“So much depends / upon / a red wheel / barrow /
glazed with rain / water / beside the white / chickens.”
Well, the U.S. Federal Reserve’s monetary policy is a
lot more complex than the simple tools mentioned in the oft-memorized William
Carlos Williams’ poem, The Red
Wheelbarrow, but an awful lot is depending on it. In some of those
countries that have been affected negatively by changing expectations about
quantitative easing, the importance of chickens, wheelbarrows, and other basic
tools to a family’s economic well-being has not been forgotten.
During the past 10 weeks, currencies in many emerging
countries tumbled against the U.S. dollar on expectations the Fed will begin to
taper off its bond buying program (which is known as quantitative easing). The
Brazilian real sank like a weighted fishing line, dropping almost 16 percent. The
Indian rupee dropped almost 12 percent. The Indonesian rupiah lost seven
percent, and the Malaysian ringgit fell by a bit more than 6 percent during the
period.
The Mexican peso and South African rand dropped, as
well, but both have recovered some value, in part because they don’t have large
deficits, according to The Indian Express. China and South Korea, which are strong
exporters, saw their currencies dunk down, but both bobbed back up.
According to The
New York Times, currency weakness caused several emerging markets to lose
significant value recently. India’s stock market lost one-quarter of its value
during the past three months in U.S. dollar terms, but market declines in local
currency terms have been much smaller. A recent New York Times article pointed out, “…From the end of 2000 through
the end of 2010, the developed market index rose a scant 5 percent. The emerging
markets index more than tripled during the same period. Since then, however,
the developed markets have risen nearly 20 percent, while the emerging ones
have fallen about the same amount.”
As we’ve mentioned before, mean reversion theory
suggests prices and returns adjust towards a mean or average over time. That
raises an interesting question. Have recent market shifts been adjustments
toward a mean?
the next big things… In May, The McKinsey Global Institute released its latest
thinking on disruptive technologies. That is, technological advances which have
the potential to disrupt the status quo and transform life, business, and the
global economy as we know it. Among the dozen technologies mentioned in the
report were:
- Mobile
Internet
is expected to improve productivity and delivery of service. McKinsey estimated
one application – remote health monitoring – could reduce healthcare costs
of by one-fifth. (Slide 1)
- Automation
of knowledge work is a brain twister of a category that
encompasses intelligent software systems, which could produce output equal
to 110 to 140 million full-time workers. (Slide 2)
- The
Cloud delivers
services over the Internet or a network. It could improve productivity in
IT infrastructure, application development, and packaged software by 15 to
20 percent. (Slide 3)
- Advanced
robotics
could improve the lives of 50 million people who are missing limbs or have
impaired mobility. Also, industrial, manufacturing, and service robots may
change the face of labor. (Slide 5)
- Autonomous
or semi-autonomous vehicles could save 30,000 to 150,000 lives
by eliminating potentially fatal traffic accidents. (Slide 6)
- 3-D
printing
may offer the ability to manufacture custom goods at home, while the
medical industry may be able to bioprint tissue and organs in the lab. (Slide
9)
According
to the report’s authors, these ideas “…can change the game for businesses,
creating entirely new products and services, as well as shifting pools of value
between producers or from producers to consumers.”
Weekly Focus – Think
About It
“If
you don't have time to do it right, when will you have time to do it over?”
--John Wooden, American basketball player and coach
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