- THE RECESSION & THE NEW ECONOMY -
Many journalists and professional punters are attempting to describe what has recently happened to the NASDAQ and DOW. To add to the confusion, what follows is SPIN's concept of what is happening.
The recent boom in the NASDAQ was a "Black Tulip" incident. Internet stocks are not intrinsically more valuable than Blue Chips.
Not that Blue Chips are a good investment any more. SPIN believes that large scale "corporate" or "monopoly" capitalism is dead. It is dead because it's raison d'être has vanished into the new economy. The new does not rely on the economies of scale, the new economy depends on brilliant, flexible management teams that earn millions of dollars in fees, and can turn a broken organization into an economic powerhouse.
The market for stocks and bonds is in long term trouble. Bill Gates recognized that Microsoft was in trouble in 1996. That's probably why he did Netscape. Like Microsoft, the industrial dinosaurs will take a while to die. In the meantime, the best strategy for punters might to be to bet on the jockeys with a proven track record.
Does this mean that the US economy is in trouble? According to SPIN's model, not bloody likely.
The whole thrust of the new economy is communication. Communication allows fragmentation. Small (down to one man) businesses can communicate and supply their specialties, and will do so, and will be competitive. This is why the big business will go broke. It just ain't competitive.
News Limited (owned by Rupert Murdoch, who also owns FOX) is a typical example of a dinosaur industry. Rupert has apparently closed his loss making internet division, believing that internet advertising revenues will never generate enough income to support the staff required to manage the business.
He is quite correct. Internet businesses need dedicated, hands on, genius ( = 99% hard work, 1% inspiration) level management. A one man operation or a small team can run an internet news operation, and it could be enormously profitable. Like Matt Drudge. Trouble is, anyone with that capability will do it for himself. It can be started on a shoestring. Who needs the moneybags middleman to skim the cream?
SPIN believes the fragmentation paradigm is propagating through the US economy. We are witnessing a structural shift that will take the USA into a new era of incredibly flexible super productivity.
Bad news for people who rely on investment for income. They are going to find it hard to find a good, safe investment. Bad news for the managers of corporate Japan/Korea, Mainland China & Europe. Within a couple of decades the governments there (= management teams) will control "nation corporations" that will have a smaller GNP than some US corporations. And their citizens will be desperate to migrate to the USA.
The USA narrowly escaped that fate under Bill Clinton.
When a government collects an increasing proportion of the GDP as tax, then that government is incorporating.
Governments that incorporate use the excuse that they want to "look after" their citizens. An analysis of the result shows that the people who are best looked after are the government cadre and the bureaucrats.