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If you could go back in time to 2005, what would you do?
Well, you’d probably sell your home, I hope, if you were planning on moving any time before the next ice age.
But what if you couldn’t sell your home? What if you were stuck in an illiquid asset that you knew was going to lose a substantial amount of value in the coming years? And what if you couldn’t do anything to stop it? Well, you could hedge your bet by selling short collateralized debt obligations and asset-backed securities. Or you could buy an inverse ETF that is meant to rise as real estate prices fall.
There are many things in life that discourage us, many times we feel helpless. But for those of us determined to do more than just survive, we press on. We find ways to stop the bleeding. We batten down the hatches. We prepare.
I can’t help but think we’re soon to encounter a similarly challenging situation (if it’s not already staring us down). Now is the time to prepare for it because …
The robots are coming.
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| The demand for robots is rising. That’s because the feasibility of robots is rising. |
Since the 2008 financial crisis, unemployment in the U.S. (and globally, for that matter) has been a lingering concern. Rosy expectations for economic recovery are mostly pared back by lackluster improvement in the labor market.
In the U.S., things have been looking a bit better lately. But workforce participation and wage growth remains a concern. And this sluggishness raises an unwelcomed question: Are we facing structural unemployment?
There’s a lot out there to suggest many jobs aren’t coming back. And there’s even some indication many more jobs will become obsolete in the not-so-distant future.
So why have some manufacturing jobs in the U.S. been growing in recent years, after a virtual moratorium due to outsourcing overseas? Robots.
The demand for robots is rising. That’s because the feasibility of robots is rising.
Costs are falling while wages are pressured higher in key manufacturing regions around the globe. Not to mention: Technology is improving. Robots simply make more and more sense.
Last year two men from Oxford University made a prediction: “47 percent of jobs in the U.S. are now at risk from computerization.”
Does this mean robots are set to wipe out the manufacturing gains in the U.S. labor market? Perhaps to some degree, if the growth in high-skill jobs doesn’t offset the loss of lower-skill jobs. But that’s not necessarily the biggest or most immediate concern.
The breadth of manufacturing in the U.S. is relatively insignificant when compared to its importance elsewhere. Countries where cheap labor has put their economies on the map have the most to lose. The more feasible robots become, the more quickly these jobs become obsolete.
And that could really change the game for global-minded investors.
Certainly, in this increasingly globalized economy and financial system, tough times in one part of the world can emit far-reaching tremors. So on top of labor market uncertainties, add on potential global-macro and financial system risks.
Basically, you have the makings of a very trying situation. That’s not to say the speedy progress in technology and robotics ushers in a doomsday scenario. Rather, the path will be bumpy.
You, personally, may not be at risk of losing your job to a robot. And potential structural unemployment may not completely hold back the U.S. economy. But the same cannot be said for other parts of the world.
If you’re an investor, you’ll eventually be exposed to a broad-market rethink.
With this information, are you going to prepare? Are you going to hedge your bets? How?
You can’t go back and change what may have happened to you as a homeowner during  the last big storm. But today as an investor you can get in on the technology sector to weather the next one.
Best,
JR Crooks
P.S. Whether you own tech stocks or are just now contemplating getting your feet wet, we have expert help for you on the Money and Markets blog.
Our new technology stock specialist — Jon Markman — is standing by to answer your questions! Here’s your chance to ask one of the world’s greatest tech stock experts anything you like about technology stocks: Simply click this link to jump over to the Money and Markets blog. Jon will check in during the day to answer your questions.
