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Capitalism: The Greatest Show on Earth

Capitalism: The Greatest Show on Earth
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Thursday, 27 April 2017 03:37 PM Current | Bio | Archive

In less than a month, the Ringling Brothers Circus will have its last performance. After 146 years, the famed “Greatest Show on Earth” will be defunct. What happened? As with many changes, it was a confluence of factors.

First was high operating costs. The logistics of a travelling show are expensive enough—but with specialized equipment, trained professionals, and the high cost of training and keeping a variety of live animals ended up being too much.

Attendance was dropping as well. That reflects changing consumer tastes. Gone are the days where the circus coming to town would be a big deal—because it was likely the only thing to do in town until the invention of film and television.

As with any business, if you can’t keep customers coming back or keep costs in line, it’s time to fold up shop. It’s a simple lesson about business in general. In hindsight, it’s hard to see how to solve that problem with a live show.

But Ringling had to contend with another challenge as well: public outcry and regulation. The circus’ main attraction, its animals, made the company a target of animal rights groups. That led to the circus removing elephants from its shows last year. While many supported the move to keep big animals from performing, ticket sales plummeted even further, exacerbating a decade-long drop.

Some cities joined in by passing laws preventing the use of bull-hooks or other tools for keeping animals tame. With an increasingly shorter act—just over two hours from a peak of three—folding up shop became the only remaining move.

All in all, however, the circus had a great run. Most businesses can’t trace their history back nearly 150 years.

And it’s a great lesson in capitalism. Capitalism is innovative. The circus lasted for over a century. Today’s latest entertaining gadget is now out of date in just a few short years—or even months. Innovation means new products, which displace older ones. If older ones can adapt, they can survive.

Even without the circus, Ringling’s parent company still offers live shows such as Disney on Ice, which bring in tickets without dealing with the specific issues that made the circus defunct. The company, to some extent, lives on.

As investors, paying attention to these trends matter. It’s easy to guess that some industries will fare better than others. But trends never move in an exact, straight line. It’s harder to tell when there will be a permanent loss.

For two decades now, the death of print media has been heralded as a sure thing. While there’s certainly been a decline in physical newspaper circulation, one of the small luxuries of the digital age seems to be having something tangible to interact with. And physical book sales have been increasing in the past two years after a long decline.

Investing in an age of rapid innovation presents great challenges—and great opportunities. I’m a fan of buying out-of-favor names that seem to be priced for bankruptcy when that’s simply not the case. I’ve been pounding the table on some (but definitely not all) retail names that seem to fit the bill.

Fast changes can create some fear as well. That’s usually more accurate on the geopolitical front. As news headlines have reported escalating events in Syria and the Korean Peninsula, fear has risen, sending gold to its highest levels in months. That won’t move in a straight line either, and geopolitical events tend to flare up and quickly die in the markets. But it’s worth looking into.

What investors should really be looking for are the circuses of tomorrow—businesses that can attract investor and consumer interest everywhere they go. These circuses will have a better ability to adapt.

Companies like Google (GOOG), which recently re-branded itself Alphabet, is striving to create a lifestyle of brands beyond its dominant search engine. Apple (AAPL) has become the dominator in the consumer tech space. Even Microsoft (MSFT) managed to build up a video game division in the space of a few years that competes with Sony’s (SNE) PlayStation and Nintendo’s video game consoles.

These companies too will someday come up against an innovative competitor or other impediments that will impact their ability to provide returns to investors. That’s why they’re hard at work on coming up with new offerings. While Apple recently celebrated 10 years of the iPhone, that development came off the success of the iPod. And they essentially created the modern tablet market a few years back with the iPad.

Capitalism is clearly the greatest show on earth. There are perils and pitfalls, dizzying highs and nauseating lows. While it’s fun to get caught up in those emotions at a circus, that’s not the case when your money is at stake and values fluctuate by the nanosecond. Keeping a cool head during the highs and lows prevents big setbacks. It accelerates the wealth building process.

You can make your investments as exciting or as boring as you’d like. Boring may bring in come steady income, but it’s the exciting prospects that can bring about the best returns. You can stuff cash under the mattress or in a shoebox, but like the Parable of the Talents in the Bible, you’ll only end up with what you started with. Risk is part of the game. It doesn’t always pan out. But no risk means no rewards.

Take a risk. Invest in out-of-favor names. Don’t be afraid of paying up for growth; just don’t buy indiscriminately at current market valuations. Stay safe by buying protective assets like gold. You don’t need much to protect yourself, just as you don’t need all your investments in cash to stay safe. Risk is part of the game.

The world is changing rapidly. Staying safe means a huge risk: the risk of missing out on profiting from those big changes. Don’t miss out on the greatest—and most profitable—show on earth.

Andrew Packer is a Senior Financial Editor with Newsmax Media. He currently writes the Insider Hotline investment advisory, serves as investment director for the Financial Braintrust, and writes the monthly newsletter Crisis Point Investor.

© 2019 Newsmax Finance. All rights reserved.

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In less than a month, the Ringling Brothers Circus will have its last performance. After 146 years, the famed "Greatest Show on Earth" will be defunct. What happened?
Capitalism, Greatest, Show, Earth, Invest
Thursday, 27 April 2017 03:37 PM
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