Calling all economists, part 2
Today, we’re going try to take the unusual tack of finding the market upside in all of the bad news of a questionable US economy, a sliding dollar, a blown-out housing market, and such. We all know that there’s always another bubble around the corner, and now’s the time to figure it out. (Of course, there may not be a bubble, and the whole world might fall apart, but we’re screwed in that situation anyway, so let’s focus on what we can deal with.)
It’s tempting to perform a process of reduction, geographically. This separates the world into little chunks of good ideas and bad ideas. If the US is down, all of the countries heavily leveraged with it (in terms of trade, currency dependencies, etc.) look bad, right? So that would mean that if the US economy falls from grace, so would Mexico, Canada to some degree, China, India, and more. The ones that are left would be those farthest in the graph of dependencies.
Reduction may have worked a few decades ago to some degree. Now, the global market ties everyone together in really fun ways. China’s still bound to the US, but floating the Renminbi against something other than the dollar might do a lot of good. Of course, the artificial weakness it holds right now makes China’s output seem cheap, too.
Likewise, reducing the ‘good markets’ to those least dependent on the US to, say, ‘Europe’ ignores a lot of internal complexity like the current labor market issues and other bureaucratic messes that have prevented the EU from getting some of the stature it probably deserves. EADS’s performance is a pretty clear example of both of these issues combined into one.
Because everything’s intertwined, it’s pretty much impossible to isolate a specific region or country that seems like a good investment. APAC still seems most poised for growth overall, China specfically, but that’s not what we’re after here. The goal is the next bubble, remember? That’s a specific sector, although usually within a specific country. Think IT outsourcing and India a few years ago.
If this was truly easy, we’d all be there already. It’s not. And I have zero real background in economics, which doesn’t help.
However, the gut reaction is that the next 5-10 years will see a large amount of interest in energy (technology and security) and currency trading. The US is going to have to unhook from oil in a serious way, and the rest of the world has to unhook from the dollar as the US falters in the process.
Sounds reasonable, right? Scientific? Maybe not - but hey, if the numbers gave a really clear view, we’d all have the answer already.
Hmm. So, who has the next big idea in energy, and where are they? And really, how do you make money exactly in currency trading? The concept makes sense, but what are the specifics? Can you just cut a check to a trader and get a bigger one back?
Any thoughts would be appreciated - a real energy option would be good to read about. Biodiesel’s neat, but there’s some serious questions on efficiency, at least right now. Advances in photovoltaics seem to be just ‘2-5′ years out from full production, although it seems like if it could be perfected, as a source, the sun is the most reliable source of energy we have for the next few billion years.
Other guesses would be helpful too. I sure can’t figure it out. Comment or email matt.sherer@gmail.com and tell me how this all fits together.