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6 Events in 2010 That Will Reshape The Future, and Deliver Unending Wealth To You Many years from now, your family could remember your swift action today as the start of their unending wealth. Find out how the first 2010 event, scheduled for Feb. 5, can begin your unending wealth. All the details here... --------------------------------------------------------------- Joel Bowman, reporting from two sides of Taipei, Taiwan... Last weekend your editor attended an Italian opera at the National Theater here in Taiwan. The actors were all petite locals, but that didn't stop them from belting out arias in a sonorous enough fashion to make the fattest Italian leading lady blush. The audience consisted of well-to-do academic types and business people. Men came in dapper suits and the women wore silks and fine coral jewelry. It was a far cry from what you might expect from a society that, only a few generations ago, was largely agrarian-based. As the orchestra's notes filled the plush, cavernous hall, we wondered, "Could this be the new Asia? The Asia of the future?" Those who dream of a great global economic recovery certainly hope so. Now that the American consumer is all but tapped out, they look to Asian producers to fill the demand gap. But one opening night does not make a season, as those in the industry might say. Taiwan is not all Lucia di Lammermoor's and lorgnettes, of course. Far from it. Indeed, few places we've visited in Asia more abundantly furnish the senses with the rich/poor, old/new dichotomies so prevalent around this region. Just outside the concert hall, for instance, looms a giant bronze statue of Chiang Kai-shek, a stark and foreboding reminder of the not-so-distant past when the tiny South China Sea island was plunged into chaos and routine class purges. Ever since Kuomintang (KMT) Chairman Chiang, the one-time friend and later arch nemesis of Chairman Mao Tse-Tung, fled to Taiwan (or Formosa, the Portuguese name meaning "beautiful [island]") in 1949, the place has been a hotbed of political friction. Naturally, not all locals welcomed Chiang's heavy-handed, authoritarian rule. There was plenty of bloodshed in the streets under Chiang's "White Terror" and masses of dispossessed citizens rebelled against his iron fist. But Chiang did have a few things going for him. When the KMT party arrived in Taiwan, they brought with them a huge portion of the mainland's gold and foreign currency reserves. Much of the intellectual and business elite also followed in order to avoid the communist crush of Mao's "Reds" back home. And, vitally and with the help of aid from the US, the KMT also instituted an import-substitution policy, whereby the country began to manufacture previously imported goods domestically. This policy was to prove an invaluable part of the small island's economic growth in subsequent years. After Chiang, the increasingly capitalistic, export-driven Taiwan grew its foreign reserves exponentially. Today it has the fourth largest stash in the world, behind only China, Japan and Russia. (As a point of interest, the US comes in 21st on the rankings, right between Poland and Libya.) It's not difficult to imagine a place like Taiwan, one of Asia's four "Tiger Economies" (alongside Singapore, Hong Kong and South Korea), leading some kind of regional renaissance. But the plot here is just as much tragedy as it is comedy. For one thing, a not-insignificant portion of the island's 23 million people still lives hand to mouth. Your editor buys his fresh fruit and vegetables from a local night market right next to his building, where vendors shuttle their produce in from farms in the surrounding mountains on the back of smoke-spluttering mopeds. These people work long, hard hours and are by no means equipped to pick up the conspicuously lagging consumption duties abandoned by their cash- strapped American cousins. The lines on their smiling faces run deep with the stresses and pains of the recent past and of a life spent laboring for little in return. Not two stops away on the world's most advanced underground metro system, Taiwan's tallest building, Taipei 101 (the world's highest until the Burj Dubai opened earlier this month), towers as the centerpiece of the high-end retail area surrounding the City Hall. Streets there are lined with luxury items form Paris, Milan and Seoul. Vacationing shoppers gorge themselves on Hermès handbags and Prada pumps, the price tags of which would have been unimaginable here a few years ago. To be sure, the island has come a long, long way over the past five or six decades. Where agriculture once made up more than one third of the GDP here, it now contributes less than 2%. The lion's share of economic activity today belongs to the booming information technology and biotech industries. Semiconductors sales are a source of national university pride and cutting edge companies like Acer (TSE: 2353), Asus (TSE: 2357) and HTC Corporation (TSE: 2498) churn out $300 laptops and smartphones by the ton, which they then pump into hungry foreign markets. But it is important to remember, especially when considering export driven/reliant economies, that not all demand is created equal. There is the kind forged in the crucible of the free market, rooted in sound money and underpinned by the desires of real people. Then there is the phantom, government-sponsored kind, masquerading behind a cloak of public stimulus boondoggles and debased currencies. Administrations from DC to Beijing and beyond are guilty of exactly this act of economic sleight of hand. It is impossible to know exactly how much of the world's current demand is real and how much is simply manufactured by make-work governments looking to pad their GDP figures with public works programs and easy money handouts. We've written in this space before about how liquidity inflows from the West, coupled with loose monetary policies locally, have pushed property prices and stock markets in China to bubble-like valuations. Dan Denning, our mate who heads up the Aussie chapter of The Daily Reckoning, spent the week there warning his readers of China's overly ambitious capital outlays. "Now it would be presumptuous to say that all Chinese capital spending was somehow derivative of American consumer demand," observes Dan. "China has other trading partners and markets, although without America things might not be so flash. But it is without doubt true that Chinese capital spending is a direct consequence of the global credit bubble." The faux demand plot is yet to fully reveal itself on the world economic stage, but it would be foolish to assume export dependent economies have not grown somewhat accustomed to bloated order books. Taiwan's generational gains are hard fought and the people here are among the most intelligent, driven individuals we've ever met. It is hard to ignore, however, that on both sides of the Pacific an over- consuming, publicly-funded "Chi-merican" fat lady may already be singing her swansong. We'll be back next weekend with more leisurely musings. Until then, please enjoy your archived reckonings from the week just gone, below... --- Start 2010 with a 60-day, Risk-Free Trial --- We're looking for readers to test one of our most profitable buy and sell recommendation research services for a full 60-days, starting now. In 2009, our research analyst delivered 1,685% cumulative gains with a 70.1% gain per recommendation. That means by February of 2010, you might have already had the chance to more than DOUBLE your money. We have one spot open for you, click here and find out how to activate your trial. --------------------------------------------------------------- | |
| ALSO THIS WEEK in The Daily Reckoning... Our NEW Trade of the Decade By Bill Bonner Bethesda, Maryland So what's next? What's the trade of the coming decade? Well, your editor has decided not to double-down on the identical trade. Gold will remain in our core holdings, but not in our Trade of the Decade for the next 10 years. Why? Because we think the US economy is going the way of Japan. Betting Against the US Treasury By Eric J. Fry Laguna Beach, California Maybe the US Treasury pulls off this financial miracle without a hitch. But we would take the other side of that bet. The Treasury auctioned off $118 billion of Treasury notes during the last week of 2009 - a record quantity. We predict this record will fall in 2010...several times. As these monstrous auctions sweep through the bond market like rogue waves, interest rates are sure to rise. The Trade of the Century By Chris Mayer Manhattan, New York City When you think about hot commodities right now, you probably don't think of water. Yet the price of water in some parts of the world is rising...sometimes very quickly. Take California, for example. California is a good case study where the water crisis is in bloom. Parasites, Bureaucracies and Soviet Boots By Bill Bonner Baltimore, Maryland Out of 10 government employees, probably 2 do useful things...things that we would willingly pay for if they weren't done for us by the government, though we would almost certainly pay less for them than they cost us now. Five others do things that are not worth doing at all - things that are purely wastes of money. And the other three do things that destroy wealth...things that actually make the situation worse. Those three are economists. Or lawyers. Or who-knows-what. 100 Years of Mismanagement By Bill Bonner Baltimore, Maryland There must be some dark corner of Hell warming up for modern, mainstream economists. They helped bring on the worst bubble ever...with their theories of efficient markets and modern portfolio management. They failed to see it for what it was. Then, when trouble came, they made it worse. --- The Lifetime Income Report Presents --- Enroll today and immediately start collecting "pension paychecks" every 15 days, for the rest of your life... Retirement, Plan B: Without doing a single moment's work, now you can legally sneak onto the "payroll" of nearly 1,000 of America's best companies...
--------------------------------------------------------------- The Weekly Endnote: When one thinks of today's modern financial system, phrases like "survival of the fittest" hardly spring to mind. We're more likely to recall imbecilic idioms like "too big to fail" or "zombie bank" instead. As Bill kindly noted in yesterday's reckoning, the nation's flagship automotive company and its largest insurer are now custodians of the not-so-almighty state. It's more like "preservation of the weakest" than anything Sir Charles had in mind; a kind of involuntary, taxpayer-funded dedication to market devolution, if you will. That being said, we like to think there still exists some scrap of the competitive marketplace that made America the 20th century powerhouse it once was...however corrupted it has now become. And so, in an effort to honor those institutions that have kindly removed themselves from the greater financial gene pool (despite the fed's best efforts to revive their rotting corpses) we're reinstituting a competition known here at the DR as The Financial Darwin Awards. The concept is simple. We're asking readers to identify companies that, through unbridled stupidity and an uncompromising dedication to fiscal inefficiency, have gone the way of the dinosaur. To help get you started, here is an excerpt from the First Annual Financial Darwin Awards roster of nominees from back in 2001, this one penned by Bill Bonner. "Here's one worthy of an award," writes Bill, "Millionare.com. Alert readers may think they have caught me in yet another spelling error. But let me assure you, this error is not mine. This is the way they spell it on the website. "The site promises to reveal the secret of making millions of 'Internet dollors' - again, not my error. How? Well, send $10 dollors to a P.O. box in England and the secret will be yours. "There is no further information. Nothing else to do at the site. That's it. And yet, investors actually paid as much as $4 for the shares in this company. Now, the shares can be purchased, in bulk I would bet, for just 13 cents." Subsequent winners include Ken Lay, Jeffrey Skilling and their crack team of accounting contortionists over at Enron. The brains behind outfits like Pets.com managed honorable mentions. So now that you've got some creative kindling, we'll leave you the weekend to think it over. Nominations should go to this address (2009darwinawards@gmail.com). If you have any additional comments, feel free to write me at the address below. That's all from us for this Weekend Edition. Until next time... Cheers, Joel Bowman Managing Editor for The Daily Reckoning joel@dailyreckoning.com | |
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