Fw: Macro outlook – thinking out loud

Sent wirelessly via BlackBerry from T-Mobile.

Inputs

– the dollar – can’t see how it goes anywhere but down. Fed is lowering rates which reduces the amt paid to dollar deposits at same time trade balances and federal debt climbing rapidly. Ultimately, foreign deposits may stop as confidence in dollar and rates are inferior to oppts abroad. Asia should move faster and further than europe as china is artificially low.

– the economy – no more consumer spending engine. No more obvious wealth effect at top. Govt about to increase taxes which will drain money supply at same time demand is weak too.

– inflation – should be pretty high with dollar falling and cost of real world inputs from oil to clothing going up. normally economists can count on increases in unemployment to hold labor costs down but that may have been different as labor was a bigger component of us cost base. Also, overall employment may stay pretty high.

+ productivity – this has been the real underlying economic driver that has been propelling our economy for past 18 yrs. Most white collar workers have blackberries and can be more productive more of the time. Obviously, the internet has been both an industrial boon and productivity driver for the past decade with big room left to drive efficiencies in how we live and transact.

My gut tells me that while there are very negative near term inputs that should keep us assets like equities and real estate down for the next 18 months, overall productivity gains will overwhelm these.

This feels a bit like 1989-1993 where we lacked clear direction for real economic growth. Even during that time we were benefitting from an IT revolution that (some claim) drove 80 pct of new job creation for the next decade.

As I find myself on a surprisingly relaxing and well run swa flt on sunday march 2nd, 2008, I realize that I’m still an optimist, still sold on this net revolution.

If I had the time I would reorient my portfolio towards real commodities like gold and oil that can maintain world based pricing and away from all assets priced in dollars esp us equities.

Sent wirelessly via BlackBerry from T-Mobile.

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