What could be the Problem in the World?

Friday, February 07, 2014 Francisco Carneiro 0 Comments

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Since 2008 financial crisis the world looks different

Why?

The world has almost no growth
Inflation is almost at zero everywhere
Regulation is in bull market
There is a big resentment with people that are doing well
Politicians are in the center of every decision
Tax receipts keep going up, the governments slowly take a bigger share of the pie
Unemployment is still high
There is excess supply of almost everything

News like this one are normal (Today news)

STOCKHOLM (AP) — Truck maker AB Volvo said it plans to lay off 4,400 employees this year as it revealed a 37 percent slide in fourth quarter profits.

Volvo CEO Olof Persson said the job losses, which include the previously announced reduction of 2,000, will affect employees worldwide in group truck operations, as well as in technology, sales, marketing, IT, finance and human resource department

To me the problem in the world is a lack of demand. There is excess supply of almost everything.

What causes this situation?

a)Technology, now a worker operating a machine or a Robot can produce thousands of units when in the past this same man/woman could only produce a few. In the new world not everybody is needed in the workforce.

b)One way to increase demand is to borrow but debt is already to high (Governments & Privates are already over levered)

c)Rates are at zero so the savers are not making money from their savings and are not spending. They get no income so they don't spend.

d)Since there is oversupply of almost everything there are no obvious investment opportunities. Normally a new investment is trying to address a lack of something but today we have everything.....

Who can win in this environment?

I think markets will keep going up, when rates are at zero everything will converge to zero. Dividend yields will fall (Stock's up), bond yields will converge, etc.... Zero is a magnet.

Robotics & Automation will keep replacing humans

Brands will keep doing business

And the big kill small is still in place

For the moment this is the world we live on, i don't intend to fight it.