Tuesday, October 14, 2008
"I have long held that brainpower trumps all economically--that intellectual capital is the most reliable way to wealth, for a person or a company. But sometimes even brilliance can't outperform the brute force of giant economic trends, and that has been a major theme of the past several years--much to my surprise. ... So let's review. The closer a product is to the dirt from which it came, the more its price has risen, while if it has been upgraded and sweated over by hundreds of Ph.D. engineers, it's lucky just to have held steady. What on earth is happening? ... Some realms of intellectual property, like brand building, require little capital--so as opportunities in Asia blossom for a top-end brand like Hermes, competitors rush in as well. ... Thus commodity bulls like Jim Rogers have been spectacularly right for the past several years and may be right for years to come. Yet ultimately, in their lumbering way, commodities will behave like commodities. As supply and demand ponderously equilibrate, prices eventually will barely cover costs, the most ambitious products will prove unwise, and the zip will go out of the share prices. That's the definition of a commodity business", my emphasis, Geoff Colvin (GC) at Fortune, 15 September 2008.
GC, that's true of all businesses, except the Fed. What is happening? Read some of C.V. Myers books for an explanation. Like: The Coming Deflation, 1976; Money and Energy, 1980 or World Rollover, 1985. Some people wrote of current conditions decades ago. American living standards will fall relative to those of the rest of the world. Americans consumption must decrease. That's reality.