Thursday, May 29, 2008

7 billion development experts worldwide

The end of the “development expert” paradigm does not mean the end of hope for development. Development is al­ready gradually ending poverty (global poverty rates have fallen by more than half in the past three decades) – not be- cause of development experts such as those who wrote the World Bank Growth Commission report – but thanks to more freedom for more of the 6.7bn individual development experts alive today.

Couldn't agree more. / Comment & analysis / Comment - Trust the development experts – all 7bn

Palestinians pin biz hopes on high-tech industry - Yahoo! News

The question of the Middle East is obviously a very complex one, but I have to think that economic development that provides jobs and financial security has to be a good thing. It looks like a number of innovators in both Israel and Palestine agree and are putting money and expertise to help build an indigenous Palestinian IT industry.

Palestinian information technology is still in its infancy with just two dozen software houses, a few thousand engineers and $15 million in exports a year.

I have to admit, these numbers surprised me. I didn't think the Palestinian IT industry was even this big. It looks like a very positive development.

Palestinians pin biz hopes on high-tech industry - Yahoo! News

Wednesday, May 28, 2008

Inflation's march...

... continues. Energy and commodity prices go up, which is now leading to a rise in other material and manufacturing costs.

Dow Chemical hikes prices 20 percent, citing energy - Yahoo! News

Decoupled or diversified?

LatAm equities (specifically Brazil) have had quite a run so far this year but questions are starting to surface if the party's over. Can LatAm markets really be "de-coupled" from the US's? How long can LatAm ride the commodity wave which seems to be lifting the region's equity boats?

Personally, I'm not a huge fan of the decoupling theory, the US is still something like +40% of the global economy so if it tanks, everyone’s going to be impacted. But it is a question of how badly and Brazil in particular is (relatively) better shielded from perturbations in the US, mainly because it can rely somewhat on a huge internal market.

If commodity prices drop, that may have a negative impact on the region as a whole. But I think people aren't aware at how diversified the BOVESPA is. Of the 800 or so companies listed, about 80 are in oil, gas, and basic materials and about another 80 are in construction/transportation. Just by eyeballing the sectors represented, it looks like various financial institutions make up the plurality of listed companies.

Sure, this is a very quick look at the BOVESPA and I'm glossing over a lot of key questions (what percentage of the BOVESPA's value is in the commodity/construction companies? how much do the other companies ultimately rely on the functioning of commodities?) But that said, the BOVESPA is more diversified than many seem to think and that may be contributing to some of its gain and resilience. / Columnists / John Authers - The Short View: Latin America

Tuesday, May 27, 2008

Tech.view | The broadband myth |

Broadband on its own is obviously not sufficient to improve a nation's productivity. Rather, the critical question is what do you do with broadband?

The US probably has the greatest "creating for the Internet" culture, as opposed to a culture based around "consuming on the Internet".

Japan, Korea, parts of Europe, even in some emerging countries have very sophisticated cultures based around consuming Internet content, but not as much as using the Internet as an innovation tool. Because of that, they do not enjoy the same sort of productivity gains as the US.

Tech.view | The broadband myth |

Monday, May 26, 2008

Real Time Economics : Oil Bubble? The Debate Rages

Are oil prices in a bubble? Methinks yes, sorta. I believe much of the problem is fundamentally a demand one, there is too much of it. And as a supporter of the peak-oil theory, I think everything we do on the supply side will be a temporary fix and not really worth the trouble. Indeed it will cause more trouble (climate change) and will hurry the draining of existing oil (new supplies lower prices, increases demand, and consumes whats left of the oil at faster rates.)

So where is the "sorta"? Well, I think some speculation and the low dollar/interest rates have fueled (pardon the pun) some irrational exhuberence. It maybe is not leading up to a dot-com style bubble, but a bubble none-the-less.

Here is my thought on what will pop the bubble: interest rates finally hit bottow and the Fed begins to raise them to combat inflation and support the dollar. That's my call on how the price of oil may drop. We'll see....

Real Time Economics : Oil Bubble? The Debate Rages

New Find Fuels Speculation Brazil Will Be a Power in Oil -

I've read several articles of late on Brazil as an emerging oil power, some even breathlessly saying that the country could displace the Middle East as a major oil supplyer to the US (shame same can't be said at the moment about Brazilian ethanol.)

This line caught my attention:
Some investors aren't waiting to place bets. The publicly traded slice of Petrobras has risen so much this year that the company's market value has surpassed that of household names like General Electric Co. and Microsoft Corp.

So for laughs, I looked up the marketcap of some random large companies. Here are the results for your viewing pleasure:

$ 479.23B Exxon
$ 317.53B Petrobras
$ 303.31B GE
$ 261.24B MSFT
$ 236.19B BP
$ 220.60B WalMart
$ 208.35B Chevron
$ 149.14B Cisco

New Find Fuels Speculation Brazil Will Be a Power in Oil -

Sunday, May 25, 2008

Energy as a demand problem, not a supply one

Very odd article in the NYT today; like many writers, this one has focused on the imperative to alter the way we generate and consume energy. Except here the writer takes a very supply-side look at things and suggests that the only way out of our current situation is to generate more energy, at the expense of everything else. Here’s his conclusion:

BUT most of all, we treat this as a true crisis. As my pal Glenn Beck, the conservative commentator, says, we need a new moon-shot mentality here. We need to turn coal into oil into gasoline, to use nuclear power wherever we can, and to brush aside the concerns of the beautiful people who live on coastal pastures (like me). And we need to drill on the continental shelf, even near where movie stars live. This must be done, on an emergency basis. If we keep acting as if the landscape were more important than human life, we will make ourselves the serfs of the oil producers and eventually reduce our country to poverty and anarchy.

In that long message sent to Congress 35 years ago, there was an outline of what we needed to do on coal-to-oil and shale-to-oil, as well as wind, solar and wave power. For a generation plus, we have done next to nothing. The hour is late. The clock of destiny is ticking out, as the Rev. Dr. Martin Luther King Jr. said. Let’s roll.

So here are my thoughts:

1) Yes, we are in a crisis

2) Agree, need a “moon-shot” mentality to address the issue. Others have been saying this for years, if not decades, but I’m glad that Glenn Beck (whoever that is) is on board.

3) Sure, we need to find new sources of energy and no good idea should cast aside. But I find it hard to believe that all good ideas mean necessarily destroying the environment around us. The various dichotomies of “economy vs. the environment” or “human life vs. landscape” are entirely false and are the basis of the “do-nothing” attitude that the writer seems to be against.

The writer tries to trivialize concern over our natural environment by saying that only those concerned are “beautiful people” or “movie stars.” These are the meaningless arguments of people who look at the energy crisis as a supply problem rather than a demand one. By looking at the problem from a demand perspective, we can take steps to reduce our consumption of energy and thereby lowering the price of oil and not destroying everything else around us.

Sure this will take a long time, but last I checked getting an oil-field up and running takes a few years as well. Beside, if we destroy landscapes in search of energy, and then we tap-out that new energy source because demand has not been curbed, what will we be left with. (Indeed, new energy sources will probably increase demand because it will bring prices down and eliminate any incentive to conserve, so we will use up energy and destroy our landscapes and an increasing rate. I don’t see how this in any way benefits human life.)

4) Earlier in the article, the writer makes reference to the gas-war anarchy of the “Mad Max” movies, hence his comment “and eventually reduce our country to poverty and anarchy.” I hate paying +$4 at the pump and I hate that my way of life is dependant on doing so (but I, like other thoughtful people, are seeking substitutes), but I don’t see this leading our country to anything close to resembling poverty and anarchy. I see it resulting in innovation and new technologies. Current economics is giving way to a rise in alternative energies and new ways of using energy more efficiently. Sure, it is a messy process (see my notes on ethanol) but the market works, and I don’t see anarchy anywhere on the horizon.

The aritcle is called "Running Out of Fuel, but Not Out of Ideas". The writer hasn't come up with any new ideas of his own, but at least has tried to be somewhat environmental by recycling old ideas, even if they are tired and discredited.

I’m kinda amazed this weak article got past NYT editors.

Everybody’s Business - Running Out of Fuel, but Not Out of Ideas -

Ethanol and fundamental economics

The fact is, there is very little argument in favor of corn-based ethanol; it is expensive, its is energy consumer and, most damaging, it is not economic. I am all in favor of alternatives to fossil fuel, in fact, I believe that finding such alternatives is one of the great challenges of our times. But an “alternative” that has to be propped up by protectionist measures put in place for political purposes is no alternative at all.

Regardless of how well a government thinks in can out-wit the markets, fortunately often simple economics comes back into play to show the fallacy of ill-thought-out policies. This is no clearer than in the ethanol market today.

There are many reasons for the high price of food right now, and I’m not claiming that there is one single magical cause. But a major contributor has to be that the price of corn is shooting up because of all of the protections around corn-based ethanol.

While these protections may not be going away (they are politically valuable), they are at least being called into question. And that is having a chilling effect on the corn-ethanol industry.

"If you sell one product and the only reason there's a market for it is because the government makes a law requiring consumption - if that law goes away, obviously you're in trouble," Gilpin said.

Greenwald argues that if there are still government regulations in your favor, that could be a competitive advantage. Indeed, the corn-ethanol industry has enjoyed competitive advantage verses other ethanols (Brazilian sugarcane for example) precisely because of these regulations. However, I don’t think Greenwald or anyone else would argue that if those policies are fundamentally uneconomic, they present a long-term haven. An attack on this false safe-haven is what we are seeing now in the markets.

Ethanol Turmoil Calls for Legislative Change a Threat to Some Companies - Business - redOrbit

Friday, May 23, 2008

Retire on Dilbert

Just read Dilbert. It is so simple it is genius, even I get it. As relevant now as it was two years ago.

Dilbert's 9-point financial plan worthy of economics Nobel - MarketWatch

Monday, May 19, 2008

An Alarm Is Blaring: Time to Buy - New York Times

This strikes me as an articulation of the "buy low, sell high" mantra... and right now things seem to be low.

An Alarm Is Blaring: Time to Buy - New York Times

Wednesday, May 14, 2008

Our Great Economic U-Turn -

Surprising words from the WSJ. A pro-labor plea is not what I usually expect to read in their pages (or on the website.)

Growing income inequality, rising inflation, the credit crisis, an unregulated financial system that seems to have run amok all play into what seems to me to be a sea-change in society's general take on government and regulation.

It feels to me that we're going through a generational change, similar to the one that occurred in the 1980s. Society will be demanding more from government and while huge, bloated bureaucracies will (hopefully) remain out of style (although we still seem to have them IMHO), society in general will demand govt. to be more pro-active in addressing problems. I don't view this as "anti-market" per se, but a realization that the market cannot solve all problems and that markets by their very nature (profit-maximizing) need to be contained in some ways so they can operate for the benefit of society.

The change is happening, regardless of who wins the presidential race in Nov. The only difference Nov. will make is the degree of change.

Our Great Economic U-Turn -

Thursday, May 01, 2008

War on savers

Inflation is eating away at your money faster than a normal savings plan will grow it. Bottom line, it now costs money to save. Seriously, how did we get into this mess? (That's a rhetorical question).

If increasing savings in the US was difficult before, it is actually counterproductive now. There is actually no point to save. This is great news for fans of foreign deficits

Here's the money quote on how depressing the situation has become:

"As I pointed out last week, one of the few things you can do easily to avoid this trap (inflation) is to buy some of your family's non-perishable foods, like pasta and canned foods, ahead of time and in bulk. Their prices are rising much faster than your savings are growing in the bank."

Fed Move Is Tough News for Savers