Long term opportunities abound

I am a believer in long cycles. As part of that framwork, I believe we are in the bottoming phase of the long cycle that arose out of the Great Depression.  The changes that are happening today in the economy are not of the cyclical nature, they are of the secular nature.  We are in the midst of the final collapse and restructuring of the old "mass market" economy.  In its place, the "new economy", or what I call the "mass customization" economy, will take control.

As the tide of consumer credit that has been building since the New Deal in the 1930s washes away, so does consumer demand, leaving the industries that benefitted from that credit creation awash in excess capacity.  There are additional old economy industries that are seeing consumer tastes or technological advances leave them behind.  A list of industries with excess capacity is below:

Industries with excess capacity

Commercial and residential real estate, homebuilding, appliances, autos, retail, consumer lending, broker/dealers, airlines, media, land line telephony, pharmaceuticals, fast food

That said, there are several sectors that are dealing with capacity shortages:

Industries with capacity shortages

Data centers, developing market infrastructure, railroads, mass transit, electricity generation/transmission, oil production/refining, LNG transportation/storage, financial advisory, wireless network capacity, biotech, organic foods

Mostly, the list of industries with capacity shortages are those that require investment to complete the modernization of the old communications, energy and transportation networks. 

Given the economic shift, there should be investment opportunities in the following sectors:

Long term investment opportunities

Electrical equipment, smart grid technology, mobile platform developers, capital goods manufacturers, steel and basic materials manufacturers, very light jets, carbon fiber manufacturers, ETF providers, private equity, retail financial advisors, financial services software, software-as-a-service, solar panel developers/manufacturers, organic food packagers/distributors, railroad equipment manufacturers, wireless towers, oil field services/equipment, LNG shipping, oil & gas pipelines, machine-to-machine communications, seafood farming, developing market consumer goods companies, next gen battery developers, home automation, biotechnology

I could keep going.  The point is, there are a ton of sectors that have terrific long term prospects, and the United States is well positioned to lead in most of them.  The current crisis will pass and yield to better times, as it always does.

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