The shift in the world’s centre of economic gravity from west to east

This is interesting. A very small entry in the economist weekly news briefing this week. It was the last entry in the email. Short. Sweet. But, it speaks volumes. No, it screams volumes.

"HSBC decided that from February its chief executive will be based in Hong Kong. The bank will keep its global headquarters in London. It explained Michael Geoghegan’s move to Hong Kong, where it was founded in 1865, as part of its strategy to ready the group “for the shift in the world’s centre of economic gravity from west to east”."

If London, the world financial centre, were still booming, if there'd been no credit crisis, would HSBC have made this move? The global HQ will remain in London (for now), but we are moving the CEO to HK?!

Interesting that they are doing this now. Something is up.... HSBC.... Robert Zoellick`s comments this week about the US Dollar... China floating yuan bonds... I feel like Churchill watching Hitler back in the 1930s..

The Market Oracle

Been turned on to this site a few months back. A fellow with his head in the same place as me kept referring me to stories he'd read on The Oracle. While the topics and view points here offer a refreshingly open and non-mainstream view, some writing does have a bit of a 'whacked out' feel to it. Use your better judgement.

The Market Oracle

Gold and the future of currency

There is a major shift happening right now. It has been happening for the past year. This story is big. really big. A major, fundamental, paradigm-altering shift is occuring. Really big. It is happening at the highest levels of banks and governments on the planet.


If you are Joe Sixpack, not to worry, (likely you are not reading this posting anyway!), keep eating you chicken wings and your pizza. Keep watching football and your "reality" TV. Keep drivin' that big truck.

For the rest of you, that 1% or less, take a look at this:

How to get rich... and why
http://www.marketoracle.co.uk/Article12803.html
[great article, great perspective on it all]

Central Bank Gold Agreement
http://news.goldseek.com/Zealllc/1250269200.php

still going on about a "recovery"

The media continues to drone on about an economic "recovery". There have been some small signs of positive change. People are so hopeful, not realistic. The full impact of the "credit crunch", the bail out of the US auto industry and the travails of the US housing industry are yet to be realized. You can't force it. There is just too much slack in the system -- too much supply / capacity and not enough demand to absorb it.

We have seen improvements in the US stock markets. This is -not- an indication of a recovery.

I predict that stocks will hem and haw. we will see some increases. typically the summer months (August) is slow as many traders are on vacation. September and October are typically "down" months. No reason to expect any different this year.

Green Shoots?

Here is a term that I'd never heard a year ago. Now, I can not watch the business news without hearing this phrase. What does it mean? Signs of new (economic) growth in business, I suppose.

Time Magazine - 'Green Shoots': The trouble with economic metaphor

Time Magazine - "Whatever is happening with the economy right now green shoots is the wrong metaphor for it"

I quite like this perspective:
The real meaning of "Green shoots"


The Green Shoots Debate

New claims for unemployment (US) There is no hope here. It is an economic winter. Hibernate. Plan. Live off your savings. Live off the nuts you've squirrelled away. What? No savings? Hmmm. That's a real problem.

Everyone is talking about / looking for these "green shoots". I've got news. Listen up. You will not see any sustainable "green shoots" in the US economy for a long, long while. It's a long, cold winter. And, when the spring does arrive and you awaken from your hibernation, don't expect to see the same world that you once did. It will be a different world. And those "green shoots"? They will be plants you've never seen before. Expect change. It is coming. Think differently about the world, about business and about economics. This will help your garden grow.

Bullish on Japan? Nonsense

Why I am bullish on Japan

I want to thank Mr. Koll for writing as his view highlights a way of thinking that is no longer effective.

It is clear to me that Mr.Koll has the wrong perspective on Japan and on the world going forward. As a former economic analyst with a major investment house, he is seeing the world in ways that no longer apply. He is looking at the world through the rear view mirror.

The R&D argument is easy to refute. As is the case with the education system in the US where more money is spent per child than in any other country. You would expect the results to be stellar. Far from it. It is not how much you spend, it's how you spend it.

If patents are a measure of economic success, does it really help the wealth of the nation if these patents pertain to some functionality of a vending or pachinko slot machine? sheer numbers of patents indicate nothing nor do patents on a vast array of technologies that may never be adopted. The number of patents in relation to economic output over the past 10+ years tells me that their systems are misaligned. They are out of focus. If,however, they are continually dominating patent awards and clipping along at 3-5% growth in GDP, then I'd say, yeah, they are really onto something and all countries would be rushing to Japan to study their success. They are not.

"The future will be designed and invented in Japan" Should read: "The future will be designed and invented in by a few companies in Japan for a little while longer until the Indians and Chinese have fully ramped up."

Creativity has been bred out of Japanese. That is no great revelation. The ability to get things done is clearly here, but those steering the ships are largely inept and inbred - in politics and in business - large and small. Ability, profit motives, efficiency and effectiveness are clearly absent from Japanese business. If the Japanese economy comes back it will take another 20 years. That's the amount to time it will likely take for all the deadwood to retire from the system.

Japan has been coasting for years on an explosion of wealth, savings blanketed in protectionism. Now that wealth is dwindling, the savings are going fast, and the population is ageing.

Japanese are not any more "hard working" than anyone else. They work long hours. Are they any more productive? Look at all the overtime, no holidays, no layoffs and economic growth that's been sliding for years. This is a very ineffective economy. Look at the other G7 countries where overtime is much less, people have holidays and there has been economic growth.

Japan today is the rich, spoiled child, now fully grown with no career, smokes, drinks, gambles and is living off a trust fund that's soon to run out.

All the "wa" in the land will not help Japan, the nation, regain it's former position.

At best, Japan will find its position in the world as the ageing engineer uncle who used to be wealthy, still knows a few things, but who no one takes seriously as the world has moved on while he still talks about the old days.

There is no vision in japan, no inherent spirit or drive like post-war Japan.

India and China will soon regain their positions as world leaders that they held a few hundred years ago.

Sadly, Mr.Koll is analysing the wrong things. The world has changed. Governments are and will continue to fall, banking systems are and will continue to collapse. Riots - have started and will continue. what we see now with bailouts is a necessary but short term window dressing. The media uses the word: recovery. This, too, is a misnomer. It's a whole new world emerging and we have to see it in a different way. The way that it is and not the way we think it is (or was) or the way we think it ought to be.

Which currency?

Which currency will be the strongest in the next 12 to 18 months?
- US Dollar
- Euro
- Japanese Yen
- British Pound

These are the major currencies. But how about some of the others. Others that might be in a better position to weather the global economic storms?
- Brazilian Real
- Canadian Dollar
- Swiss Franc
- Indian Rupee
- Chinese Yuan

Others?
How about the Vietnamese Dong, South Korean Won or the Australian Dollar?

If you had $100,000 USD to invest in a currency. Where would you put it for the best return?

Shame on Japan

Clearly, Japan has lost it.

And this week, they announced it to the world.

Their 3rd prime minister in less than two years, Aso entered with a 75% approval rating, now, less than one year later, his popularity sits at a tiny 9.7% approval.

9?!

A single-digit approval rating.

The Japanese Finance Minister, allegedly "drunk" while speaking on camera at a G-8 meeting in Rome, resigns due to "health" reasons. The other G-8 countries are taking the global financial crisis seriously.

It was reported the day before this event that Japanese GDP fell 3.3% for the quarter. In three months. For a developed economy, a 3.3% decrease in GDP in one year is serious cause for concern. This is an annualized rate of 12.7%.

They have allowed themselves to become vulnerable due to a major drop in exports.

For years, the Japanese government has constipated and rudderless -- no vision, inept.

Japan's lost it.

How to hedge against the coming economic / currency collapse in the US?

Where we are right now, there is no rule book. It is entirely possible that more companies will collapse (financial and non-financial), unemployment can spike into double digits and that a flood of money into the system, in an effort to re-kindle a constipated financial system, may spark major inflation, the like we've not seen in 25 years. This inflationary rise - too many US dollars - will reduce the value of the US currency. What can you do now to protect yourself and your investments?
1) Move into non-US dollar investments. Choices: the UK Pound, the Japanese Yen and the EU Euro. The Euro is fast becoming a go-to currency
2) Convert your currency in gold bullion. Gold has long been a hedge against inflation. And with so much uncertainty in fiat currency, it's not a bad place to be.

A False Economy

Easy credit. Too much credit. Lax lending practices.
This easy credit consumer created a false economy in the United States for years and this impacted the global economy.

”A few years back banks would lend to anyone who could fog a mirror.”

-Richard Yamarone
Chief economist at Argus Research Corp in New York.

American consumers had access to too much credit. This credit was used. Consumer debt rose dramatically over the past ten years. This credit was extended to the housing market. Not all of this credit was bad, though. This credit expansion sparked a housing boom as more and more people purchased real estate. Greater demand than supply caused healthy increases in property values. Consumers, keen to keep spending, borrowed this newly created equity in their homes. Over many years this caused manufacturers and producers to scale up to meet the market demand. They produced more, they hired more people and they made more money. Share prices rose. Investors gained. However, these profits and gains were false.

When the banks and financial markets collapsed, this was exposed. Those hired shouldn’t have been hired. Last hired, first fired. Profits and growth were false. The market is now taking back. Don’t see it as decline. See it as a restoration.
Some people, me included, could see this coming, one day. As far back as 2003, I was shocked to read about the magnitude of American consumer debt.


The grey bars in the above chart indicate periods of recession.

The present level of US consumer debt stands at around $15 trillion ($45,500 per household)

Warren Buffet Quote

I came across a great Warren Buffet quote this week and wanted to share:

I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.

-- Lecturing to a group of students at Columbia U. He was 21 years old.

economic whirlwind

The recession in America is now being branded as a whirlwind? Is that what they're calling it now? Did Madison Avenue do another spin job?

A recession (or whirlwind) in Tokyo? Here is a definition: There is a recession in Tokyo when the line up to pay for your designer clothes is shorter than usual.

In Japan, well, Tokyo, people make money people spend money. It flows. the yen has jumped quite a bit as a result of the banking meltdown in the US, so foreign products are cheaper and i get a great rate when i send $ home. People are flying to Seoul to shop 'cause their currency has dropping making the difference even more extreme.

That being said, people -are- being affected here. Though nothing like in North America.
Areas outside of Tokyo and Osaka have been hard hit for a long time.

I'd say that I am affected by some corporate training contracts that are "pending", so it is not losing work, rather, not getting proposed work.

Here in Japan and especially in the US there was what I call a false economy for years: People spending money they don't have on things they don't need. Too much credit. People kept buying. Companies scaled up production and operations based on this. Now that it's crumbling, 'false profits' are going and 'false jobs' are now gone.

Everything goes in cycles. Economies go in cycles. When times are good people think they'll never end. When times are bad, likewise.

It is possible, not only to survive but thrive, during a recession. Where there is crisis, there is opportunity. You have to think differently. With the wipe out of the banking system, when it gets restored, it will not be the same as before. When the economy recovers it will not be the same as before. Things will be quite different in the future. Expect change. Don’t expect that a 'recovery' will look like things did before.

I predict that as I write now in January 2009, things will get worse before they get better. We have not seen the worst of it yet.

I’ll be ok. I am used to it. Here's why:

For the past 10 years, all my work has been on contract. I generally work 2-4 different places. Sometimes I am really, really busy. Sometimes I am not. When I am not working, I have no income. It happens. I've learned to expect it and manage it. Eventually it comes back.
Compare me to a Japanese "salary man" who has worked 10 years at the same company. If / when he loses his job tomorrow with wife, family and no savings (they've spent it all on Disneyland, Louis Vuitton bags and a host of other useless things). And, never having been in that situation, it's major stress. he's likely to jump in front of a commuter train (which happens far, far too often here).

As for me? I'll be fine. Just inconvenienced by the train delay. Most Japanese, like Americans -- with way too much unwarranted credit -- have lived in a happy-happy world too long. Time to wake up, read a newspaper and learn what's really going on in the world.

Get rich.

Get rich. Build wealth in good times or bad economic times. Wealth-building comes from how you think about money and your life. If you want to build wealth you must change the way you think.

In the posting that begin 2009, I will provide tips, insight and ideas upon which you can begin to change the way you think about money: earning and spending; a dozen ways to begin to save money now and how to used your own talents to make more money and use your time more effectively.

Building wealth is a journey and not a destination.

The journey to wealth-building begins now.

A good time to buy for long term holds

Going into 2009, after all the tax sell offs and write offs have ended for 2008, you may begin looking at equities to invest for the long term. Likely we will see an upward blip early in 2009. However, beware. The longer term fundamentals remain somewhat bleak. The stock market is an advanced indicator of economic activity - usually signalling what is to come 6+ months ahead.

There are -always- bargains out there: undervalued and mis-priced assets in the market. Though, given the fundamental shake up of the equities and capital markets, I predict that going forward we can no longer think as we did in the past. Do not expect things to return to the state they were in in the past.

Cash is king. However it is important to pick your currency: Japanese Yen, US Dollar, or Euro.