Tuesday, September 9, 2008 0 comments ++[ CLICK TO COMMENT ]++

Articles: GM's Mistake; Tobacco Companies Live in Hell; World Consumer Spending (recreation macro trend); Russia Agrees to Honour Georgian Ceasefire

Some articles I ran across that you may also find interesting:


  • GM's Green Mistake: Fabrice Taylor of The Globe and Mail writes an article summarizing the mistake Bob Lutz of GM made in avoiding fuel-efficient cars. Bashing Toyota's Prius and ignoring the Global Warming movement, while spending most of the resources on muscle cars, may end up sealing GM's fate. They still have a chance with the Volt, their plug-in hybrid under development, but it's going to be tough. Even if they can release the Volt on time, GM may have trouble financing the huge capital expenditures required to re-tool all their factories and produce enough of them. In the end, it's the product that matters and if the Volt ends up being a bust I think it may be the end of GM. Even if oil prices drop to $50 and stay there forever, I highly doubt that the SUV and truck market would go back to what they were.
  • Russian government targets British American Tobacco: I don't know if this is a politicallly motivated action but even if it weren't, what's to say that a legitimate action like this won't materialize in the future? Not just in Russia but all over the developing world as well. Tobacco companies are living in hell but they have no other choice. They are pursuing smokers in developing countries or other untapped regions of the world, where smoking laws are weak or non-existent. But, as it happened in America, I can easily see them paying billions in damages for causing all the health problems. It won't happen now but what's to say it won't happen in 5 or 10 years? (for what it's worth, I'm "liberal-libertarian" so I'm against regulating tobacco and if someone wants to smoke it, that's their problem. I am against the government suing them or seeking damages. However, citizens in many countries, including my allies, the liberals, are often in favour of banning tobacco and seeking damages. All I'm doing here is raising the risk involved in tobacco companies. Tobacco companies are cash cows but one should discount them appropriately in case governments of this world start suing them.)
  • World Consumer Spending: The New York Times has very good multimedia department and here is an insightful one showing consumer spending by various regions of the world. You can draw your own insights on various items but let me point out one important one. If you flip between the various items, you can easily see how recreation is very small for the developing world (look at China and India). If these countries keep growing, one of the biggest macro trend will be the growth in recreation. Things like travel are going to see massive growth. Some people always talk about the potential infrastructure or consumption boom but the biggest is actually travel, recreation, and the like. If you look at household goods or clothing/footwear, China is already 1/4th of USA or thereabouts (it's much smaller in per capita terms.) But if you look at recreation, it is maybe 1/10th. As wealth is created, you are likely to see recreation grow 10x to 15x, versus maybe 4x or 5x for household goods. This plays straight into the theme that Jim Rogers has mentioned in the past. He pointed out that travel is going to be big. He says that you are going to see Asian tourists travelling the world. He didn't say it but based on the chart, I extend that to include sports, movies, theme parks, and so on. I don't know how much original thinking I provide but if you are influenced by macro trends and think Asia will keep growing, I suggest that you spend more time with profit opportunities in recreation rather than the beaten-to-death infrastructure, commodities, or consumer goods theme. This seems like a hidden opportunity that Wall Street doesn't seem to spend much time on (areas like casinos have been covered in detail so stay away from them.)
  • Russia says it will pull out of Poti: Russia now agrees to pull out of the Georgian port of Poti, which was actually part of the original ceasefire agreement. I was dissapointed that Russia took so long to do what was honourable and leave. Saakashvili and whoever that was pulling the strings back in America got schooled by Putin. Sarkozy and the EU--innocent bystanders--take the fall and get blamed for cutting a ceasefire argument stacked in favour of Russia, even though Saakashvili was the one who "started" the war and was in no position to negotiate with tanks fast approaching his capital. I maintain my original view formed almost immediately after reading about the war. Namely, Saakashvili ended up sacrificing his people, his military and his economy, while undoing everything that was accomplished in Georgia in the last decade. Georgian economy is going to be destroyed and it will likely become a state dependent on American aid in the future... I'm no fan of Russia but this whole war was started by Georgia. It would be similar to if Cuba invaded Guantanamo Bay and ended up getting crushed (technically belongs to Cuba (it doesn't recognize US treaty to lease it) but escalating the war is just stupid and immoral if you care about lives.)

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