INSIGHTS
JAN
10
COSTA’S CORNER: I’M PARTIAL TO VIETNAMESE FOOD TOO.
The light at the end of the tunnel that is this trade war with China gets brighter and dimmer each day. When you think there will be a resolution, there isn’t. When you think things will get worse, they don’t.
I say enough already. Fix it or I am going somewhere else.
According to several different sources, it appears there are manufacturers that are starting to source materials and finished products from places other than China.
One of those places is Vietnam.
Vietnam is still considered a firmly communist state but like China 25 years ago they are aggressively courting manufacturing and just like China 25 years ago, their labor costs are considerably lower than Western costs. So, Western manufacturers come a calling.
With low cost manpower, a decidedly friendlier government and no risk of tariffs, why wouldn’t they?
I do believe that the Chinese powers that be are concerned about this flow of business leaving China and going to a neighbor. However, those same powers that be understand that China with its rise to prominence is losing that low cost manufacturing edge.
How this plays out over time no one really knows but there is something afoot in China that not many people are talking about and it bares watching.
The Chinese are going through something that the United States and pretty much every other major Western economy has gone through and that is they are developing a large and mobile middle-class. The difference is that it took most Western societies 40 years plus to develop into that Middle-class heavy society, the Chinese have done it in roughly 15 years.
While the extraordinary expansion of the Chinese economy is still taking place, one of the huge advantages in China, cheap labor, is quickly disappearing. That Chinese middle class has grand expectations for their future and those expectations will need to be met.
Can China maintain its dominance in World trade when that cost advantage quickly disappears?
Will it be able to supply its growing middle class with the demands of every middle class? Better schools, better food, better cars, better homes?
The Chinese, if the arc continues, may be net importers and their balance of payments will be trending towards negative territory.
This could have serious consequences financially around the globe and I honestly don’t think that they have a plan for this.
For a culture that takes the long view, this might be very shortsighted.
My point is, while China works to continue growing at realistically, an impossible rate to maintain, it probably will be bitten in its own butt by its success.
This failure to anticipate, leads you to what might be the story of 2025 and beyond, the rise of the Third World as far as growth potential.
I might even suggest that there will be an expansion in these Third World economies sooner than that.
While the fears of recession always tend to scare people off to the idea of emerging markets as an investment option, I like to be a contrarian.
If we have this mild recession, the common thought is, emerging markets suffer most because a lot of them are dependent on commodities and commodity prices tend to fall during a recession.
However, hold on, if you are in a recession and your income is compromised, do you buy less or do you buy cheaper? History shows you buy cheaper and that’s where emerging markets come in.
With China falling to be that go to low cost provider, countries like Vietnam and Malaysia fill that gap.
Just something to keep in mind for the future.
No changes today
50% Stocks
25% Fixed Income
25% Cash
I say enough already. Fix it or I am going somewhere else.
According to several different sources, it appears there are manufacturers that are starting to source materials and finished products from places other than China.
One of those places is Vietnam.
Vietnam is still considered a firmly communist state but like China 25 years ago they are aggressively courting manufacturing and just like China 25 years ago, their labor costs are considerably lower than Western costs. So, Western manufacturers come a calling.
With low cost manpower, a decidedly friendlier government and no risk of tariffs, why wouldn’t they?
I do believe that the Chinese powers that be are concerned about this flow of business leaving China and going to a neighbor. However, those same powers that be understand that China with its rise to prominence is losing that low cost manufacturing edge.
How this plays out over time no one really knows but there is something afoot in China that not many people are talking about and it bares watching.
The Chinese are going through something that the United States and pretty much every other major Western economy has gone through and that is they are developing a large and mobile middle-class. The difference is that it took most Western societies 40 years plus to develop into that Middle-class heavy society, the Chinese have done it in roughly 15 years.
While the extraordinary expansion of the Chinese economy is still taking place, one of the huge advantages in China, cheap labor, is quickly disappearing. That Chinese middle class has grand expectations for their future and those expectations will need to be met.
Can China maintain its dominance in World trade when that cost advantage quickly disappears?
Will it be able to supply its growing middle class with the demands of every middle class? Better schools, better food, better cars, better homes?
The Chinese, if the arc continues, may be net importers and their balance of payments will be trending towards negative territory.
This could have serious consequences financially around the globe and I honestly don’t think that they have a plan for this.
For a culture that takes the long view, this might be very shortsighted.
My point is, while China works to continue growing at realistically, an impossible rate to maintain, it probably will be bitten in its own butt by its success.
This failure to anticipate, leads you to what might be the story of 2025 and beyond, the rise of the Third World as far as growth potential.
I might even suggest that there will be an expansion in these Third World economies sooner than that.
While the fears of recession always tend to scare people off to the idea of emerging markets as an investment option, I like to be a contrarian.
If we have this mild recession, the common thought is, emerging markets suffer most because a lot of them are dependent on commodities and commodity prices tend to fall during a recession.
However, hold on, if you are in a recession and your income is compromised, do you buy less or do you buy cheaper? History shows you buy cheaper and that’s where emerging markets come in.
With China falling to be that go to low cost provider, countries like Vietnam and Malaysia fill that gap.
Just something to keep in mind for the future.
No changes today
50% Stocks
25% Fixed Income
25% Cash