Outside the Box

Weeks When Decades Happen

March 20, 2012

My friends at GaveKal are uniquely positioned to help us think about where we have been in the past decade and where we are going in the next one. Their perch in Hong Kong lets them keep their fingers on China's pulse, but they also have profound roots in Europe – the Gave family is French – as well as a thorough grasp of the US economy and culture. (Louis Gave, the author of today's Outside the Box, is a Duke grad.)

We can all second Louis when he notes "the discomfort and uncertainty we find in most meetings with clients" – we're treading on uncertain turf here and moving into unexplored territory. We sense that the potential, in the next few years, for both creation and destruction (so yes, creative destruction) is greater than at any time in our lives – and greater perhaps than at any time in the history of the human race.

How do we get our heads around something that big and dynamic? Where do we find the confidence that our next steps will take us forward rather than back? How do we allocate and husband our resources, wisely and profitably? In the following piece, Louis Gave takes an approach that is genuinely helpful: he looks back to the crucial year of 2001 and identifies three big events that largely determined global economic and investment trends in the '00s.

And then he does something that is rather scary but very necessary. He says, don't look now, gang, but those trends have stalled; and so we had better come to grips with the great trends that are now forming (lest we be like the British guns of Singapore at the outbreak of WWII: facing the wrong way).

And then – GaveKal to the rescue! – he tells us what those trends are. So, without stealing any of Louis's thunder, I will deliver you into his capable hands. But first, this note –

I did get my iPad 3 on time. No line, in stock at the local Apple store. I decided to try when I got a few emails from analyst types who actually go to stores to check on lines and inventory instead of just looking at numbers. Lines were down, for whatever reason. And inexplicably to me, there is absolutely no visual difference between the iPad 3 and the 2. None. And there is nothing on the box to reassure you that you actually got the 3, if you don't get the 4G. Now, the 4G speed is cool, and I can see the increased processor speed, and the display is in fact nicer. Not sure, unless you are an early adopter or hooked on speed (as I am) that the need will be there to buy up. And if you don't get the 4G? There is no difference in connection speed. And Apple stock is priced for perfection. Just saying…

Finally, I rarely ever provide a link that is simply for fun, but my friend Cliff Draughn of Excelsia sent me the funniest 5-minute clip I have seen in years. I laughed out loud for some time. Do not listen unless you are where you can laugh. This may be something of an inside investment-world joke, but I think most people will appreciate it. http://www.xtranormal.com/watch/12032078/a-day-in-the-life-of-a-financial-advisor. I think even Suze will get a kick out of this!

Have a great week. I am finishing this up in the airport, and am off in a few minutes to Stockholm and Paris. I intend to take some time and see the Vasa, a 68-gun warship built in 1628 and pulled up from the bay in 1987, where it had been perfectly preserved. Stunning history and something I have long wanted to see. (en.wikipedia.org/wiki/Vasa_(ship)) Plus a lot more of Stockholm and a few spots in Paris before the GIC conference. And I am also going to spend some time with people who went through the banking/sovereign crisis in Sweden in the '90s and see what I can learn. And now let's turn you over to Louis.

Your up on my board, surfing the inevitable analyst,

John Mauldin, Editor
Outside the Box

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Weeks When Decades Happen

Talking about the Russian Revolution, Lenin once said that "there are decades when nothing happens and there are weeks when decades happen." The last quarter of 2001 looks in retrospect like one of those exciting periods: three events occurred which set in motion the main economic trends of the ensuing decade. Successful investors latched on to at least one of these trends. The problem…

Discuss This

8 comments

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Comments

jacob korngold

April 1, 2012, 7:41 p.m.

I wonder how an individual investor might profit from the growth of the RMB bond market ?

Steve Herr

March 23, 2012, 9:19 a.m.

Great article, and interesting discussion.  For those of us that don’t have the ability to follow the thought process to its final conclusion I would love some additional insights into how these trends will affect the long end of the bond market?  The article seems to assume that the government will get control over fiscal deficits.  I wish I were that confident.

Another aspect of the cheap energy story in the US is the emergence of cheap solar energy in certain areas of the US.  I live in Southern California and recently installed a 20 KW solar system.  Our rate for top tier electricity is one of the highest in the country at $.30/KWHr, and the solar system has a payback of less than 4 years.  The utility, SDG&E, is getting really nervous that their customers will start producing their own power, and that they will become nothing more than a big battery, which is hard to get paid for under current law.  Lots of places to profit, and lots of pitfalls to figure out.

Gerald Ferguson

March 21, 2012, 7:50 p.m.

Increased use of robotics in US will continue to increase number of unemployed unneeded workers. The social effect could be unsettling.

Greta Perleberg

March 21, 2012, 1:06 p.m.

In order for the Chinese to “internationalize” the RMB, wouldn’t they have to decide to let it float freely on the market? Is there any sign they’re willing to do that? Without his addressing this factor, doesn’t his analysis lack credence?

Harvey Ring

March 20, 2012, 5:13 p.m.

I believe that there is a very important corollary to your Robotics trends.  Wireless applications on smartphones and tablets are remaking the services segment of our country.  People become much more productive using these tools and are able to do their job anytime and place not being teathered to a desk.  I have seen productivity gains of 2x or more.  We are just at the beginning of this trend and it is fueled by the hardware platforms, software applications and the need to improve service worker productivity.  The economics of this trend in many service businesses is enormous.

Richard Offerdahl

March 20, 2012, 4:53 p.m.

Wow!  Good choice, John.  Clearly there will be efffects on the dollar, gold, oil, trade, etc.  Without riots?  Doubltful.  Changes of this magnitue have big ripples.

Erik Dunleavy

March 20, 2012, 2:20 p.m.

Interesting, but he igores the elephant in the room, DEBT- both government and personal.

Larry Brown

March 20, 2012, 1:45 p.m.

The US cutting Iran off from SWIFT may have nasty unintended consequences.