Magazine article Management Today

State of the Union

Magazine article Management Today

State of the Union

Article excerpt

Sensible investors have written off the online media sector - which is why it offers good opportunities now, especially in private equity.

It 's the great dilemma of the deflation-era investor: what to do with the money. Prices for prime real estate in London and New York are down more than 10% and rental income is falling even faster: the latest New York Times survey showed declines up to 20%.

The stock market is directionless: a double-dip recession is still a likelihood, and company valuations still assume a return to earnings growth.

Corporate debt is increasingly risky, as even blue-chips flirt with bankruptcy.

Money market returns in the US and Europe are at their lowest rate in decades.

So where to invest? Here are some ideas, based on a rough-and-ready technique: look at technology trends and tease out the long-term implications. The market usually focuses on the sectors in the path of change, whereas the real beneficiaries are often elsewhere.

The classic example: the invention of the car created unexpected opportunities in out-of-town shopping malls. There are modern equivalents: flat-screen technology, the pervasive internet, cheap computer graphics ...

Take outdoor advertising. LCD manufacturing is increasingly efficient.

Within a decade, it will be cost-effective to replace billboards with moving displays - more attractive to advertisers. In Steven Spielberg's Minority Report, Tom Cruise runs a gauntlet of personalised video pitches; that is less science fiction than an extrapolation of the present. Already, high-traffic locations such as Times Square are plastered with dynamic advertising.

The opportunities: outdoor display businesses like Viacom Outdoor and JC Decaux; public transport systems, extracting greater value out of captive commuter audiences; and some well-sited real estate.

Next: pretty places. Discount airlines such as JetBlue and easyJet have put smaller destinations within easy reach of big cities. And the spread of high-speed internet access makes it ever easier to tap corporate information systems and communicate with the office. If location no longer matters, why not spend the winter in Marrakech?

My picks: Essaouira, in Morocco, if they can get an airport built; the resorts outside Tunis; Dubrovnik on the Adriatic; the Buda hills of Budapest; and Havana. Just three hours' flight from New York, Havana beats Miami Beach hands down for allure and excitement, Castro is getting old, and you can buy an Art Deco apartment by the promenade for dollars 20,000. …

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