future predictions

[Ray Zee]

nz and aud currencies will go way down
they just dont produce anything

canadian dollar goes up- they have big natural resources

japan economy collapse- high labor costs, no natural resources

china drives the price of oil through the roof- obvious happening

euro becomes world currency replacing the dollar.

u.s. standard of living drops


i think all will happen but i dont have the time frame.
but for the long run i would use these or your own predictions for portfolio planning.

[adios]

I guess I liked this article because it more or less ties into what I think and makes some points you make in your post. However, one point where you and these guys disagree is on the standard of living in the U.S.

So, what is this new picture as hinted by the Fed and demonstrated unequivocally by the data? It's a picture of a domestic economy that, aside from volatile energy prices, has an inflation rate of barely 2% a year. It's a picture of productivity defying historical patterns and remaining high even after the economy has begun to expand. It's a picture of corporations able to arbitrage labor globally and take advantage of software to calibrate inventories, supply and demand on a global scale. It's a picture of a concentration of wealth at the top and on corporate balance sheets. It's a picture of downward pressure on wages -- but because of global deflationary pressures, it is simultaneously a picture of more people in the U.S. enjoying a higher standard of living than most previous generations.

Personally I'm not so sure about the conclusion regarding deflationary pressures helping more than the downward pressure on wages hurts if that makes any sense. In the long run I don't see strong demand for labor, at least not much demand for uneducated and unskilled labor. A growing Chineese economy should actually benefit the U.S. economy in the long run methinks.

The Greenspan Nation

By DAN CHUNG and ZACHARY KARABELL
August 12, 2004; Page A10

The American public is being presented with two vastly different perspectives on the U.S. economy. At their convention in Boston, the Democrats complained that job creation is weak, that there are now two Americas and that the only jobs in this recovery are low-wage ones. The Republicans counter that 1.5 million jobs have been created in the past year, many of these jobs pay well and that this is one of the stronger recoveries on record. Which of these views is right? In truth, neither.

Who is right? Alan Greenspan and the Fed.

For all the opprobrium that Mr. Greenspan has been subjected to, first for "allowing" the Internet bubble to form and then for "getting behind the curve" by not raising interest rates sooner than June 30 of this year, the Fed appears to have seen the forest where everyone else is seeing trees. Mr. Greenspan is politically astute, to be sure, but he's also prone to look for tectonic shifts in the economy. As evidenced by the buildup to Tuesday's 25 basis-point increase, Fed policy on interest rates gets an inordinate amount of attention. In order to arrive at a decision on rates, however, the regional Federal Reserve Banks employ an extensive staff of researchers and economists and sponsor a wide range of academic research.

The Fed may or may not raise or lower rates at precisely the right time or pace -- but over the past decade, it's been more on target with what's happening in the economy than most politicians and business leaders.

Starting in the mid-1990s, under Mr. Greenspan's prodding, Fed economists were early in trying to identify evidence that information technology was leading to productivity enhancements. Most economists at the time were skeptical; and even as late as 2000, most, in both academia and the government, were unable to measure the effects of information technology on the economy. But at several Fed branches, papers and studies were commissioned to illuminate the link between IT and increased productivity -- a link which no one now disputes.

Today, the Fed believes that globalization is essentially deflationary and that IT continues to change the nature of jobs and prices. That means the current recovery will not be like past recoveries. Political parties (and bond investors who think the Fed is "behind the curve") don't understand that and don't believe it. Politicians want the answers to be simple. So the Democrats point to statistics showing that wage growth over the past two years has been stagnant and that the top 5% of Americans are benefiting more than the remaining 95%. Republicans point to data showing an average of 200,000 new jobs a month (a figure which may have to be lowered in light of last Friday's weak employment report) and increasing public confidence that jobs are more plentiful and the economy is healthy. Democrats rail against corporations that "outsource" jobs that "should be in the United States," while Republicans insist that rising corporate profits will benefit all Americans.

These are half-truths. There are so many flaws with party rhetoric that it's hard to know where to begin. In essence, the twin effects of globalization and the continued spread of productivity-enhancing information technologies mean that a number of the old economic patterns are useless.

Most of the jobs Democrats claim have been outsourced have been lost not to low-wage competitors in China or India, but to computers -- and frankly, it's easier to rail against China than it is to make a stump speech against the disruptive effects of technology. Statistically, yes, many of the jobs that are being created are temporary, or lower-wage service jobs; and yes, the upper echelons of the pay scale are doing better, but those trends began long before the current Republican administration. And while median incomes have been flat, a closer inspection of census data shows that averages are skewed down by singles, young people and the elderly. That's not to underplay the difficulties such people face, but rather to emphasize that most of the generalizations offered up tell us little.

Meanwhile, the economists at the Fed continue to delve into questions such as the impact of e-commerce on the U.S economy and whether the U.S. consumer will be able to sustain spending after the mortgage-refinancing boom subsides. They have also been tasked with examining the global flow of prices, goods, and jobs.

So, what is this new picture as hinted by the Fed and demonstrated unequivocally by the data? It's a picture of a domestic economy that, aside from volatile energy prices, has an inflation rate of barely 2% a year. It's a picture of productivity defying historical patterns and remaining high even after the economy has begun to expand. It's a picture of corporations able to arbitrage labor globally and take advantage of software to calibrate inventories, supply and demand on a global scale. It's a picture of a concentration of wealth at the top and on corporate balance sheets. It's a picture of downward pressure on wages -- but because of global deflationary pressures, it is simultaneously a picture of more people in the U.S. enjoying a higher standard of living than most previous generations.

In short, it's a contradictory economy that defies easy characterization. Politicians and investors don't much like that. But the Fed at least isn't pandering. Look at the research that's quietly emerging from the Fed branches; chart what Mr. Greenspan has said and how he's said it. They recognize that we're in the early stages of a shift away from a national economy and toward a global economy, and they seem to recognize that for now, we lack the tools to analyze the effects.

At the end of the day, the underlying goal of Mr. Greenspan and the Fed is equilibrium. The great economic crises have been caused by imbalances based on inadequate information-too much supply, too few buyers; too many buyers, too little supply; companies not knowing how much to produce and guessing wrong.

Information technology combined with globalization is leading to a level of equilibrium impossible in the past, with some unforeseen consequences. For instance, 30 years ago, a television set, an air conditioner or an airplane ticket cost, in constant dollars, two to three times what they would cost today. Prices have been dropping even more rapidly in the past five years, with the $50 DVD player being only the most dramatic example. Wages are coming under pressure, but prices are under even more pressure, with the result that more people are now able to afford the things that early generations could only dream of, and that includes homes. In essence, the less affluent live better -- in purely material terms -- than at any time in the past, even as they are faring worse in comparison with the more affluent.

We'll hear a lot of political rhetoric about the economy in the next months, a lot of noise, and a lot of confusion. But if we want to actually comprehend what's going on, we should look to the Fed. They may not get interest rates exactly right, but they do understand what's happening with our economy.

Mr. Chung is president and chief investment officer and Mr. Karabell a senior vice president and senior economic analyst at Fred Alger Management.

[GeorgeF]

Both Australia and NZ have large natural resource industries. While both countries lack industrial 'national champions' like America's GE or Frances Alstom they won't have to bail them out like Alstom and Fiat. Australia in partiuclar has an auto industry and global companies like Rinker http://www.rinker.com/.

1) The situation in Iraq fails to improve, Ayatolla Sistani dies of what ever he is being treated for in London. In exchange for recognizing Israel, giving up all claims on the Golan heights and Lebanon Syria is given control of Iraq; restoring Bath party rule.

In related news Afghanistan is divided up amongst neighboring countries. In particular Pakistan turns over Bin Laden in exchange for the Pashto regions. A pipeline from Central Asia to Karachi is now possible.

2) Cumbre Vieja volcano becomes active but does not collapse. This scares the hell out all people living on the North Atlantic Coast.

http://www.google.com/search?hl=en&lr=&ie=UTF-8&q="Cumbre+Vieja+volcano"&btnG=Search (http://www.google.com/search?hl=en&lr=&ie=UTF-8&q=)

3) I personally don't think that the Europeans are willing to do the things necessary to make the euro the "world" currency. In particular bail outs of Alstom, Alitalia, and Fiat are likeley to weigh down on the euro. I do see the US dollar falling in value. I believe that pension bail outs in the US and europe plus use of currency devaluations in the US as a tool to reduce pensions owed to former government employees will result in a world where the US$, euro, whatever they use in China, and possibly the Indian Rupee are all used.

4) U.S. standard of living drops. I believe the the US standard of living will improve but drop relative to other nations like China that improves theirs. Although it is fun to chant USA #1, I am happy to see improvements in standards of third world peoples.

5) I believe that alot of natural resources capacity will come online in the next few years.

5) A "flying car" is produced eventually causing property values in urban centers to collapse.
http://www.moller.com/

6) Fannie Mae, Freddie Mac and the rest do not blow up until price declines in real estate caused by flying car occur. There is no real estate bubble now.

7) Interest rates stay low for 5 years. Making bonds equal to stocks.

8) Birth rates in Germany improve.

9) The US institutes a Value Added Tax and Highway congestion taxes as a replacement for income taxes. This is bad news if you have a Roth IRA.

[dune]

if one had to bet on currencies long-term, asian currencies(ex japan) seem the place to be. by betting on the currnecy you're effectively betting on the country. risk/reward seems better there than in the us of a.
japan has been collapsing for 15 years. another problem going forward is the the terrific ageing of their population. and they have strict immigration rules which prevent foreigners coming in to replace the retiring workers and negative population growth rate. an excellent expirement in politics winning over economics.
china will continue to drive the price of many things in many directions. they're shrewd traders w/ a tremendous need for resources and a very very long-term view on things. re:oil, go to hubbertpeak.com and one will see the other big factor going forward. as the price goes up though, real money will be devoted to finding/maximizing alternative sources of energy.
re: euro. all i know is, never bet on the europeans.
i agree that the us standard of living will drop relative to other countries. which is a win-win situation.

[playerfl]

NZ and AU will probably drop vs. other currencies but maybe not vs. the $US.

Canada looks like one of the most stable and safe countries in the world right now. ( I'm not canadian, but I like canadian gold mining stocks )

I think the $US has already lost its status as the main reserve currency in favor of the Euro.

The decline in the $US standard of living is being masked by increased reliance on personal debt and happy talk media. There is a lot of denial.

[gvibes]

[ QUOTE ]

9) The US institutes a Value Added Tax and Highway congestion taxes as a replacement for income taxes. This is bad news if you have a Roth IRA.

[/ QUOTE ]

Which is why you hedge /images/graemlins/wink.gif and get a 401(k) as well. I hope they eliminate the income limit on people eligible for roth's.

[obi---one]

1. Invest in alternative energy. It is obvious the world apetite for oil and energy will never stop, and we are already running out. If the current American administration wins the election thier energy policies will only exasperate the world energy problems/shortages with their drill/mine all natural resources and anti-conservation strategy. Good news for friends of GWB in the short term but great news for the forward looking investor in the long term.

2. I am bearish on long-term american economic dominance. I think our standard of living will decrease relative to the rest of the world. Therefore I don't like the US stock market (in a broad sense) or the dollar.

3. I would bet on a few select foreign countries, in real estate, markets and currencies. You can pick these countries from long term trends (India) or short term events (invest in Thailand after the baht devaluation in 97 or Argentina after the non debt repayments in 2002). These type of events will continue to occur and give opportunity for the smart investor to cash in.


Of course all my predictions come with a grain of salt. I have not been able to put my money were my mouth is as I am still very green as an investor.

[GeorgeF]

Interesting article on government spending in CA and NJ.

``The largest cost-drivers are public-employee pensions and school aid.''

http://quote.bloomberg.com/apps/news?pid=10000039&refer=columnist_mysak&sid=ay2JD1 INhsjM