Confirmation of a trend


Last week we looked at investing in Wellness Revolution and small is beautiful. Just a day later we saw this idea in USA Today showing the Tipping Point by Malcolm Gladwell working in the market place. Learn here how someone will really make some bread on small now.

The article “Is small beautiful,” if you failed to read it, is at http://www.garyascott.com/archives/2004/03/29/1024/index.html

One reader replied to the article:

“Gary, I really have to compliment you on your article today. About a year ago, I read The Tipping Point by Malcolm Gladwell's upon your recommendation. I believe you've spotted an early indicator of the kind of trend he describes. One can hope, anyway.”

His comments about the Tipping Point can give us an opportunity to make some dough by learning a lesson from bread.

Malcolm Gladwell in his book “The Tipping Point” points out that ideas expand in the market place in predictable ways.

Predictability is the key to investing success. If you can predict a trend in advance, you can see ways to win.

Here is what we can expect of trends. They begin with an innovator and don’t go far at this stage. This group is usually composed of mad scientists and those who do not conform to or have the ear of society. Investing in innovation at this stage is riskiest and not assuredly most rewarding. Often the idea needs modification to work in the market and the innovators lose when modifications come in.

The pace of an idea’s introduction only accelerates when the early adaptors start to catch on. Early adaptors are forward thinking members of society who have the respect of the establishment. When they begin to use an idea, the chances of it catching on drastically grow. This is the time to invest before the early and late majority accept the new mode of thought. Finally the skeptical mass and laggards come on board.

This tipping action in the market place can be seen in the March 29 2004 USA Today article “Bread Basket Case”, by Maria Puente.

This article is about bread, but we can lean more about the art of making dough in the monetary sense.

The small is beautiful idea is already working in the market place where food and carbohydrates are concerned. Look at any best selling book list and you will see that low carbohydrate diets are the rage.

Now this trend has reached bread. The article referred to above says:

“Anti-carbohydrate diets like Atkins and South Beach are wildly popular. Growing numbers of people have been diagnosed with diabetes and told to stay away from bread. Bread industry statistics show a 2%-a-year drop in unit bread sales in recent years and even higher for specific brands. In one industry survey, 40% of consumers said they eat less bread now than a year ago.

“Scores of ‘low-carb’ breads compete for space at grocery stores and at premium artisan bakeries; even the people who make Wonder Bread are making low-carb brands. Ten years ago, bread-making machines were the trendy kitchen appliance; now people have moved on to George Foreman grills and chucked their breadmakers into the garage or the garage sale.

“The bread industry is so unnerved, it has started holding annual ‘bread summits’ to fret about the threat and devise strategies to fight back.”

You can read the entire article at http://www.usatoday.com/life/lifestyle/2004-03-28-bread_x.htm

The investing lesson is to look for broad trends that are already the rage (such as low carb diets). Then search for niches that will obviously develop from this trend. Bread, pasta, sweets and sugar are a few examples in this instance.

The key is to invest as an early adaptor. Get in ahead of the majority and take your profits as the rest of the investing world catches on!

Until next message, good investing!

Gary


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