Collaborative Investing in Local Clusters Leads to Economic Development

Group investment is not a novel idea but can be significant in developing stronger local growth models. A “hot” market is one that draws substantial investment interest that encourages growth among market relevant businesses. Pack investing offers opportunities to create multiple points of capital infusion that lead to the growth of a battery of related companies.

Companies do not work in a vacuum and rely on different local stakeholders to feed the building of their business. They need resources, human capital, science, facilities, suppliers, partners, and customers to develop momentum. If they lack the right environment, their business is doomed to failure before it gets started.

Pack investing offers the opportunity to take a local core competency with a solid industry base and infuse large amounts of capital at various points to encourage mutual growth. Multiple investors may work together to invest in complementary businesses that have market relevance but are not operating at peak performance.

The potential for quick growth and higher market returns is greater for companies that work together. Network relationships and alliance capitalism can create higher growth records among businesses (Eng, 2007). Sharing resources and knowledge during the growth stages with peer companies seems to make a difference.

Pack investing, and allied companies develop a stronger competitive stance. Industry alliances, even when money is not transferring between them, earned abnormally high local returns (Wang & Der-Jin, 2005). Getting businesses to support each other’s growth trajectories with shared services lead to stronger intra-firm alliances.

Collaborating on an investment level and working on a firm level creates two forms of potential synergy. Infusion of cash allows individual companies to expand their operations. Sharing knowledge and resources with other businesses helps them learn and adapt. Together investment and development create clusters of competitive firms that lead to jobs and economic wealth.

Investing in a pack and encouraging mutual growth is different than standard competitive strategies and requires a new way of thinking. Competitiveness is in the American blood, but collaboration can sometimes supersede this instinct to create greater value. Persuading investing institutions and company CEO’s to work together is a challenging game.

Pack investing relies on transparent city data that allows investors to find underperforming clusters and explore them. Seeing the opportunities and sharing those opportunities with like-minded investors may be against culture but can be lucrative, in the long run, when investment returns rises. Greater revenue is followed by new investment, tax income and jobs that can raise living standards of residents.

Eng, T. (2007). Relationship value of firms in alliance capitalism and implications for FDI. International Journal of Business Studies, 15 (1).

Wang, Y. & Der-Jin, M. (2005). Using strategic alliances to make decisions about investing in technological innovations. International Journal of Management, 22 (4).

Poll Shows Investors are Optimistic in 2014-Can We Find a Place for Their Money?

A Morgan Stanley poll of high net worth individuals found that 88% of investors are optimistic about their future economic prospects. High net worth individuals are people 25-75 with at least 100K in investable assets. A third of these individuals have at least a million dollars of investment assets and can significantly impact national economic growth if they believe that investing today will earn them higher rates of return in the short, medium, and long-term future.  

Investors are expecting a positive investment environment over the next year. Eighty-eight (88%) believe their worth will rise, 84% believe their investment portfolios will stay the same or improve, and 70% envision a better investment climate. This optimism pushes the belief that investment prospects are growing and a few gold nuggets provide for higher growth sectors.

Positive impressions are persisting despite some looming problems in the governance and the geo-political issues of our times. A total of 90% of those polled are somewhat concerned about prospects of the nation, 87% about government budgets, 82% about international conflict, 81% about trade deficits, and 75% about terrorism. America has a stable but adjustable system that can attract investors if they believe policy makers are trying to solve problems and create win-win situations. 

Starting to make small adjustments in government spending to ensure that money is being wisely spent in a manner that raises the functionality of the nation; economic and human. The very way in which government representatives handle international conflict to reduce risks or the development of stronger treaty management to fosters hub growth can be an important topic of discussion.

This year technology is seen as a hot market by 72% of investors who feel it has high growth potential. New products are being developed at a sufficient pace to make investment returns higher than other markets. Other areas of positive investment include bio-tech (67%), energy (66%), pharmaceuticals (61%) and communications (54%).

The U.S. is considered the best place to invest money by 52% of investors followed by China (41%), India (39%), Japan (38%) and Brazil (34%).  National investment positions are a vote of confidence in the entire environment that includes everything from infrastructure to political stability. Those who prefer one nation over another due so based upon risk assessment and their personal affiliations with that culture. 

High optimism are rare opportunities to boost improving growth by putting together investment pathways through better open data management. Economic growth is heavily influenced by human psychologies (Dhaoui, et. al., 2013). Encouraging investors to find locations where their personal investment optimism match with local clusters that need investment capital can make a difference in national growth. 

Approximately 2.5 trillion dollars are held by institutional investors in the U.S. (Voorhes & Humphrey’s, 2013). Factoring in sustainable and responsible principles among the decision-making matrices institutional and capitalist investors use can better ensure this money is making it to areas that have the widest sociological and economic impact. When investors and labor both reap the benefits societal stability increases and motivation rises.

American growth relies on many factors that are too numerous to mention within a short article. It is possible to say that improved investment optimism, stronger political decision making, and stronger information on investment “hot spots” within local clusters and hubs can ensure that optimism doesn’t go to waste. Optimism can beget more optimism with paths open to more opportunities.

As Robert Trout the WWII news broadcaster known as the “Iron Man of Radio” stated with eloquence, “A successful society is characterized by a rising living standard for its population, increasing investment in factories [i.e. hubs and clusters] and basic infrastructure, and the generation of additional surplus, which is invested in generating new discoveries in science and technology.”

The Report: http://www.morganstanley.com/about/press/articles/e1f23a70-90cd-4948-bc41-ba663837dd8f.html

Dhaoui, A. et. al. (2013). The impact of investor psychology on stock markets: evidence from France. Journal of Academic Research in Economics, 5 (1). 

Voorhes, M. & Humphreys, J. (2011). Recent trends in sustainable and responsible investing in the United States. Journal of Investing, 20 (3).

Book Review: Buffett: the making of an American Capitalist

Rarely do we get a glimpse of the life of the successful and famous.  To many in the business world Warren Buffett is more like a god than a man. In his book Buffett: the making of an American Capitalist you won’t be receiving insider investment tips but you will come to know a little of the man that has been an inspiration to business students and investment gurus for a number of decades. You will learn what made him the man he is today. Sometimes, it is those little things in life that put on us on unique paths.

Of particular interest is the information about Buffett’s life and his formation as a leading investor. He started as an odd but liked child who seemed more like a fish out of water than the confident billionaire he is today. A little socially awkward people came to accept him as he was. He watched the stocks while other boys made modeled airplanes. A boy who loved to play sports, talk of financial success, and attract other boys to him. 

He loved to read and apply those concepts to his paper route, pinball business, and future enterprises with passion. Warren was always learning and applying and made a life out of this process. With a few good mentors he became the investor magnet he is today. It was a long process of learning, adapting, and applying that seemed to meet with the right personality. Something business students should consider as they learn new knowledge and have a chance to use it.

When Warren met the professor Benjamin Graham he was able to use his native talents in a systematic way based upon the principles and philosophies of his mentor. The philosophy, “For stock speculation is largely a matter of A trying to decide what B,C, and D are likely to think-with B,C and D trying to do the same” seemed to stick. The precocious student learned quickly and developed his own methodologies. 

Much of the rest of the book talks of Warren Buffett’s life, loves, and business successes. It is more than a story of an emerging wealthy person but the way of thinking of the boy who grew to be a man that made it all possible. It is a story of financial strategy and pure diligence of a person that became known as the Oracle of Omaha. 

Warren’s story doesn’t end with this book. It is only a snap shot into his process of development and growth that led to great fortune. As recently as March of 2014 Warren is encouraging groups to become more engage in social causes that help those in need. It is these philanthropic adventures that help others to remember that wealth is not a source of happiness in and of itself. Wealth is a tool that places greater responsibilities on the owner to use money to enhance life. 

Lowenstein, R. (2008). Buffett: the making of an American Capitalist. NY: Random House

Fitch Ratings Report Suggests Independent Economic Growth

Fitch Ratings released a report entitle Mapping a Subpar Economic Recovery: What Can History Tell Us? that details the differences in historical economic recovery and growth.  They analyzed various recoveries in countries like Germany, U.S., U.K, and Japan and found similar trends that define these recoveries. Many of the eras of recovery saw the wealth effect, lower inflation and interest rates, higher government spending, new technology, changing consumer preferences, global competitiveness, trading relationships and currency effects. Today’s recovery has some unique differences that challenge basic economic assumptions. 

Interest rates are at historic lows and have been for some time. It is not believed that continued low interest rates will add much more to the economy. The same can be said of the stimulus policy. Each of these naturally has an influence on growth but can become increasingly burdensome after their initial shock impact.  

Exports often rise during a recovery and some small signs of growth are spurting upwards but are not yet conclusive enough. There have been some indications of growing health in the global economy but many developed nations do not yet appear to be sucking in American products. The trade deficit is still in the negative but has improved slightly indicating a potential better market.

The stock market has outperformed expectations and is doing better than during many other recoveries. They are at triple the level of recession bottom and there is some indication that growth will continue. Stocks are a sign of investment and wealth generation that help show that company positions are growing. 

Manufacturing within the U.S. is growing as more companies return to home soil. The increase in productivity, technology, and energy costs is helping to drive growth in this sector. The authors cannot state conclusively whether or not growth will continue but do highlight that services seems to be a bright spot and lower energy production costs seems to be making its way into the economy from a macro perspective. 

The report is inconclusive as the nature of economic forecasting can be a little like looking into a crystal ball or throwing darts onto a map to determine the best vacation spot. However, after reviewing the report you can see that there is a slight upswing in each of the sections such as share price, home values, manufacturing, and exports. The interest rate is slightly rising and government spending appears to be moving downward while unemployment is declining. The higher stock returns and improvement in home based manufacturing are extremely important in supporting long-term investment and growth. It is often the multiple markers of upward trends that hint to a possible re-emergence of the American economy based upon its fundamental merits.