breakthroughs. According to Spivey, the country will be one of the biggest winners of these trends.
“Snow Leopards” Could Make or Break Your Portfolio
It’s easy to ignore change when it’s not right in front of our faces.
However, “snow leopards” will likely have a big impact on various investments in 2023. That’s why as an investor, you have to keep these trends in mind.
Oh, and one more thing: Before you buy into companies at the forefront of big industry shifts, consider the TIMING. This will help improve the way you think about your investment ideas.
Take note of these “snow leopards” as you think of ways to boost your investing strategies!
These big changes often lead to the biggest money-making opportunities. So, consider how they might alter the global economy… and how you can best prepare your portfolio. This could mean thinking about which companies could be hurt by greater algorithm regulation or finding a list of firms investing in a platform-based labor force.
By knowing what changes are coming ahead of time, you will be able to stay in or get out of trends before it’s too late.
(This article is from The Business Builder Daily, a newsletter by The I Institute in collaboration with MBO Partners.)
About The Dynamic Marketing Communiqué’s
“Wednesdays: The Independent Investor”
To best understand a firm, it makes sense to know its underlying earning power.
In two of the greatest books ever written on investing, the “Intelligent Investor” by Benjamin Graham and “Security Analysis” by David Dodd and Benjamin Graham (yes, Graham authored both of these books), the term “earning power” is mentioned hundreds of times.
Despite that, it’s surprising how earning power is mentioned seldomly in literature on business strategy. If the goal of a business is wealth creation, then the performance metrics must include the earning power concept.
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Hope you’ve found this week’s insights interesting and helpful.
Stay tuned for next Wednesday’s “The Independent Investor!”
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