Thursday, June 19, 2008
That Tinkling Sound You Hear
Imagine a diaphanous network of chains composed of glass and rubber links stretched like a huge, disorderly spiderweb across the globe. That is global trade. The rubber links in the chains can stretch to a certain point, but after that point the pressure is shifted to the glass links, and they begin to snap.
I have never seen anything like this. At these fuel prices, it becomes uneconomic to ship a bunch of products. What is Hawaii going to do? I have no clue!
Like the first snow of fall, shards of glass are drifting downward almost unnoticed. They will accumulate rapidly, and abruptly overages and shortages of products will appear. There will be sharp increases in the prices of some materials, as enterprises drop out after prices plummet unpredictably for a time.
The result is a massive overcapacity of production in some areas, and the need to expand capacity in others. But that is globally speaking, inefficient, and it sucks up capital. Many of the highly leveraged companies are now in deep trouble, which will show up on the spreadsheets of the financials relatively quickly. The cost of paying for budget deficits is rising sharply for many Asian countries (see Indonesia, for example), even while growth is slowing substantially.
The thing to stay away from is corporate debt unless they are bonds from a very strong company with very low leverage. Banks continue to be a no-no. The best sectors are fundamental ones that have already sold off, like some groceries.
Fund investing is awesomely dangerous at this time.
Update: And China makes its move.
But new ones might VERY well be planned to be from-the-ground-up versions of the clipper.
It sure would make economic sense so long as sufficient controls can be automated (I am sure they can be) to avoid the need for large crews.
In the meantime, it's going to be increasingly frustrating to deal with the constant change as we move towards whatever brave new world we are headed towards.
Can gardens really be considered a pox upon the neighborhood?
Regarding the suburbs, I recently saw some story or another about people farming in the suburbs by using lawns - theirs and others. If I remember correctly, one couple had made a business of it. It worked sort of like a co-op - people allowed them to plow up their lawns in exchange for a share of the crops, and others would pay a yearly fee for a share of the veggies.
I believe the lead gardener (Kipp Nash) was featured in some newspaper stories.
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