Investments

The Next Big Thing

ICangles Investment Post…

Periods of prolonged economic prosperity are driven by technology innovations. Today’s low growth economic paradigm stems in large part from the absence of such a driver. Growth in the nineteen eighties and nineties was driven by microprocessor innovation. In the middle of the twentieth century it was the oil economy characterized by the internal combustion engine. Preceding this, the Roaring Twenties witnessed the electrification of the world. It’s a regular pattern of periods of wealth creation around disruptive technologies interspersed with periods of economic turbulence. The good news is despite today’s poor economy this long cycle argues that another innovation and period of growth isn’t that far off. Some educated guesses about the nature of the next big thing driving a prolonged boom in the stock market can even be made.

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Attack of the Economic Zombies

ICangles Investment Post…

Last Friday’s government report on the economy, detailing Q3 GDP growth of only 2.0 percent, confirmed that the U.S. remains mired in a low growth, high unemployment paradigm. In a viewpoint I wrote for EE Times in February 2009 I predicted as much noting that the government’s economic stimulus package was more likely to make things worse than better and that strong sustainable economic growth requires a powerful technology innovation, like the internal combustion engine or microprocessor, being in its growth stage. I argued since 2000 there has been little real sustainable growth. I focused that short viewpoint on the impact of technology on the future growth potential of the economy. But with poor economic performance now confirmed it is worth spending some time on how government intervention can actually make things worse by among other things fostering economic zombies.

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Risky Lessons from ’87 and ’07

ICangles Investment Post…

History didn’t repeat in the 1987 stock market crash and the bear market that began in 2007, but it rhymed. Both market tops were propelled by the use of derivate security products that falsely promised to remove risk from investing, were characterized by unrealistically high valuations around an asset class and witnessed an important financial market freeze due to an ‘insurance run’. Although the general symptoms were the same however, the specifics were very different. And it is important to understand both the similarities and differences in order to spot future stock bear markets and assess the current market.

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Great Recession Over?

ICangles Investment Post…

Earlier this week the National Bureau of Economic Research, the official arbiter of the economy, declared that the so-called Great Recession ended in June 2009. Having started in December 2007 and lasting for 18 months, it represented the longest recession since the end of the Great Depression. The NBER found that a mix of economic indicators it tracks began a period of sustained growth starting last June, driving the economy as measured by gross domestic product (GDP) higher. But whether you consider the recession over depends a lot on your definition of a recession.

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Reading the Unemployment Tea Leaves

ICangles Investment Post…

Looking into and understanding the devil of the details in government employment and economic reports reveals that the job market is likely to remain poor for some time to come. This most recent report however was marginally positive. The Labor Department reported on Friday that the unemployment rate rose slightly from 9.5 percent in July to 9.6 percent in August. In the stock market everything is relative, and relatively speaking the results of a slight increase were marginally positive because economist expected an even bigger rise in unemployment. The stock market response might have been called a relief rally had it been stronger, but it was more of a relief pop with the Dow Jones Industrial Average rising a little over 100 points.

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The Three Bears Economy

ICangles Investment Post…

In hindsight it’s ironic that the economy of the nineties was described as the Goldilocks economy—not too hot, not too cold, but just right for high employment and strong growth. Ironic, because the real moral of the story people should have heeded is that there is no free lunch. And, like in the Goldilocks’ fairy tale, three unfriendly bears emerged. If the nineties was the Goldilocks economy then the period we now find ourselves in of both weak growth and employment might best be described as the three bears economy. Since 2000 there was the baby bear of the dotcom bubble, the mamma bear of the residential real estate bubble and the daddy bear of the government debt bubble—corporate, consumer and now government-led bubbles of unproductive and hence unsustainable spending.

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Prologue

Welcome to ICangles…

Investment & Communication Angles focuses on subjects germane to my professional experience—investments and communications consulting from investor and public relations to branding and marketing. I’m categorizing most posts as either investment or communications related with investor relations posts getting dropped into the communications bucket. It may be a bit of an eclectic mix, but that is a fair characterization and by far not the worst that could be said about me. On a positive note some have found my musings on various subjects to be of interest, and hopefully you will also. Having previously been a magazine columnist and contributed articles to various publications I am looking forward to the freedom of blogging. I hope you will look forward to my occasional blog posts.