Investing is intuitive, according to Craig Swanger, head of Macquarie Global Investments.
Australia-based Swanger, who is in Canada for a cross-country tour, made this assertion to a group of advisors and clients at the Allstream Centre in Toronto last night.
Modern portfolio theory says don’t put all your eggs in one basket, but over the last 50 years, the financial services industry has added layers of complication to that simple edict. Get your investment plan back to basics, said Swanger, and recognize that human emotions drive the markets.
Using an inflation-adjusted chart of U.S. home prices, from 1890 to 1997, he pointed out that values stayed around a baseline level. In 1998, prices began to rise, creating the housing bubble that burst in 2008. Swanger suggested a student of history would have intuitively realized the extreme rise in prices.
Investors looking for new opportunities should focus on where wealth is moving, he said, likening the rapid development of China to the immigration waves hitting Canada and the U.S. in the early 1900s. As China’s middle class swells, there will be a massive migration from rural to urban centres.
For most clients, the numbers involved are too large to comprehend, said Swanger, so advisors must set them in a human scale: to accommodate internal migration, China needs to build a city the size of Vancouver every nine weeks for 25 years – that’s 120 Vancouvers.
This creates once-in-a-lifetime opportunities for investors, he said, not only in the resource sector, but in logistics, engineering and technology.
He also pointed to coal, water, food and oil shortages as pressure points for China as the population demands a more Western lifestyle. Again, recognizing these needs is intuitive, if you consider the human story behind the rise in commodities prices.