IT'S DIFFERENT THIS TIME?
Tom Evslin pointed me to this piece via his interesting post.
The good piece in question is an article by Andy Kessler in the Wall Street Journal( via his website), that comments on the "it's the worst of times, best of times" state of the world he sees right now:
"Oil is over $70 a barrel, Iran’s got nukes, and soon they’ll price gas per ounce. The Fed has jacked short rates up 15 times....
The yield curve is as flat as a subsidized Iowa corn field.
There’s $1 trillion of teaser rate Adjustable Rate Mortgages about to burst all over Southern California and ’burbs everywhere. Gold is over $600, commodities are roaring, the dollar is dropping again, there are trade deficits as far as the eye can see and GM is on life support.
Drunken sailors in D.C. are running a sea of red ink and every time it’s sunny, some antigrowth global warming nutjob wags his finger at your $100-to-fill SUV. It feels like the ’70s all over again, a blaze of malaise. Except . . .
The stock market is like the little engine that could, and seems to go up everyday. The Dow is just shy of its all-time high, the S&P 500 is over 1300 and Nasdaq has doubled in three years. Yee-ha, bull markets are fun, but something doesn’t add up. They say the stock market climbs the Wall of Worry, but this is ridiculous—it’s got the Wile E. Coyote Acme Jetpack on."
Andy then goes on to explain his theory of a "Margin Surplus" that may account for the better world that the market sees as a whole. It's a theory he's talked about before and is worth reading.
But then I remembered what happened to Wile E. Coyote with his Acme Jetpack on full blast...every time. (Image via Yahoo!)
SPLATT!
Don't get me wrong...my tendency is generally to see the glass half full than empty.
And I somewhat buy into this whole business of "we'll do all the creative design stuff (the iPod is the iconic example), then send it overseas to be made inexpensively, generate a whole lot of revenues for those overseas companies, which then find their way back into the stocks of the Apples, the Microsofts, the Googles etc, that then trade to high valuations and don't get accounted for in the trade statistics", that Andy talks about. (I'm paraphrasing here of course).
But then I look at his impressive list of woes above, and feel compelled to add some that directly impinge on the very process of "Margin Surplus" creation he talks about. I've provided links to my previous posts where I've expounded on these additional walls of worry:
- IMMIGRATION BACKLASH: We're putting out a "foreigners not welcome" sign in the name of national security. We're forgetting the very unique, secret ingredient that made America the most powerful nation in the world.
- TRADE WAR SABRE-RATTLING: Some members of our Congress are threatening 27% tariffs on trade with China, one of the key components of the "Margin Surplus" production chain outlined by Andy above.
- CREAKY PATENT SYSTEM: The Patent Process has gone amok, where the main windfall from intellectual property accrues to smart and quick lawyers rather than people and companies who actually convert ideas into market-leading products and services.
- BROADBAND OLIGOPOLIES: Congress continues to give more and more power to the oligopolies who control the deployment of both wired and wireless broadband, be they from the cable, telco and/or cellular industries. Local and State governments are also guilty here, beholden as many of them are to lobbying clout of the large oligopolists.
- MAINTAIN MYTH OF SPECTRUM SCARCITY: In an age where technologies are eroding the very need to think of spectrum as a scarce commodity, our regulators continue to maintain a system that is holding back a whole lot of innovative products and services, not to mention new companies and jobs.
- GOING OVERBOARD ON DIGITAL COPYRIGHT PROTECTION: We've lost the balance between protecting copyrights and intellectual property, and allowing for not just fair use, but innovation built on prior innovation and creativity. Again, there are moves afoot in both houses in Congress to extend these protections to the point of hampering the very digital innovation that fuels the iPod-driven "Margin Surplus" that Andy applauds.
This is not meant to be a comprehensive list, but are some of the reasons why Wile E. Coyote may not have the jet pack work for him again this time.
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