Thought of the Day

Wealth median top 20% / wealth median bottom 20%

Source: European Central Bank (2013b)

Why there are almost no really rich people in the south of Europe? Because there are no big corporations like Bayer, BASF, BMW, Siemens, SAP, etc....The owners of this big multinationals are the rich people of Europe. The Globalization created a big and powerful multinationals. The big got bigger and the smaller got crushed.

When we open a big space to free trade, that is a boom to the biggest corporations.

Europe is in constitutional crisis. No one seems to have the power to impose a sensible resolution of its peripheral countries' debt crisis. Instead of restructuring the manifestly unsustainable debt burdens of Portugal, Ireland, and Greece (the PIGs), politicians and policymakers are pushing for ever-larger bailout packages with ever-less realistic austerity conditions.

http://www.guardian.co.uk/business/economics-blog/2013/may/23/eurozone-crisis-france-germany-kenneth-rogoff

What to do?

a)restructure = we can't pay so much so forgive us 50%---------> The north doesn't want this
b)Put some inflation in the system---------------> There is zero inflation
c)Get some growth-----------------------> if Europe cuts the cost of labor/taxes/energy bill,etc.... we might get some real growth. This is not going to happen.

What to do? We will need to restructure. Debt is like a backpack with rocks. People can not work with a huge backpack full of rock's. You can't move!

If Europe want to get away from this.

1.Restructure fast
2.No one will lend again to finance Greece, etc..... If they do it they will do it at their own risk
3.Greece will have to live with their own taxes.

France is a mess! No doubt about that. You cannot decide anything when you have no money. When you are broke there is no room for politics. Politics is only possible when there is money!

Source:

http://dilbert.com/strips/comic/2013-05-25/

I tend to agree with the first part of the cartoon. You don't have to be the best if you know how to recognize ability! That is the most important quality of a leader, hire the best and the smartest.

Why is important/key to have smart people on board? In my view in our world supply is bigger than demand in most businesses. you need smart people to figure out 4 things:

a)Ways to produce whatever you do cheaper than the competition

b)marketing/positioning/branding are much more important than the product/stuff

c)If you are not the nº1 in your industry you have a big problem

d)It's much smarter to be different (different from competitors) than to be better (similar to competitors but a bit better)

if you believe in

a)best practices/copying the leader

b)advertise you are the cheapest price in town

c)saying that you product is good in everything vs the best in one feature

it's because you don't have smart people working for you.

World Population Prospects, the 2010 Revision

Figure 13: Population change between 2010 and 2100 by major region (millions)

Source: United Nations, Department of Economic and Social Affairs, Population Division (2011): World Population Prospects: The 2010 Revision. New York

(Updated: 5 July 2011)

It's very difficult to grow and make money when there is no population growth. In Africa there is population growth and people still don't have cell phone, bank account, car, etc.... Buy Africa but only the consumer story. Don't buy commodities.

In 2009 we came up with 'The New Normal'" - characterized by persistently slow economic growth, elevated unemployment, high levels of geopolitical tension with social inequality and strife. It's pretty amazing how spot-on PIMCO has been with this concept. They also produced the idea of multi-speed recovery in 2011 - an idea that perfectly encapsulates this dichotomy between multi-national corporations (they have never been stronger) and low-income households (quite a different story).

"When we first introduced the concept of The New Normal, it was dismissed at idiotic and even fatalistic - by now it has become conventional wisdom, so widely used that even the IMF has adopted it."

Re: the popularity of the term New Normal, "We probably should have trademarked it, there is even a TV show that's using it."

http://www.thereformedbroker.com/2013/05/23/notes-from-the-pimco-investment-summit-with-mohamed-el-erian/

PS The new normal is nothing more than a big oversupply of everything. In this world only the big corporations can prosper and survive. Globalization, information, internet, etc.... give a big advantage to the biggest player in each market. The middle of the pack (corporations or households) are doomed