Thursday, October 13, 2016
The Wall Street Journal published one of the most meaningful and visually interpretive surveys of the employment picture in the United States today. Coinciding roughly with the passage of NAFTA and the widespread adoption of the Internet in the early 1990s, it portrays the massive disruption of technology, management, and political policy in shifting this country from a manufacturing base to a software-centric service hub.
As anyone who has worked in Silicon Valley for the past several decades will tell you, the Valley has shifted from hardware to software. This megatrend has resulted in massive job losses to cheap overseas manufacturing; spun with rose-hued glasses one could say the United States has spurred global growth and prosperity on an unequaled basis for the past 20 years.
For those wishing to Invest Like A Farmer, the trend of service-based employment and out-sourced manufacturing may have reached its pinnacle, especially as 3D printing and the very machinery has negated the cheap labor rates which caused massive job flows to countries like China, India, Vietnam, and other Southeast Asian labor markets.
With lean-inventory and production-on-demand now commonplace, I predict former manufacturing hubs like Detroit, St. Louis, Cleveland, and other "left-for-dead" traditional manufacturing cities making a strong comeback on the heels of (literally) dirt-cheap land prices, a workforce educated on demand, and the massive shipping moat known as the Pacific Ocean.
As Amazon.com has successfully proven, consumers embrace the concept of sacrificing a little time to get a great product cheaper. An educated, mobile, fluid USA workforce with 3D printing, manufacturing-on-demand, and a diverse skill-set can successfully leverage the Pacific Ocean, dirt-cheap land, and hopefully a political climate that supports them via an "America-first" mentality.
Sunday, October 9, 2016
A World Awash in Money
Even as real wages as measured in constant dollars haven't risen in DECADES, the world seems awash in money. How could this be? This is how: the purchasing power of those dollars has fallen like a rock in terms of real value. The giant vacuum sound you hear my fellow financial farmers is the real dollar value of your fiat currency being sucked away into a global vortex. When a buyer can get a million dollars to purchase a home for little down at 2.75% 30-year interest rate, there is a serious problem that is going to fuel a massive societal shift. A great report detailing this seismic financial shift was recently published by Bain & Company. You can read it here: A World Awash in Money
Sunday, September 11, 2016
Tuesday, August 16, 2016
The Pillars of Wealth
The four pillars of wealth have remained constant over time; Stocks, Bonds, Real Estate, and Gold. Barring the use of fiat currency, i.e. cash, for intermediate transactions, the world's wealthy have consistently built, stored, and extracted their wealth from those four pillars. Go and do likewise financial farmers; the means and methods vary, the intricacies differ, and the medium may change, but make no doubt about it, those pillars have remained constant bastions of wealth over time.
Saturday, July 16, 2016
Automation and the Gig Economy
What has been termed the Gig Economy may be the proverbial canary in the coal mine for the estimated 40% of the world's population that works in agriculture. As Marc Andreessen famously wrote in the Wall Street Journal article "Software Is Eating the World," there are tremendous implications for software disruption hitting many traditional industries. Not all of this is good, however, especially if you aren't skilled in software. I believe a massive net negative is going to feed the growing global dystopia of income and wealth inequality.
Historically, technological advances have actually produced more jobs, i.e. the industrial revolution, but recent advances in distributed software have made many jobs borderline sustainable; who really needs (wants) a taxi driver when a car installed with autopilot can get the job done? Others like farming, which are extremely labor dependent, are ripe for full automation. The unemployment implications are particularly disastrous in countries reliant upon agriculture for sustaining the bulk of their GDP.
The automation trend is on the cusp of cannibalizing many traditional jobs. The prosaic answer to this disruption, espoused by the billionaire networked elites, is "education." But how many programmers do we really need? Or better yet, how many programmers can this world support? Even programing has become commoditized as the H-1B visa saga illustrates; why hire a USA programmer when one from overseas can be had at a fraction of the price?
As readers of this blog know, we try to identify mass trends and tack our investment course accordingly. It is hard to believe the powers that be, i.e. Silicon Valley Venture Capitalists, will not pursue increased automation. It is a cheap solution to generating massive wealth without having to really create anything. By shirking existing laws, like occupancy taxes or taxi safety standards, software can leverage huge swarths of existing infrastructure, drive out the middle (wo)man, and siphon the profits upwards.
The transition to a Gig Economy is very telling. Many existing jobs are eliminated and traditional employees are dropped into the Gig Economy like Neo in the Matrix as essentially economic mercenaries looking to fulfill increasingly more challenging positions that are not consumed by automation. Expect this trend to continue and invest accordingly; boring, monopolistic, dividend-paying companies that this blog traditionally espouses once again fit the bill. Software may be eating the world, but the installed base of commodity-dependent consumer staples (of which technology now can be considered a staple too) is winning the alpha race.
Wednesday, July 13, 2016
"Yeah, But Gold Doesn't Pay Any Interest!"
Courtesy of our friends at the Federal Reserve Economic Data (FRED) division, pictured above is the Purchasing Power of the Consumer Dollar. Essentially from 1975, the US Dollar has lost more than 95% of its purchasing power.
As those who like to Invest Like A Farmer, we don't like losing purchasing power. It is a really bad thing; you receive less and less in terms of goods and services over time for each US Dollar you save. Traditionally this was offset by having FDIC-insured risk-free savings accounts that yielded interest.
With interest now completely laughable, in some countries it is even NEGATIVE now (meaning you pay the bank for the pleasure of them then lending your money,) savers either have to chase risk in the hopes of getting a higher return on their dollars or seek an alternative asset class to hold their fiat currency.
Although having seed capital available has always been a good idea, the mechanism of value in which that capital is stored is very important. Holding cash money long-term has proven to be a big-time loser for protecting the purchasing power of consumers.
Wednesday, June 29, 2016
How Does Your Retirement Cashflow Stack Up?
Projected GDP Per Person over the next 5 years through 2020 gives an idea of what the average citizen in each of the following countries makes (either passively or actively) in income. Great snapshot of where investors should be targeting their returns in terms of local fiat currency. Interesting to see the effects of inflation even over a short amount of time in regards to estimated cost of living. Inflation is the enemy that never sleeps.
Tuesday, June 28, 2016
So You Say You Want a Revolution?
Payments over the course of history have increasingly moved towards a digital ledger system, the latest entry into this evolution of Fintech (financial technology) is the newly coined...sorry minted...sorry invented...term "fintat," meaning a "financial tattoo," that is a truly wearable temporary tattoo. Yes that was all one sentence, and yes I tried one out at Dunkin Donuts (odd, but successful nonetheless.) The temporary tattoo is a Quick Read (QR) code and can be washed away with soap and water at any time or will naturally dissipate over the course of a week or so. If you ever forget your wallet or go for a run you can feel at ease knowing you have cash "on" you at all times!