President Trump’s tariff hike on steel coming into the U.S. has shown that the world’s economy is entering a volatile time. An article by Lewis Johnson for StrongVest Insights argues that this is only one part of the elephant known as global economics.
Lewis, co-chief investment officer for Capital Wealth Advisors, compares the mistake of using only tariffs as a harbinger and the potential for de-globalization to sending blind men out to touch an elephant in order to determine what it looks like.
One touches the ear and says it is a wispy, floppy animal, kind of like a big fan. Another touches the tusk and says it is an animal that is hard and smooth like a spear. Yet another touches the legs and says it is an extremely strong pillar of a beast. The one who touches its side says the creature is like a wall. Finally, one touches its tail and compares the animal to a rope.
Look at the Whole, Not Just the Parts
Such disparate assessments and perspectives can increase uncertainty about where to invest in this changing global economy, according to a large capital investment firm, Southridge Capital, LLC.
However, because the portfolio of Southridge Capital includes financing of more than 250 public companies over the past 20 years, it is the firm’s job to gain an accurate picture of Lewis’s elephant, so it can advise growing companies on matters ranging from financing techniques to balance-sheet management.
Privy investors know that one must understand the entire history of globalization and de-globalization in order to make the best prediction for what’s ahead in these times, encouraged by such historic events as the Greece bailout after the creation of the European Union and the 2008-09 banking crisis in the U.S.
Nationalism Can Reshape Investment Models
Indeed, in his article, Lewis further suggests that the continuing stagnation in the economy after such events—not to mention the dwindling middle class sector in the U.S.—might morph into yet more nationalistic fervor in Europe and the U.S., resulting in renewed re-armament of defenses in countries such as Japan and Germany, where American soldiers lost their lives fighting overseas during World War II.
Lewis suggests it can be no surprise should countries start to rev up another Cold War of re-armament if current trends prevail, tariffs included. If this occurs, overseas defense industries will be a sector of the global economy that attracts U.S. and European investor attention—more so than it already does.
Wherewithal Separates the Sensible from the Sucker
Southridge, its financial leadership notes, tallies a global investment of around $2 billion in growth companies. Issues integral to targeting worthy investments—e.g., creditworthiness, stock liquidity, and financial security—fall into play. The evolution of these factors and a keen insight on this transformation of the global economy are necessary for companies to grow or maintain their current growth pattern, according to Southridge officers.
For instance, Lewis writes in another piece that among the world’s emerging companies credit default swaps—one of the most trusted economic indicators—show a drastic rise since January—about 50 percent in fact. Much of this can be attributed to investor gullibility, best illustrated by the age-old scam of selling non-existent land or currencies to naïve or misled investors.
According to Southridge Capital founder Stephen M. Hicks, the key to investment is tailoring “each solution given the circumstances at hand.”
This is where an educated understanding of global trends and their ramifications either vaults or sinks an investment, Hicks notes. It separates the foolish from the prudent. The Southridge Capital CEO, along with Lewis, agrees that the economy’s health swings, stagnates, climbs, and declines in accordance to the well-being of credit.
Reactions and Emotions Are Also the Drivers
At this point on the ride of an elephantine global market—the second longest post-war expansion on record—the recent decline in credit quality is spurring a selling off of full-value equities in favor of holding high-quality bonds, Lewis says.
Essentially, investors are possibly hitting a wall—the side of the elephant metaphorically—the point where the human instinct to believe economic trends will last longer than the time it takes to come to grips with the reality that all good things must end, according to Lewis. This element of human nature and its resulting emotions, Lewis avers, continues to play significant roles in every boom and bust of our economy, whether two-hundred years ago or today.
An Educated Foresight Is All We Can Ask For
People like Hicks and Lewis know that no one—let alone themselves—is a Nostradamus. Keeping one’s self from falling into the well of the foolish is, after all, nearly a lifetime endeavor of historical economic study and market participation.
As a result, Southridge Capital and similar companies owe their clients and decision drivers—the world’s components to Lewis’s elephant—enough wisdom and foresight to offer secure solutions at historic junctures in time when the elephant pivots.