Observations

Richard was driving and talking to Jim. I was sitting in the back with all my reading material. Finally I had the time to catch up. Three articles caught my attention.

The first one was unfavorable to the ethanol craze going on right now in the US. This is an industry buoyed by 51 cents per gallon government subsidies to a few major companies such as ADM.

This market interference by the government is creating distortions as farmers and speculators take advantage of the bonanza. The ensuing misallocation of crops will increase the price of commodities not produced because of the emphasis on corn and soybeans. There will be a green effect because corn and soybean require large amounts of fertilizer, pesticides, and fuel.

The second article dealt with the new shape of the global balance of power. As other countries grow faster, their relative economic weight increases.

Asia (mainly China and India) is creating its own organizations and excluding the US. The US, on the other hand, is trying to bring all the countries in the existing global structure to keep control of what is happening. China, meanwhile, is opening aggressively to Africa. Russia is increasing its ties with China and Asia.

The power structure of the world is evolving and everybody is positioning to gain most control.

The third article dealt with the world demographics. People spend progressively more money until the age of 48, after which spending slowly decreases as they save more for retirement. You can tell what is happening to a country by looking at the number of new born 48 years ago!

The outcome is countries with the youngest population will grow faster such as India will assume power. Those with older population (Japan) will grow very slowly. Europe, Russia, and USA are “middle-age” countries and are entering the slower growth phase.

China, with its one child policy in 1979, had plunging births. It will grow rapidly until 2015. It looks like China will grow old before it grows rich!

(This Observations appeared in the 5-28-2007 issue of The Peter Dag Portfolio ).

George Dagnino, PhD Editor,
The Peter Dag Portfolio.
Since 1977
2009 Market Timer of the Year by Timer Digest
Portfolio manager

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