Everyone wants a piece of the consumer. It ain't going to be pretty.
In the future higher taxes will take a bite out of the pocket book (income, state, sales and property - we've got to pay for what we have deferred). Also, higher telecommunications costs (cell phone, data plan, cable), higher energy costs (electricity and gasoline, and cost of climate management), higher water/sewage/trash costs (got to pay for infrastructure investment), higher living expenses (food), higher retirement costs (increased savings bought on by greater financial insecurity).
Any way you look at it, there is less and less disposable income available for discretionary items (did I mention inflation robbing real income). Welcome to the future! Welcome to a more comfortable life with higher living standards (although reduced relative to our faster growing third world brethren), offset by less discretion and less financial flexibility.
Thursday, February 18, 2010
Monday, February 15, 2010
EU at crossroads
The EU is at a crossroads.
The Greek crisis is just the first test of an infant union, but it has brought all the weaknesses of the EU into stark view.
The Germans and French are suddenly realizing the implications of their grande idea, and are having second thoughts. Their fortunes, for better or worse, are inextricably tied to all the other member states. I've got to believe that, instead of dithering, they'll wake up and realize they have no choice.
They must therefore forcefully fill the breach, and continue to do so, or risk their labors unravelling.
Although the probability is small, it is higher than in a normal state, investors need to be careful about the possibility of global dislocation caused by political upheaval.
The Greek crisis is just the first test of an infant union, but it has brought all the weaknesses of the EU into stark view.
The Germans and French are suddenly realizing the implications of their grande idea, and are having second thoughts. Their fortunes, for better or worse, are inextricably tied to all the other member states. I've got to believe that, instead of dithering, they'll wake up and realize they have no choice.
They must therefore forcefully fill the breach, and continue to do so, or risk their labors unravelling.
Although the probability is small, it is higher than in a normal state, investors need to be careful about the possibility of global dislocation caused by political upheaval.
Monday, February 8, 2010
Whereto our living spaces
It is currently fashionable to assume that re-urbanization (moving from the suburbs back into the city) is going to be a long term trend. And possibly it will. But much less talked about is the fragmentation of cities into satellite parts, and the reversal of people moving from rural to urban.
Modern telecommunications in conjunction with a growing knowledge-based economy make it likely that we see the disaggregation of migration trends and the prospect, at some point, where people begin moving back out to the country. It will require a little culture change within companies and good software (to keep in touch and to keep an eye on people), but all of the ingredients are already here.
I would be a nervous holder of anything but AAA office space in a CBD location.
Modern telecommunications in conjunction with a growing knowledge-based economy make it likely that we see the disaggregation of migration trends and the prospect, at some point, where people begin moving back out to the country. It will require a little culture change within companies and good software (to keep in touch and to keep an eye on people), but all of the ingredients are already here.
I would be a nervous holder of anything but AAA office space in a CBD location.
Friday, February 5, 2010
A tough circle to square
Is global infrastructure an asset class? Don't know, don't care.
It doesn't matter. What matters is that there are great hopes and great needs to build out and support infrastructure (water, power, transportation) around the world over the next 20-30 years. I saw in one place that they estimated global infrastructure spending at around $35 trillion over the next 20 years. Even if it is half that amount (which is probably more likely), it is a substantial amount of money.
Quite apart from the obvious need and the potential investment opportunity, the case for global infrastructure development begs the question. Who is going to sponsor the development? Where are the funds going to come from to pay for it? and, What will be the cost of those funds?
Infrastructure sponsorship is generally the domain of government. But governments the world over are going to be balance sheet and budget constrained as they pay out on the accumulated obligations of the past while trying to meet the generous promises of the future. Consumers (at least developed country consumers) will be going through their own weight loss program, but at least in cutting back they are likely to be saving a little more and so provide a source of funds (although it will be constrained because they are going to be tapped out by higher taxes to pay for everything and higher costs associated with paying for the new/improved services - not much discretionary spending in the future). Finally, corporations. They are going to be only too happy to provide the product/services to develop infrastructure, but don't have the independent financial capacity to borrow sufficiently to fund projects. A conundrum.
When demand is greater than supply, prices go up. With government needs for funding set to rise, massive global works projects waiting in the wings, it only makes sense that the price of money goes up.
It doesn't matter. What matters is that there are great hopes and great needs to build out and support infrastructure (water, power, transportation) around the world over the next 20-30 years. I saw in one place that they estimated global infrastructure spending at around $35 trillion over the next 20 years. Even if it is half that amount (which is probably more likely), it is a substantial amount of money.
Quite apart from the obvious need and the potential investment opportunity, the case for global infrastructure development begs the question. Who is going to sponsor the development? Where are the funds going to come from to pay for it? and, What will be the cost of those funds?
Infrastructure sponsorship is generally the domain of government. But governments the world over are going to be balance sheet and budget constrained as they pay out on the accumulated obligations of the past while trying to meet the generous promises of the future. Consumers (at least developed country consumers) will be going through their own weight loss program, but at least in cutting back they are likely to be saving a little more and so provide a source of funds (although it will be constrained because they are going to be tapped out by higher taxes to pay for everything and higher costs associated with paying for the new/improved services - not much discretionary spending in the future). Finally, corporations. They are going to be only too happy to provide the product/services to develop infrastructure, but don't have the independent financial capacity to borrow sufficiently to fund projects. A conundrum.
When demand is greater than supply, prices go up. With government needs for funding set to rise, massive global works projects waiting in the wings, it only makes sense that the price of money goes up.
Thursday, February 4, 2010
Disconnect
We're seeing signs of a disconnect.
General economic trends are moving in the right direction, earnings are coming through better than expected.
And yet, the market is getting sold!
Welcome to a balance sheet recession.
We have hollowed out core economic institutions (bankrupt state governments, overleveraged consumer, increasing financial risk on the sovereign) which mean bombs can go off anytime (after all it is a confidence game) and there is less margin for error.
Greater market volatility likely to ensue.
General economic trends are moving in the right direction, earnings are coming through better than expected.
And yet, the market is getting sold!
Welcome to a balance sheet recession.
We have hollowed out core economic institutions (bankrupt state governments, overleveraged consumer, increasing financial risk on the sovereign) which mean bombs can go off anytime (after all it is a confidence game) and there is less margin for error.
Greater market volatility likely to ensue.
And now for something completely different
When I look back over my posts, there is a lot of negativity.
Am I that much of a sadsack? I guess so, and yet, it ain't all bad.
We may be heading into a slow patch, but the future is known. Progress, development, and economic growth are in the long term forecast.
Not only that, but I'm hopeful culturally and generationally we are learning some valuable lessons.
Am I that much of a sadsack? I guess so, and yet, it ain't all bad.
We may be heading into a slow patch, but the future is known. Progress, development, and economic growth are in the long term forecast.
Not only that, but I'm hopeful culturally and generationally we are learning some valuable lessons.
Monday, February 1, 2010
These guys kill me
There are a lot of technical commentaries out there right now looking at the current pullback in comparison to all the other pullbacks since the low in March 2009. I've seen lots of means, medians, ranges, averages, % above/below 50 day MA, etc. bandied about, all inferring that the recent past is a good approximation for what is likely to happen this time.
Quite apart from conducting dubious statistical analysis with limited explanatory power on a meaningless sample size, what kills me is that they do it everytime and they invariably miss the forest for the trees.
The technicians are always very good at describing what has happened, but like all other prognosticators, they are not so good at telling us what will happen.
Addendum: It's all about the graphs. It also really bugs me when someone uses a volatile data series depicted in graphs to make their case. They invariably extrapolate some future scenario based upon (1) an historical pattern, (2) the current trend, or (3) both 1 and 2, but with so much noise in the data, it is a crapshoot.
Quite apart from conducting dubious statistical analysis with limited explanatory power on a meaningless sample size, what kills me is that they do it everytime and they invariably miss the forest for the trees.
The technicians are always very good at describing what has happened, but like all other prognosticators, they are not so good at telling us what will happen.
Addendum: It's all about the graphs. It also really bugs me when someone uses a volatile data series depicted in graphs to make their case. They invariably extrapolate some future scenario based upon (1) an historical pattern, (2) the current trend, or (3) both 1 and 2, but with so much noise in the data, it is a crapshoot.
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