To continue growing rapidly, China needs to make the next transition, from sweatshop economy to innovation economy. This transition is the one that has often proved difficult elsewhere. Once a country has turned itself into an export factory, it cannot keep growing by repeating the exercise. It can’t move a worker from an inefficient farm to a modern factory more than once. It cannot even retain its industrial might forever. As a country industrializes, workers will demand their share of the bounty, as has started happening in China, and some factories will start moving to poorer countries. Eventually, a rising economy needs to take two crucial steps: manufacture goods that aren’t just cheaper than the competition, but better; and create a thriving domestic market, so that its own consumers can pick up the slack when exports inevitably slow. These steps go hand in hand. Big consumer markets become laboratories where companies know that innovations will be tested and the successful ones richly rewarded. Those products can then expand into countries with less mature consumer markets. Look at the telephone, the personal computer and the iPhone and iPad, all of which were designed in the United States and are now sold around the world.
Source:
In China, Cultivating the Urge to Splurge
David Leonhardt
Published: November 24, 2010
In China’s halting efforts to build a new economy today, there is an intriguing parallel to the United States: Both the world’s largest economy and its latest challenger need to remake themselves. As Guo bluntly told me, “You are facing transformation, too.” The United States needs to shift away from debt-financed consumption with little long-term benefit and toward investments that can create good-paying jobs, like education, infrastructure, energy and scientific research. China needs to invest less and consume more — to keep growing rapidly and, in the process, to stimulate economic growth around the world. In both countries, significant changes are necessary to create more sustainable growth. And in both countries, they inspire fierce internal opposition.
We tend to think of the United States and China as rivals, and they will continue to compete in coming years, over which will build the industries of the future and which will be the dominant power in Asia and the world. But our problems are also linked, just as the Chinese export boom and the American consumption boom depended on each other and, together, helped create the financial crisis. The worst outcome now, for both countries, might well be economic stagnation in China. That would slow U.S. growth and could lead to political chaos in China. The best outcome would be for both countries to reshape their economies gradually, benefiting both. In neither country will it be easy.
About me: I give Economic, Social and Global trend briefings from some of the world's brightest minds at my blog http://saveriomanzo.com/ and http://saveriomanzo.blogspot.com/. I also provide true and tested financial planning and wealth advice. Most recently, over the past few years, I have become socially conscious and have been attempting to practise ways in which I can live my life more environmentally friendly. Along with some truly exceptional friends, we provide consulting and business development for small-medium sized businesses. In addition, I truly believe in being philanthropic, giving and doing unto other as we would have them do unto us. Some of my fondest resources are from Barry Ritholtz of The Big Picture, David Rosenberg and what Warren Buffett of Berkshire Hathaway is up to behind the scenes, as an example.
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Sunday, November 28, 2010
Friday, November 19, 2010
When will Renewable Energy replace Oil & Gas, really?
131 = The number of years to replace oil
It seems the panic time for both green enthusiasts and peak oil pundits has arrived.
According to a new paper by two researchers at the University of California, it would take 131 years for gasoline and diesel to be replaced given the current pace of research and development; however, the world’s oil could run dry almost a century before that.
The research was published on Nov. 8 at Environmental Science & Technology, and is based on the theory that market expectations are good predictors reflected in prices of publicly traded securities.
By incorporating market expectations into the model, the authors, Nataliya Malyshkina and Deb Niemeier, indicated that based on their calculation, the peak of oil production could occur between 2010 and 2030, before renewable replacement technologies become viable at around 2140.
The estimates not only delayed the alternative energy timeline, but also pushed up the peak oil deadline. The researchers suggest some previous estimates that pegged the year 2040 as the time frame when alternatives would start to replace oil, could be “overly optimistic”.
As I pointed out before, despite the excitement and hype about a future of clean energy, most of the current technology simply does not make economic sense for regular consumers and lacks the infrastructure for mass deployment … even with government subsidies, tax breaks, and outright mandates.
In addition, the supply chain of renewable technologies is not as green as people might think. Most alternative technologies rely on rare earths for efficiency. However, the radioactive waste produced by the rare earths mining process makes oil sands look like a green energy. This overlooked (or ignored) fact has now received some attention due to the sudden shortage caused by China’s embargo and export quotas on rare earths.
Another case in point: In China, the city of Jiuquan in Gansu province needs to build 9.2 gigawatts of new coal-fired generating capacity as backup power for the 12.7 gigawatts wind turbines due to be installed by 2015. More wind farms would need more coal-fired power plants, with little or possibly no carbon reduction.
Capitalism means investment naturally flows to the more profitable proposition … and vice versa. With more data and information becoming available, not much could go unnoticed by the markets, particularly in a relatively new sector such as renewable energy. And this harsh reality is clearly reflected in this new study.
Now, in its latest long-term outlook, the International Energy Agency (IEA) predicts that oil demand, prices and dependence on OPEC are all set to continue rising through 2035, and that global oil supplies would be near their peak in 2035 as China, India and other emerging economies keep on trucking.
So the world needs to come to a common understanding that:
1. the alternative energy is not mature enough to completely replace fossil sources any time soon;
2. energy security means a diversified and balanced portfolio inclusive of every bit of resource, fossil as well as renewables, just to meet the projected demand, and
3. real “green” energy is easier said than done.
Furthermore, the increased rare earths dependency, and the latest food vs. fuel debate when the food industry instituted a lawsuit against the EPA over E15 ethanol, underline some of the unintended (we hope), yet nasty consequences that often come with ill-informed and poorly-planned policies. (In the case of E15, the EPA is an easy mark considering one in eight Americans is on food stamps.)
All this requires a balanced and unbiased government policy to guide exploration and development of technologies to unlock the new fossil fuel reserves, expanding the R&Ds of emerging technologies, while effectively practicing and promoting energy efficiency and conservation.
Otherwise, we may literally witness $300 a barrel of oil before the electric vehicle could even achieve one percent market penetration. Unfortunately, there’s no easy fix, and the clock is ticking.
Posted By Dian L. Chu
About me: I give Economic, Social and Global trend briefings from some of the world's brightest minds at my blog http://saveriomanzo.com/ and http://saveriomanzo.blogspot.com/. I also provide true and tested financial planning and wealth advice. Most recently, over the past few years, I have become socially conscious and have been attempting to practise ways in which I can live my life more environmentally friendly. Along with some truly exceptional friends, we provide consulting and business development for small-medium sized businesses. In addition, I truly believe in being philanthropic, giving and doing unto other as we would have them do unto us. Some of my fondest resources are from Barry Ritholtz of The Big Picture, David Rosenberg and what Warren Buffett of Berkshire Hathaway is up to behind the scenes, as an example.
It seems the panic time for both green enthusiasts and peak oil pundits has arrived.
According to a new paper by two researchers at the University of California, it would take 131 years for gasoline and diesel to be replaced given the current pace of research and development; however, the world’s oil could run dry almost a century before that.
The research was published on Nov. 8 at Environmental Science & Technology, and is based on the theory that market expectations are good predictors reflected in prices of publicly traded securities.
By incorporating market expectations into the model, the authors, Nataliya Malyshkina and Deb Niemeier, indicated that based on their calculation, the peak of oil production could occur between 2010 and 2030, before renewable replacement technologies become viable at around 2140.
The estimates not only delayed the alternative energy timeline, but also pushed up the peak oil deadline. The researchers suggest some previous estimates that pegged the year 2040 as the time frame when alternatives would start to replace oil, could be “overly optimistic”.
As I pointed out before, despite the excitement and hype about a future of clean energy, most of the current technology simply does not make economic sense for regular consumers and lacks the infrastructure for mass deployment … even with government subsidies, tax breaks, and outright mandates.
In addition, the supply chain of renewable technologies is not as green as people might think. Most alternative technologies rely on rare earths for efficiency. However, the radioactive waste produced by the rare earths mining process makes oil sands look like a green energy. This overlooked (or ignored) fact has now received some attention due to the sudden shortage caused by China’s embargo and export quotas on rare earths.
Another case in point: In China, the city of Jiuquan in Gansu province needs to build 9.2 gigawatts of new coal-fired generating capacity as backup power for the 12.7 gigawatts wind turbines due to be installed by 2015. More wind farms would need more coal-fired power plants, with little or possibly no carbon reduction.
Capitalism means investment naturally flows to the more profitable proposition … and vice versa. With more data and information becoming available, not much could go unnoticed by the markets, particularly in a relatively new sector such as renewable energy. And this harsh reality is clearly reflected in this new study.
Now, in its latest long-term outlook, the International Energy Agency (IEA) predicts that oil demand, prices and dependence on OPEC are all set to continue rising through 2035, and that global oil supplies would be near their peak in 2035 as China, India and other emerging economies keep on trucking.
So the world needs to come to a common understanding that:
1. the alternative energy is not mature enough to completely replace fossil sources any time soon;
2. energy security means a diversified and balanced portfolio inclusive of every bit of resource, fossil as well as renewables, just to meet the projected demand, and
3. real “green” energy is easier said than done.
Furthermore, the increased rare earths dependency, and the latest food vs. fuel debate when the food industry instituted a lawsuit against the EPA over E15 ethanol, underline some of the unintended (we hope), yet nasty consequences that often come with ill-informed and poorly-planned policies. (In the case of E15, the EPA is an easy mark considering one in eight Americans is on food stamps.)
All this requires a balanced and unbiased government policy to guide exploration and development of technologies to unlock the new fossil fuel reserves, expanding the R&Ds of emerging technologies, while effectively practicing and promoting energy efficiency and conservation.
Otherwise, we may literally witness $300 a barrel of oil before the electric vehicle could even achieve one percent market penetration. Unfortunately, there’s no easy fix, and the clock is ticking.
Posted By Dian L. Chu
About me: I give Economic, Social and Global trend briefings from some of the world's brightest minds at my blog http://saveriomanzo.com/ and http://saveriomanzo.blogspot.com/. I also provide true and tested financial planning and wealth advice. Most recently, over the past few years, I have become socially conscious and have been attempting to practise ways in which I can live my life more environmentally friendly. Along with some truly exceptional friends, we provide consulting and business development for small-medium sized businesses. In addition, I truly believe in being philanthropic, giving and doing unto other as we would have them do unto us. Some of my fondest resources are from Barry Ritholtz of The Big Picture, David Rosenberg and what Warren Buffett of Berkshire Hathaway is up to behind the scenes, as an example.
Thursday, November 11, 2010
Fixed or Variable? The perennial mortgage question
As a financial planner I have been asked this question over the past fifteen years far too many times to count. My basic and fundamental answer has never changed, regardless of what situation we find ourselves economically or on the interest rate yield curve.
History and statistics don’t lie: A variable rate mortgage or loan has proven to be the cheapest form of borrowing in nearly every 5-year cycle over the past 100 years.
I only deviate from this stance when a friend, a family member or anyone seeking advice expresses to me some form of concern for the “unknown” – the simple little fact that rates, especially variable – can change drastically without any given notice. Some folks just can’t stomach a variable rate today and not knowing what that rate might be 6 months let alone 5 years from now. And heck, can you blame them? At 3.75% on a 5-year mortgage why take the risk?
So the real answer: keep in mind history and statistical truths BUT follow your own risk tolerance and ‘sleepful night’ mindset. - Saverio Manzo
Another Prospective By Tom Bradley
Last week a friend asked me what his daughter should do with her mortgage. The bank was giving her the option of going with a variable rate mortgage at 2.5% or a 5-year fixed at 3.75%.
Investment professionals get asked this question all the time by friends and family. I’ve come to learn that the askers have way more interest in this topic than anything I could ever tell them about our funds or their portfolio. This is ‘food on the table’ stuff.
So how did this investment professional answer the question?
With regard to the lower variable rate, there is no free lunch here. Research reveals that going variable saves money over the long run (Note: 30 years of declining rates, since 1980, has a huge influence on the numbers), but it comes with the risk that monthly payments will go through the roof if rates rise significantly. A borrower should only go the variable route if she/he has the resources and stomach to absorb a big increase for an extended period of time.
As for the fixed rate mortgage, we have to keep in mind that 3.75% for 5 years is an UNBELIEVABLE rate. Yikes! Knowing you’re going to have low monthly interest payments until 2015 sounds pretty good. We shouldn’t forget that we’re living in an artificially low rate environment right now. It won’t always be like this.
As an investor, I’m always comparing reward versus risk. There is a good chance that a variable rate mortgage will win over the next 5 years, but the potential risk is substantial. It seems to me the borrower has a chance of winning small or losing big. Go fixed.
(Note: With regard to the numbers, I’m simplifying grossly here. Rates and conditions are different in each situation. And I’m told that variable mortgages are available at lower rates.)
About me: I give Economic, Social and Global trend briefings from some of the world's brightest minds at my blog http://saveriomanzo.com/ and http://saveriomanzo.blogspot.com/. I also provide true and tested financial planning and wealth advice. Most recently, over the past few years, I have become socially conscious and have been attempting to practise ways in which I can live my life more environmentally friendly. Along with some truly exceptional friends, we provide consulting and business development for small-medium sized businesses. In addition, I truly believe in being philanthropic, giving and doing unto other as we would have them do unto us. Some of my fondest resources are from Barry Ritholtz of The Big Picture, David Rosenberg and what Warren Buffett of Berkshire Hathaway is up to behind the scenes, as an example.
.
History and statistics don’t lie: A variable rate mortgage or loan has proven to be the cheapest form of borrowing in nearly every 5-year cycle over the past 100 years.
I only deviate from this stance when a friend, a family member or anyone seeking advice expresses to me some form of concern for the “unknown” – the simple little fact that rates, especially variable – can change drastically without any given notice. Some folks just can’t stomach a variable rate today and not knowing what that rate might be 6 months let alone 5 years from now. And heck, can you blame them? At 3.75% on a 5-year mortgage why take the risk?
So the real answer: keep in mind history and statistical truths BUT follow your own risk tolerance and ‘sleepful night’ mindset. - Saverio Manzo
Another Prospective By Tom Bradley
Last week a friend asked me what his daughter should do with her mortgage. The bank was giving her the option of going with a variable rate mortgage at 2.5% or a 5-year fixed at 3.75%.
Investment professionals get asked this question all the time by friends and family. I’ve come to learn that the askers have way more interest in this topic than anything I could ever tell them about our funds or their portfolio. This is ‘food on the table’ stuff.
So how did this investment professional answer the question?
With regard to the lower variable rate, there is no free lunch here. Research reveals that going variable saves money over the long run (Note: 30 years of declining rates, since 1980, has a huge influence on the numbers), but it comes with the risk that monthly payments will go through the roof if rates rise significantly. A borrower should only go the variable route if she/he has the resources and stomach to absorb a big increase for an extended period of time.
As for the fixed rate mortgage, we have to keep in mind that 3.75% for 5 years is an UNBELIEVABLE rate. Yikes! Knowing you’re going to have low monthly interest payments until 2015 sounds pretty good. We shouldn’t forget that we’re living in an artificially low rate environment right now. It won’t always be like this.
As an investor, I’m always comparing reward versus risk. There is a good chance that a variable rate mortgage will win over the next 5 years, but the potential risk is substantial. It seems to me the borrower has a chance of winning small or losing big. Go fixed.
(Note: With regard to the numbers, I’m simplifying grossly here. Rates and conditions are different in each situation. And I’m told that variable mortgages are available at lower rates.)
About me: I give Economic, Social and Global trend briefings from some of the world's brightest minds at my blog http://saveriomanzo.com/ and http://saveriomanzo.blogspot.com/. I also provide true and tested financial planning and wealth advice. Most recently, over the past few years, I have become socially conscious and have been attempting to practise ways in which I can live my life more environmentally friendly. Along with some truly exceptional friends, we provide consulting and business development for small-medium sized businesses. In addition, I truly believe in being philanthropic, giving and doing unto other as we would have them do unto us. Some of my fondest resources are from Barry Ritholtz of The Big Picture, David Rosenberg and what Warren Buffett of Berkshire Hathaway is up to behind the scenes, as an example.
.
Wednesday, November 3, 2010
Market warning from Peter Grandich
Wow! Peter Grandich has an unprecedented history of calling market bottoms and tops. So when he takes his bold position, I listen - and encourage all to at least do the same.
U.S. Stock Market (DJIA 11,189) – I’ve been targeting the 11,300 area on the DJIA and Election Day in the U.S. as a point in time when the “steroid-craze” rally meets horrific economic, political and social fundamentals and no amount of “QE” easing can provide enough legs to take this rise much further. My Yellow alert is now turning Red. The time has come to put the bear suit back on and suggest bearish strategies. Bearish call spreads on major indices and liquidation of most non-metals related equities now appear appropriate in this person’s eyes.
As you know, I’ve not had an official bearish stance against the U.S. stock market since March 2009 and have expected the “Don’t Worry, Be Happy” crowd to once again lead the sheep to slaughter. Bullish sentiment has returned with a bang thanks to the Pied Pipers who fill the airwaves on Tout-TV and elsewhere. This comes at a time when corporate insiders have dramatically increased their selling. Despite what many in the financial arena would like you to believe, the stock market is a place where you get to be a part owner of companies. Who knows more about what’s happening at a company than the key personnel who run the company? If they’re selling shares aggressively while the public is buying, who do think has an edge? If you don’t believe it’s the insiders, I have a bridge and some Texas Rangers World Series Champions memorabilia for sale – cheap!
I’ve often stated I’m not interested in the day-to-day movements in markets as the cemetery is filled with people who tried beating markets trading. My outlook is for the long-term and as you know I’ve stated our market and economy is likely to mirror what happened in Japan from 1989 until now. QE flamed out in Japan and it shall here as well. Borrowing and spending our way out of this mess is not the answer nor is it the first time America has tried it and failed.
We’re also not going to solve our problems simply because one party gets back into a majority because the enormous problems America faces is a sum total of both parties mishandling of things. Yes, politicians are part of the problem, but remember I believe the real culprits are Americans themselves. Having too much stuff got us here and until they’re closing public storage facilities versus opening them, we’ll never get to the root of the matter.
A beautiful Canadian sang a song a few years back that accurately described Americans then and now.
About me: I give Economic, Social and Global trend briefings from some of the world's brightest minds at my blog http://saveriomanzo.com/ and http://saveriomanzo.blogspot.com/. I also provide true and tested financial planning and wealth advice. Most recently, over the past few years, I have become socially conscious and have been attempting to practise ways in which I can live my life more environmentally friendly. Along with some truly exceptional friends, we provide consulting and business development for small-medium sized businesses. In addition, I truly believe in being philanthropic, giving and doing unto other as we would have them do unto us. Some of my fondest resources are from Barry Ritholtz of The Big Picture, David Rosenberg and what Warren Buffett of Berkshire Hathaway is up to behind the scenes, as an example.
U.S. Stock Market (DJIA 11,189) – I’ve been targeting the 11,300 area on the DJIA and Election Day in the U.S. as a point in time when the “steroid-craze” rally meets horrific economic, political and social fundamentals and no amount of “QE” easing can provide enough legs to take this rise much further. My Yellow alert is now turning Red. The time has come to put the bear suit back on and suggest bearish strategies. Bearish call spreads on major indices and liquidation of most non-metals related equities now appear appropriate in this person’s eyes.
As you know, I’ve not had an official bearish stance against the U.S. stock market since March 2009 and have expected the “Don’t Worry, Be Happy” crowd to once again lead the sheep to slaughter. Bullish sentiment has returned with a bang thanks to the Pied Pipers who fill the airwaves on Tout-TV and elsewhere. This comes at a time when corporate insiders have dramatically increased their selling. Despite what many in the financial arena would like you to believe, the stock market is a place where you get to be a part owner of companies. Who knows more about what’s happening at a company than the key personnel who run the company? If they’re selling shares aggressively while the public is buying, who do think has an edge? If you don’t believe it’s the insiders, I have a bridge and some Texas Rangers World Series Champions memorabilia for sale – cheap!
I’ve often stated I’m not interested in the day-to-day movements in markets as the cemetery is filled with people who tried beating markets trading. My outlook is for the long-term and as you know I’ve stated our market and economy is likely to mirror what happened in Japan from 1989 until now. QE flamed out in Japan and it shall here as well. Borrowing and spending our way out of this mess is not the answer nor is it the first time America has tried it and failed.
We’re also not going to solve our problems simply because one party gets back into a majority because the enormous problems America faces is a sum total of both parties mishandling of things. Yes, politicians are part of the problem, but remember I believe the real culprits are Americans themselves. Having too much stuff got us here and until they’re closing public storage facilities versus opening them, we’ll never get to the root of the matter.
A beautiful Canadian sang a song a few years back that accurately described Americans then and now.
About me: I give Economic, Social and Global trend briefings from some of the world's brightest minds at my blog http://saveriomanzo.com/ and http://saveriomanzo.blogspot.com/. I also provide true and tested financial planning and wealth advice. Most recently, over the past few years, I have become socially conscious and have been attempting to practise ways in which I can live my life more environmentally friendly. Along with some truly exceptional friends, we provide consulting and business development for small-medium sized businesses. In addition, I truly believe in being philanthropic, giving and doing unto other as we would have them do unto us. Some of my fondest resources are from Barry Ritholtz of The Big Picture, David Rosenberg and what Warren Buffett of Berkshire Hathaway is up to behind the scenes, as an example.
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