Identifying where money is going is vital to your success as an investor. For example, take military spending:
In 1985, global military spending was $1.5 trillion (this number and all subsequent numbers are based on the worth of the 2011 United States dollar). Meaning in 1985, the world was spending $312 per person on military expenses. By 2008, the world cut this cost to $194, spending only $1.3 trillion.
Are you inclined to think investing in military expenditures isn’t wise? Perhaps. But, look more closely at where military defense is headed. Cyber warfare has become one of the most serious threats a country can encounter.
For example, Russia invaded Georgia in August of 2008. While Russia rolled tanks through the streets and bombed buildings, what really destroyed any hope Georgia had of defending itself was Russia’s attack on their computers. Russia effectively disabled Georgia’s communications. Cyber warfare is a serious threat for any nation. And, it’s an investment opportunity for you. Just as public corporations, or some private corporations, may be an investment opportunity if you understand how and why they are spending their capital.
As an investor, how a business spends its capital is as important to you as how a government does, perhaps even more so. Businesses are working with much more finite resources. Their ability to allocate and utilize each resource to its full potential determines their success or failure.
Chuck Pepka, President of Renton Coil Spring, a privately owned and operated business, joined me on About Money last Friday. His unique business survived the Great Recession. They are now thriving because of their ability to increase productivity and profitability by maximizing their capital.
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