Creative Destruction – Popularized by Joseph Schumpeter, a “process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one.” In just 10 years, two industry titans have been knocked to the floor and replaced by a start-up and another firm that most industry pundits had written-off. The age of the Windows desktop PC is coming to a close and the age of smart phones, tablet computers, and cloud computing is beginning. But don’t put money on it. Microsoft and Dell looked like no-lose … [Read more...]
Archives for August 2010
Quotable
From the July 28, 2010 Financial Times, Vulnerable to Vertigo “Using past forecast errors as a guide, the new UK Office for Budget Responsibility sees an 80 per cent chance that the British economy will grow between a negative 0.4 per cent and a positive 4.7 per cent in 2011, a range so wide it encompasses both boom and bust. Not much more helpful in diving the future is its calculation that there is a 50:50 chance that 2011 growth will be below 1.2 per cent or above 3.9 per cent.” From Andrew Ross Sorkin’s Too Big to Fail “Not everyone at the Fed was in agreement with Geithner’s … [Read more...]
Canada – Land of the Free
Canada, Land of Smaller Government – Jason Clemens, The Wall Street Journal “[T]he Canada of the 1970s and early 1980s—the era of left-wing Prime Minister Pierre Trudeau—no longer exists…In 1995, the federal government, led by the Liberal Party, passed the most important budget in three generations. Federal spending was reduced almost 10% over two years and federal employment was slashed 14%. By 1998, the federal government was in surplus and reducing the nearly $650 billion national debt…all government spending peaked at 53% of Canadian GDP in 1992 and fell steadily to just under 40% by … [Read more...]
Wall Street Begging for More Stimulus
The stock market mounted a powerful rally in July. The S&P 500 jumped almost 7% for the month and has tacked on another 2% so far in August. The rally is most unusual given the raft of weakening economic data that has been reported in recent weeks. My chart shows a marked downtrend in the Citigroup U.S. Economic Surprise Index. The Citigroup index measures the difference between projected economic data and actual economic data. A falling index indicates that economic data is coming in worse than expected. Since expectations are what drive stock prices, a declining surprise index is often … [Read more...]
Back to Even and Then Some
Are you tired of the media’s nonstop market analysis yet? It’s distracting at best and harmful to your health at worst. With the Dow up 7.1% in the month of July, it’s worth noting how little ground has been picked up from mid-June of this year through the end of July. Even after climbing out of the valley of the March 2009 lows, the price of the Dow is still only worth three-quarters of its value from its October 2007 peak. Those taking a balanced investment approach had a much better experience. I like using the Vanguard Wellesley fund to illustrate the advantages of a balanced … [Read more...]
Wheat Prices Skyrocket
Wheat prices are up more than 50% in a month. Droughts in Russia, a major world wheat producer, are threatening the country’s crop. Traders bid up wheat prices in anticipation of tighter supplies. … [Read more...]