Who spots the ten-baggers first?

You might think that insiders are the first people to cotton on to a trend. Or perhaps wealthy investors figure it all out beforehand thanks to their “contacts”.

But my friend Nick O’Connor has discovered an alternative indicator of impending boom. A sure-fire signal of rapid technological change, which should signal rapid investor profits to come too. Profits measured in the thousands of per cent based on past examples.

He calls it “The Luddite Condition”. And its signal just went off in Birmingham.

The basic premise is simple. The first people to cotton on to a trend are those who are threatened by it. When people’s jobs, livelihoods, industries and incomes are put at risk, they respond faster than a day trader to unemployment data.

And the response is proportionate too, to the event at hand. If an industry is about to disappear entirely, its workers will outright riot.

Well, the people of Birmingham and other cities hit the streets recently to destroy a new piece of infrastructure which threatens millions of jobs. It’s new technology that’ll change the world radically. And people don’t like how it’ll change. Because they know it’s their jobs on the block.

For some reason, they’ve even connected Covid-19 to the spread of this technology. That’s how desperate they are to spread fear and loathing of change.

My dad’s partner refuses to have certain technology at home based on the same fears, by the way…

But we’re not here to judge the partners of our parents…

Instead, focus on what happens when there’s radial change in the world. Investors become rich. Those that foresaw the change and positioned their wealth to benefit.

If Nick O’Connor is right about this signal and its ability to foresee change, then now is the time to make your move into these stocks to profit.

Now, this opportunity isn’t for the faint hearted. Opposition to the new tech is real and violent for a reason.

We’re talking about an extraordinary shift in employment of lower skilled workers especially. Drivers of all sorts of vehicles, logistics workers, delivery providers, food prep workers, farm workers, low-skilled manufacturing workers and plenty more are at risk of being replaced by machines that can outperform them. By no small margin, either. 

And even the professional sector will discover, to their horror, that they now have to compete with people from all around the world when they provide their service. A surgery at an NHS hospital could be performed by a surgeon in Mumbai, your tax filings could be done from the Philippines and your mortgage refinancing from Mexico.

Even the world’s oldest profession may be in trouble… but let’s not go there.

It’s no wonder there’s turmoil on the streets over the coming changes. Everyone will be affected, somehow. Destruction of property, violation of lockdowns and arson seem like the only way to respond for some people.

But they won’t be successful in preventing the change. They never have been in the past.

I’d also like to point out that the change is in fact a good one… in the end. Being too direct about this is what gets people like me in trouble. Telling someone who’s at risk of losing their job that it’s for their own good doesn’t go down well. And, just as those vandalising new tech in Birmingham haven’t learned from the past, tech enthusiasts and economists don’t learn to communicate better either.

But, if you look back far enough, it becomes obvious (and dispassionate) enough to explain and understand what’s going on.

If you look at the share of people employed in agriculture, it looks like a horrific decline.

Source: Our World in Data

But it’s not like we mourn for those jobs, is it? There is no widespread destitution amongst former agriculture workers.

Heck, we import guest workers to do the few agri-jobs left. And UK unemployment hit rock bottom before Covid-19 hit.

How do you reconcile this? How can we lose so many jobs without losing jobs overall?

If the anti-tech Luddites were right, we’d all be unemployed blacksmiths by now…

But we’re not.

What are we instead?

I’ve never seen a satisfactory answer. Including my own past attempts to explain how it works.

I suppose, in order for us to raise living standards by having more stuff, people have to be made redundant first.

First the stuff they were producing is suddenly produced so efficiently that it doesn’t need as many people doing those jobs.

The redundancies are what allow prosperity by freeing up workers to produce something else. And whatever they do produce is the additional living standard created for us because it’s producing something we didn’t have before, without losing what those people have stopped producing.

This temporary change in how labour is allocated is a sign of prosperity to come. Because it happens before production of something new is increased.

The real challenge is to make the transition as smooth, fast and painless as possible. That’s why economists praise “education” so much, by the way. It makes workers more flexible. Theoretically, anyway. I don’t agree, but it sounds good.

The trouble with laws protecting labour is that it slows down this process and thereby gains in living standards. If we can’t reassign labour to its most productive purpose easily, we get stuck and productivity gains freeze.

Job demand, not job protection is the key to prosperity for all, including those who suffer under new technology.

But, do you really care about all this? Or do you see new tech and change as a simple threat?

We’ve had a huge amount of feedback on this topic, so you can join the deluge here: nickolai@southbankresearch.com.

My suggestion? If you’re planning on hitting the streets to burn down some of this new technology’s infrastructure, buy these stocks before you do.

Nick Hubble
Editor, Southbank Investment Research

Category: Energy

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