06 June 2005 Latest Letter : The Limits of Growth Ok, I am going to be a bit provocative here: does it matter that you (a worker from the West) are willing to work longer for less pay, possibly less paid holiday and quite possibly less perks (if you have any at all - I don't)? I think the global answer to that is NO. Nobody cares about you or your fears or your needs. Only you do, sadly. The "paradise" offered up by politicians over the last 25 years or so of a globalized world whereby we all profit from some sort of nebulous global trade has in fact been not only oversold but may also be coming to an abrupt end. It is now plainly clear to the politicians within the EU that there has been a serious "disconnect" between reality and what they have promised and imagined for the peoples of Europe (and USA/Western World). The fact of the matter is, in my opinion, that the political union being strived for within Europe is possibly a good thing on paper but may also be mired down in having been concipated in a Cold War bloc mentality which no longer exists in reality. The Cold War politicians and their offspring have been whittling and chiseling away at forming a more or less united Europe these last 50 years since the end of WWII but have seriously missed the demographic and social consequences of an eastern Europe joining with its cheaper labour pools and its "hunger" to catch up to the West, but also missed or at least misinterpreted the global facts of India and China coming "on-line" to join the party as well with their hunger for advancement and enthusiasm. My point is this : in a world polarized by trading blocs, capital is now global and highly transportable across regions of the world. You and your job are likely not moveable or willing to move. This "discrepancy" may be the largest challenge, or as some now say, conundrum, facing Western politicians. Likewise, it is a challenge now for workers in the West to find suitable jobs. As global manufacturers simply move entire production facilities over night to low cost labour regions of the world and displace local workers from jobs, and thus not only reduce capital inward investment but also lose the private purchasing power of those jobs lost, politicians may now be rapidly waking up to the fact that globalism is more than just a concept but in fact has serious consequences in a highly mobile world of capital (financial and human). The flip side is one of controls, tariffs, trade blocs, putting the walls up, closing the fortress doors. This would scare not only scare "global business" but could lead to a quicker exiting of those enterprises to cheap labour regions and hence a quickening on the social burdens of countries as workers join the hoards of others on the dole, thereby throwing the social transfer systems into even more disequilibrium than is currently the case. These are the challenges and conundrums facing countries and politicians and workers. With a unified Europe of 450 million people, but with highly divergent labour and wage structures; a USA with 300 million people largely coherent but also with intense pressure from legal and illegal immigration - are these any match for India and China, each with a population over 1 billion? In the medium term I don't think so. I believe the pace will accelerate much faster than anyone now thinks as global capital looks for global investment at the cheapest possible rates. The final thought on this issue is one that has me losing considerable sleep : Many businesses in the West today produce nothing of value. By that I mean this : A society thrives and moves forward by producing industries which are needed and which benefit the citizens - food production, construction, etc. - and which produce a lasting value or infrastructure for the nation. A German politician once stated, and I repeat this again because it is so true, "We are nation of manufacturers and exporters, we cannot survive by cutting each other's hair". The current businesses I see popping up are these : A company which sells ring tones for mobile phones and offers a subscription service to constantly change your ring tone, a company which builds a business model for swapping music files, a service company which help one find the best deal on items being offered on the internet, etc. ad nauseum. The point of all this ? The point is, is that NOTHING is being created of lasting value - these are all businesses based around CONSUMPTION and not PRODUCTION. The largest growing sector in the USA has been in the financial sector. Again, NOTHING is produced. It is simply a sector where money or insurance or derivative instruments or whatever is pushed around, "managed", fretted over, etc. Of course such financial and service companies are required, but my point is, should they be in the majority or minority for a nation or people or civilization to survive and grow and prosper? To conclude, the limits of growth are likely to be finite. The biggest time-bomb waiting out there is a fat and lazy West accustomed to a high-end lifestyle clashing with the hungry and up and coming East who have been held down long enough. The results will be earth - shattering. Believe me.  Addendum: my personal belief is that great opportunities await those entrepreneurs and companies that offer a solution to the environmental and energy problems awaiting us. I am talking about alternative methods of material recycling, energy recycling, alternative cooling and heating methods, etc. The simple fact is, we as a civilization are using much more resources than Mother Earth can produce, or better said, give up. We are eating our own seed corn. Either we will find technological solutions to our incessant consumption or risk a 19th Century World War scenario in what was known as the "big grab" for control and resources. If you haven't already noticed, that game is in full swing at this very moment. More info : http://www.clubofrome.org/archive/reports.php
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As predicted, the price of gold is now looking like it is starting to decouple from its near 4 year trading band and move over the 3,50 mark as shown here. Monday it was up to EUR 348,60. This may now be a catalyst for european investors to look closer at the properties and benefits of an investment in the metals.  The euro, following its mini-crash last week on the back of the EU referendum now looks to be oversold - for the moment. If the period of euro-sclerosis does set it in then I think the Euro may still have more to fall. I believe there is a very good chance that we have NOT seen the bottom for the Euro. The USD may still have plenty of upside potential into the 90 or 92 range and hence we could see the Euro pull below the 120 mark. This would propel the Euro gold price even higher.  Oil looks to be re-starting its next leg of the advancement just in time for the Summer season of drivers. I am still a believer in the >$60 / bbl scenario for oil and may even see $70 in the coming year. Long term, I believe today's letter is the most fundamental reason to be long major commodities over the next decade : a fundamental and classic case of supply .vs. demand as near 2-3 billion people join the heretofore exclusive and Western "capitalist club". Welcome !  Well, now Greenspan has come out and repeatedly said it, the conundrum of the long 30 year bond is pointing to an economic downturn. As can be seen in the charts below, the 10 year and 30 year yields are near equivalent, ie a flattening of the yield curve. As we should know, a flattening or inverted curve implies an economic recession is on its way. Equally, with all the foreign Central Bank NEED to soak up USD Treasuries, the demand is pushing the price higher and yield lower. So is it a misalignment of demand or an economic slowdown? My vote is for both. Finally, the VIX is going (back) into its benign landing mode, or, " I don't see any worries here, do you?" FEAR has not grabbed the market and therefore VIX is dimpling along back to its low teens.    As for gold and silver, I thought to show a few graphs - I don't want to say a lot right now but I think if you look at them, they are certainly still "behaving" well. The double top on the GTX has me a bit worried. Silver might try a run for $8 but then I'd sell out because it is very volatile and is prone to large corrections as can be seen. Right now the Bollinger Band has been kissed but that means nothing as at times the price rides the BB for quite a while - too early to tell right now.     Well, that's it for the Monday... Randolph Buss timestamp : 07 June 04:43 CET ps. The article below is very important as it shows the future for workers in Europe and the US 35-hour week? 35-hour day! BANGALORE, India It was extremely revealing traveling from Europe to India as French voters - and now Dutch ones - were rejecting the EU constitution - in one giant snub to President Jacques Chirac, European integration, immigration, Turkish membership in the EU and all the forces of globalization eating away at Europe's welfare states. It is interesting because French voters are trying to preserve a 35-hour workweek in a world where Indian engineers are ready to work a 35-hour day. Good luck. Voters in "old Europe" - France, Germany, the Netherlands and Italy - seem to be saying to their leaders: Stop the world, we want to get off; while voters in India have been telling their leaders: Stop the world and build us a stepstool, we want to get on. I feel sorry for Western European blue-collar workers. A world of benefits they have known for 50 years is coming apart, and their governments don't seem to have a strategy for coping. One reason French voters turned down the EU constitution was rampant fears of "Polish plumbers." Rumors that low-cost immigrant plumbers from Poland were taking over the French plumbing trade became a rallying symbol for anti-EU constitution forces. A few weeks ago Franz Muentefering, chairman of Germany's Social Democratic Party, compared private equity firms - which buy up failing businesses, downsize them and then sell them - to a "swarm of locusts." The fact that a top German politician has resorted to attacking capitalism to win votes tells you just how explosive the next decade in Western Europe could be, as some of these aging, inflexible economies - which have grown used to six-week vacations and unemployment insurance that is almost as good as having a job - become more intimately integrated with Eastern Europe, India and China in a flattening world. To appreciate just how explosive, come to Bangalore, India, the outsourcing capital of the world. The dirty little secret is that India is taking work from Europe or America not simply because of low wages. It is also because Indians are ready to work harder and can do anything from answering your phone to designing your next airplane or car. They are not racing us to the bottom. They are racing us to the top. Indeed, there is a huge famine breaking out all over India today, an incredible hunger. But it is not for food. It is a hunger for opportunity that has been pent up like volcanic lava under four decades of socialism, and it's now just bursting out with India's young generation. "India is the oldest civilization, the largest democracy and the youngest population - almost 70 percent is below age 35 and almost 50 percent is 25 and under," said Shekhar Gupta, editor of The Indian Express. Next to India, Western Europe looks like an assisted-living facility with Turkish nurses. Sure, a huge portion of India still lives in wretched slums or villages, but more and more of the young cohort are grasping for something better. A grass-roots movement is now spreading, demanding that English be taught in state schools - where 85 percent of children go - beginning in first grade, not fourth grade. "What's new is where this movement is coming from," said the Indian commentator Krishna Prasad. "It's coming from the farmers and the Dalits, the lowest groups in society." Even the poor have been to the cities enough to know that English is now the key to a tech-sector job, and they want their kids to have those opportunities. The Indian state of West Bengal has the oldest elected communist government left in the world today. Some global technology firms recently were looking at outsourcing there, but told the communists they could not do so because of the possibility of worker strikes that might disrupt the business processes of the companies they work for. No problem. The communist government declared information technology work an "essential service," making it illegal for those workers to strike. Have a nice day. "This is not about wages at all - the whole wage differential thing is going to reduce very quickly," said Rajesh Rao, who heads the innovative Indian game company, Dhruva. It is about people who have been starving "finally seeing the ability to realize their dreams." Both Infosys and Wipro, India's leading technology firms, received more than 1 million applications last year for a little more than 10,000 job openings. Yes, this is a bad time for France and friends to lose their appetite for hard work - just when India, China and Poland are rediscovering theirs. Summary:The "Hyper-Rich" surpass the richIn no other country besides the USA is the gap between the rich and poor widening ever faster What is also astounding is how little protest there is even as the gap grows ever wider. Equally, the chance for upward mobility is decreasing. This survey was taken for the book "Recent Trends in Wealth Ownership". The graphic shows a breakdown of who owns what in the USA - quite fascinating (and disturbing).  Die "hyper-rich" hängen die Reichen abIn den USA wächst wie anderswo die Kluft zwischen den Reichen und Armen immer schneller. Dass die Schere zwischen den Reichen und Armen immer weiter aufgeht, ist schon lange bekannt. Gleichwohl ist schon erstaunlich, wie schnell die Kluft sich vergrößert und dass sich dagegen Protest nicht wirklich laut meldet. Die New York Times hat dazu neue Zahlen vorgelegt - und auch deutlich gemacht, dass die Mobilität, also die Chance für einen Aufstieg zwischen den Klassen abgenommen (1) hat (Es war einmal in Amerika (2)). In den USA ist es nicht anders als in anderen Ländern (Deutschland, dein Armutszeugnis (3)). Bis zu den 80er Jahren waren die Unterschiede noch nicht so krass. Doch mit den 80er Jahren, mit den Thatchers, Reagans und Kohls und dem Erstarken des Mythos vom Wirtschaftsliberalismus, begannen sich die sozialen Unterschiede zu mehren und näherten sich wieder den kapitalistischen Boom-Zeiten der 20er Jahre an. Damals hatten die 0,1 Prozent der Menschen mit den jährlich höchsten Einkommen - von der Times die "hyper-rich" genannt - einen Anteil am gesamtgesellschaftlichen Reichtum von über 10 Prozent. Nach den letzten verfügbaren Zahlen von 2002 lag ihr Anteil bei 7,4 Prozent, doppelt so hoch als zu Beginn der 80er Jahre. Der Anteil der übrigen Personen, die zu den 10 Prozent mit den höchsten Einkommen zählen, stieg wesentlich weniger stark an. Und natürlich muss dann der Anteil der restlichen 90 Prozent zurückgegangen sein, nämlich um 9 Prozent. Zu den 0,1 Prozent der Menschen mit den höchsten Einkommen gehörten im Jahr 2002 145.000 Steuerzahler mit einem jährlichen Durchschnittseinkommen von 3 Millionen US-Dollar. Mit einem Einkommen ab 1,6 Millionen durfte man sich zu dieser Schicht der Superreichen zählen. 1980 lag das Durchschnittskommen dieser Klasse inflationsbereinigt noch bei 1,2 Millionen. Die Times macht die wachsende Kluft noch mit einem anderen Vergleich deutlich. So hat von 1950 bis 1970 die Schicht, die zu den 0,01 Prozent mit den höchsten Einkommen gehört, jeweils 162 Dollar mehr erhalten, wenn die "restlichen" 90 Prozent ihr Einkommen um 1 Dollar steigern konnten. Zwischen 1990 und 2002 erzielten die Angehörigen der reichsten Einkommensklasse von 0,01 Prozent (14.000 Haushalte mit einem Einkommen ab 5,5 Millionen Dollar) bereits für jeden Dollar 18.000 Dollar mehr. Verteilung des Reichtums in den USA. Grafik Edward N. Wolff, Recent Trends in Wealth Ownership, 1983-1998 (4) April 2000
Auch wenn man nicht das Einkommen, sondern den Reichtum ansieht, findet man ähnliche Ergebnisse. 2001 gab es 338.400 Haushalte mit einem Besitz im Wert von über 10 Millionen, 409 Prozent mehr als noch 1983, als es 66.500 Haushalte waren. Je reicher, desto stärker war das Wachstum. Die Haushalte mit einem Besitz zwischen 1 und 5 Millionen nahmen in dieser Zeit um 123 Prozent, diejenigen mit einem Besitz zwischen 5 und 10 Millionen schon um 304 Prozent zu. Die Zahl der Haushalte insgesamt wuchs dagegen nur 27 Prozent. Die Bush-Regierung verstärkt bekanntlich die Kluft noch weiter, da vor allem die Reichen von den Steuersenkungen profitieren - auch Bush und Cheney (5) natürlich. 53 Prozent der Steuerentlastungen kommen den reichsten 10 Prozent der Steuerzahler zugute. So zahlen die 400 Steuerzahler mit den höchsten Einkommen (ab 87 Millionen im Jahr 2000) nun noch denselben Prozentsatz Steuern wie die Menschen mit einem Einkommen zwischen 50-75.000 Dollar. Die Hauptlast wird wie üblich der Mittelstand zu tragen haben. Wer mehr als 10 Millionen Dollar Einkommen jährlich erzielt, so die New York Times, wird nach der weiteren Umsetzung der Steuerreform prozentual weniger als die Menschen mit einem Einkommen zwischen 100-200.000 Dollar zahlen. Any remarks or comments ? mail to : editor@dinl.net The Der Invest Informant is currently produced as a free service. It deals with international issues of The Markets - Economic Outlook - Finance - TA & Charts - Politics - Life, Culture & Technology - Geopolitics - Security - Freedom. If you would like to be on our MAILING LIST, please click here. Thank you. |
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