Historical Parallels in Investing...

Frontier Investing Week continues.

So does the Megatrend Master Series. If you haven’t registered yet, you can do so by clicking here. It’s free. The program is up to day four.

In today’s instalment, editor Shae Smith talks to emerging markets editor Ken Wangdong about China’s economic growth and what this means for Aussie resource stocks.

Even if you only own one resource stock, or you’re just thinking of buying one, you shouldn’t miss the interview.

But as it’s frontier investing week, let’s look at the idea of investing on the frontier, and take another example from history of where people of the time didn’t foresee economic growth, or tried to stop it.

Again, we can find some remarkable similarities to today…

Whatever you do, it’s important to know history.

That’s how you learn. By remembering things that others have done right or wrong in the past, you give yourself a better chance of doing things right now and in the future.

That’s super important when it comes to investing. If you’ve done something that has worked well in the past, you should remember it…so that you can do it again in the future. Hopefully, you’ll get the same result.

On the other hand, if something hasn’t worked well in the past, odds are it won’t work in the future. So you should try to avoid repeating that mistake.

Those are things you can control. Generally, you can’t control what others do. However, that doesn’t mean you should ignore what others do. Instead, if you know that others have tried and failed to do something in the past, and they’re trying the same thing again today…well, odds are they’ll fail this time too.

You should pay attention to that. There’s a chance you could use that knowledge for your financial benefit.

It’s all in the land value

We mentioned yesterday one of the books we’ve read about the American frontier. It’s The Significance of the Frontier in American History by Frederick Jackson Turner.

It’s a worthwhile read if you’re into that sort of thing.

Among the many interesting things we’ve taken away from the book, one part particularly stands out. It’s this:

‘When the Oregon question was under debate, in 1824, Smyth, of Virginia, would draw an unchangeable line for the limits of the United States at the outer limit of two tiers of States beyond the Mississippi, complaining that the seaboard States were being drained of the flower of their population by the bringing of too much land into market…

‘But the attempts to limit the boundaries, to restrict land sales and settlement, and to deprive the West of its share of political power were all in vain. Steadily the frontier of settlement advanced and carried with it individualism, democracy, and nationalism, and powerfully affected the East and the Old World.’

Can you see the parallel?

If you can’t, we’ll explain in a moment.

But before we go on, let’s quickly summarise the above quote.

In short, those with interests in the eastern states feared that the western expansion would dilute their power in the United States. Among others, the eastern farmers worried about the new farmland in the west that would compete with the existing farmland in the east.

So they tried to limit westward expansion and therefore limit the amount of farming land. It’s a key point. As controversial economist Phil Anderson will tell you, the price of everything relates to land values.

Unfortunately for the easterners, but fortunately for progress, nothing could stop westward expansion. That brings us back to the modern parallel…

Now the West wants to stop the East

As we say, you can learn from history.

History tells you that those who have power will do all they can to hold on to that power. That means trying to prevent others from gaining power.

That’s how it worked as the frontiersmen expanded into the west…and it’s happening today. In today’s case it’s not so much of a physical territorial expansion. Rather it’s a purely economic expansion.

But then, when you boil it down, the easterners fear of westward expansion was mostly economic too. It wasn’t that they necessarily wanted to own the land in the west, they just didn’t want potential competitors to own the land.

Today the West looks at China and fears the same thing. They fear the economic expansion of China into the West.

For a while, the West was happy with China’s growth. China was taking all the manufacturing jobs, but that was OK. Those were dirty jobs. The West said it would concentrate on higher value jobs.

So Western governments decided to set goals to send every student to university where they could gain qualifications for those higher level jobs. Except, things didn’t go to plan.

Read the rest of this article at Money Morning