The Dow Jones is back over 10,000 and economic recovery is on its way. Now the question is where to invest for the future. As in all growing or recovering markets there will be growth sectors and regional investment opportunities. The high tech areas of the Silicon Valley and the Pacific Northwest beacon for regional investment and likely growth sectors will be, in the near term, raw materials while longer term growth sectors parts of the economy that take advantage of technology to foster more efficient operations.
Talent seems to cluster where there is talent. Over the years many successful companies have been started by former employees of the likes of Hewlett Packard and the offshoots typically stay close to where the good schools and strong companies are in order to successfully attract talent. The Pacific Northwest with Boeing, Microsoft and more is packed with talent.
Many fortunes were made in the Silicone Valley over the years on startups. The same may well happen with regional investment in the Pacific Northwest. The biomedical companies in the Minneapolis area are a good example of both a growth sector, as in cardiac pacemakers, and regional investment where the knowledge and talent is.
Other high tech centers such as the Boston area with MIT, Harvard, and many more excellent schools beacon for regional investment in growth sectors such as genetic engineering and a whole host of barely imagined high tech opportunities.
Thomas Friedman, in his book, “The World is Flat,” talks about the outsourcing of basic and repetitive jobs throughout the world leaving the most creative and complex work in the USA, Europe, and Japan. These areas of regional investment still control the complex work but not necessarily forever. Growth sectors such as “back office” work are more promising in India and now even China. However, as the outsourcing countries learn the ropes from the ground up we are seeing more and more US patents filed from outside of the USA. Regional investment in India and some of China’s more modern cities may well be promising.
Australia is well placed to sell its raw materials to the developing industrial machines of Asia. Regional investment in this English speaking, prosperous nation may allow one to benefit from the rising price of coal, steel, and the like. It may also allow one to invest in a well educated nation with its own centers of research and innovation.
Much of the US economic stimulus money has been targeted at “green” investment. This remains a good growth sector as the price of oil will never really stay down. Investment in wind farms and newer and more efficient technology to harvest energy from the environment has always been risky when the price of energy can fluctuate widely. However, over the long term it is unlikely, baring a worse economic disaster than last year, that the price of imported oil will now rise steadily over the years.
And, to repeat what we have said on these pages before, stem cell research still holds the promise of cures for Alzheimers, Parkinson’s Disease, Diabetes, and more. This may, in the end, be the most promising growth sector of all, economic recovery or not.