Market Commentary

  • Where Are Children Being Born?

    Everyone knows that children are our future. They're the next generation of innovators, entrepreneurs, and workers. Countries that are having a natural decrease in population due to families not having children will likely find themselves becoming less important on the geopolitical stage.

    While the future is often hard to predict, here is easy “prediction” (that is much less of a prediction than it is simple math). In order to predict how many 18-year-olds there will be in a particular country in fifteen years, simply count the 3-year-olds there now.  Yes, there will be some death or migration … but it is an easy way to get a sense of some important mega-trends.

    With that said, the U.S. saw many states with more deaths than births in 2020 and 2021. 

    So, where are children being born?

    Where-Will-The-Next-1000-Babies-Come-From

    India, China, and Africa all are seeing massive population growth. America is still net positive. It's also worth noting that India and China are topping the list because they already have such large populations. Their birth rates are actually slightly below average. 

    On a longer term scale, it's also worth noting that population growth has been declining since the 1960s. Partly due to education, wealth, and the move from rural to urban living. 

    Slowing population growth means a larger portion of the population is older. As median age increases, there are lots of potential economic consequences.

    It's an interesting compounding of consequences. 

    We'll see if the countries with the largest population growth have the economy and infrastructure to support that growth. 

  • Oil Production By Country in 2021

    You could argue that we're in the middle of the first energy crisis of the 21st century.

    While gas prices are finally on the way back down, the recent surge is driving inflation and has consumers thinking much more about where their oil comes from. 

    When I last wrote about oil production, the shocking "secret" was that the largest importer of oil into the U.S. was Canada – and that most of our oil was produced within the U.S. 

    Largest-oil-producers-in-2021-by-countryvia visualcapitalist

    While the U.S. is the largest producer of Oil, OPEC is the largest organization. OPEC accounts for 35% of total production, with Saudi Arabia accounting for a third of OPEC's output. 

    Almost half of the world's oil production comes from The U.S., Saudi Arabia, and Russia. 

    Also, despite being the world's largest oil producer, the U.S. is still a net importer of oil. 

    Supply constraints on oil – as a result of sanctions on Russia – are creating a price increase with skyrocketing demand from mid-pandemic levels. Combine that with OPEC refusing to increase production to meet demand, and you have an energy shortage. 

    The U.S. has already started releasing barrels from its strategic reserves, and we've seen gas prices go down as a result, but it remains to be seen if our efforts will be enough to curb the shortage. 

    What else do you think we should be doing?

  • US Spending in 2021

    In a prior post, we looked at the Global GDP in 2021. Now, let's look at US Revenue vs. Expenditures in 2021. 

    Ezgif.com-gif-maker (9)

     

    So, from the start, we can see a 2,770-billion-dollar deficit last year. The #1 expenditure was income security. For those who don't know, income security is an extremely broad spending category. It covers everything from tax credits and unemployment to housing assistance, foster care, and many other welfare programs. It's somewhat of a catch-all for services that help people get necessities. 

    Surprisingly, the US pays more per person for healthcare than countries with nationalized healthcare. 

    Looking at 2021 isn't the best indicator of America's spending history as a whole; there were a lot of one-time events – and a pandemic. Usually, the deficit isn't that staggering. 

    Screen Shot 2022-08-05 at 5.10.06 PMvia Congressional Budget Office

    While the deficit may grow out of control, debt is a powerful tool – not just a liability.  Nonetheless, given our current economic situation, inflation, and rising interest rates, the strategy that got us here might not be the best strategy to get us where we want to go.

    What are your thoughts? 

  • Billion … With A B

    Humans are notoriously bad at large numbers. It's hard to wrap our minds around something of that scale. We're wired to think locally and linearly, not exponentially (it's one of the reasons I love AI so much).

    Here are a couple of ways to help you understand a billion dollars. 

    6a00e5502e47b288330240a4e81813200d-600wi

    via AskOpinion

    Next, let's look at spending over time. If you were to spend a dollar every second for an entire day, you would spend $86,400 per day. You can do that for approximately twelve days if you have a million dollars. With a billion dollars, you can do that for over 31 years. Ignoring the difference between net worth and cash, Jeff Bezos could spend $9M per day for over 31 years.

    If you make $100K a year, you can earn $1 million in 10 years. At the same rate, it would take you 10,000 years to make $1 billion.

    Here is an example framed around spending money.  Imagine that someone making $50K a year decides to buy a laptop, a car, and a house. Now we're going to make a relative comparison of the cost of those items for people making a lot more than $50K per year.  To do this, we'll shrink the cost of the price of those items (to see the relative cost-to-income ratio). For a millionaire, a laptop might cost the equivalent of $100 dollars, a Porsche would cost $3,000 dollars, and a house would cost $25,000. Now, let's say you're Mike Bloomberg, and you're worth $60B. A laptop's relative cost would be pennies, a Porsche's relative cost would be less than 60 cents, and a mansion's relative cost would be around $500 dollars. You could have everything you ever wanted for a minute fraction of your wealth. 

    For a different perspective, here's an interesting visualization from informationisbeautiful. It shows various examples of things worth billions of dollars – including the personal wealth of several billionaires. 

    IIB-Billions-2022-IIB-1276x825x2@2x-1via informationisbeautiful

    Okay, last one before I show a video … 

    Let's try explaining the concept of a Billion through time. Fifty thousand seconds is just under 14 hours. A million seconds was 11 days ago. A billion seconds ago from today? 1990. Pretty crazy. 

    Here's a video from the 1970s that helps you understand scale through the power of tens – and an exploration of our universe.

     

    Hope you enjoyed this.  Let me know what you think.

  • Here Are Some Links For Your Weekly Reading – July 17th, 2022

    264944

    Here are some of the posts that caught my eye. Hope you find something interesting.

    Lighter Links:

    Trading Links:

  • Reinventing The Wheel

    When I think about the invention of the wheel, I think about cavemen (even though I know that cavemen did not invent the wheel).

    Lots of significant inventions predated the wheel by thousands of years.  For example, woven cloth, rope, baskets, boats, and even the flute were all invented before the wheel.

    While simple, the wheel worked well (and still does).  Consequently, the phrase "reinventing the wheel" often is used derogatorily to depict needless or inefficient efforts.

    But how does that compare to sliced bread (which was also a pretty significant invention)?

    Despite being a hallmark of innovation, it still took more than 300 years for the wheel to be used for travel.  With a bit more analysis, it makes sense. In order to use a wheel for travel, it needs an axle, and it needs to be durable, and loadbearing, requiring relatively advanced woodworking and engineering. 

    2014-innovatie-stenentijdperk

    All the aforementioned products created before the wheel (except for the flute) were necessary for survival.  That's why they came first.

    As new problems arose, so did new solutions.

    Necessity is the mother of invention. 

    Unpacking that phrase is a good reminder that inventions (and innovation) are often solution-centric. 

    Too many entrepreneurs are attracted to an idea because it sounds cool. They get attracted to their ideas and neglect their ideal customer's actual needs. You see it often with people slapping "AI" on to their product and pretending it's more helpful. 

    If you want to be disruptive, cool isn't enough. Your invention has to be functional, and it has to fix a problem people have (even if they don't know they have it.) The more central the complaint is to their daily lives the better.  

    6a00e5502e47b2883301b7c93a974c970b-600wi

    Henry Ford famously said: “If I had asked people what they wanted, they would have said faster horses.”

    Innovation means thinking about and anticipating wants and future needs.

    Your customers may not even need something radically new. Your innovation may be a better application of existing technology or a reframe of best practices. 

    Uber didn't create a new car, they created a new way to get from where you want with existing infrastructure and less friction. Netflix didn't reinvent the movie, they made it easier for you to watch one. 

    As an entrepreneur, the trick is build for human nature (meaning, give people what they crave or eliminate the constraint they are trying to avoid) rather than the cool new tech that you are excited about.  

    Human nature doesn’t seem to change much … Meanwhile, the pace of innovation continues to accelerate. 

    The challenge is to focus on what people want rather than the distraction of possibility.

    It gets harder as more things become possible.

    We certainly live in interesting times!

  • Americans’ Top Financial Concern

    It's no secret that the economy is slowing – with high inflation rates and rising interest rates. 

    According to Mohamed El-Erian, from Queens College at Cambridge University, we're experiencing stagflation – which is when inflation is high but growth is slowing significantly. Theoretically, that leads to recession. 

    Inflation-Top-Financial-Concern_Infographicvia visualcapitalist

    The Consumer Price Index has also grown by over 8% in the past year, so the American household is facing financial threats from many angles. 

    Many feel that the Fed has responded disappointingly recently, and their response (or lack thereof) will be a major dictator of whether we enter a recession. 

    I believe that emotions play a role too. When people are afraid, they spend less and hoard what they can to save themselves from an unknown future. They feel anticipatory grief.  And their fear, uncertainty, and doubt ripple through society and our lives. 

    Personally, I've weathered my heaviest storms by sailing toward the future regardless of the threats. An abundance mindset is a powerful tool, and as more people feel confident it becomes a macroeconomic trend with real influence. 

    I'd encourage you to think about what opportunities there are and will be. There are always seasons of change … Winter eventually comes – and goes. Nevertheless, winter can be a great opportunity to plan your next moves and build the infrastructure to sow more seeds in the coming spring. 

    As well, unlike nature, you can personally have springtime while the majority are in winter. We're currently in an A.I. springtime – and I believe that will continue regardless of economic trends. 

    Happy to talk about this … Let me know what you are thinking and feeling!

  • Here Are Some Links For Your Weekly Reading – July 2nd, 2022

    Businessman-stands-in-front-of-a-diving-stock-market-graph-with-trough-lab-new-yorker-cartoon_u-l-pgqnyd0

    Here are some of the posts that caught my eye. Hope you find something interesting.

    Lighter Links:

    Trading Links:

  • How Bad Were The Markets In The First Half Of 2022?

    The S&P 500 has had its worst first half performance since 1970. 

    Screen Shot 2022-07-01 at 3.30.06 PMvia AXIOS

    But, the S&P's performance isn't the only danger indicator. 

    Screen Shot 2022-07-01 at 3.32.52 PMvia Fortune

    Stocks, bonds, crypto, and more, all saw rapid declines in the first half of 2022. 

    It's hard to pin the blame on any one factor. Was it the result of the actions we took to stabilize the economy during the throes of Covid? Is it the runaway inflation, Russia, or the continuing supply-chain issues? 

    It feels like everything that could go wrong – is going wrong. I mean, how often do stocks and bonds fall at the same time?

    On a positive note, bear markets are often much shorter than bull markets.  Also keep in mind that while global growth is slowing, innovation isn't!

    Don't forget, “Winter” for the economy or a particular industry doesn't have to be winter for you. 

    Onwards! 

  • Companies With The Most Patents in 2021

    Intellectual Property is an important asset class in exponential industries.

    Why?  Because I.P. is both a property right (that increases the owner's tangible and intangible value) and a form of protection.

    They say good fences make good neighbors.  But you are also more willing to work to build an asset if you know that your right to use and profit from it is protected.

    As a result of that thinking, Capitalogix has numerous patents – and we're developing a patent strategy that goes far into the future.  So, it's a topic that's front of mind for me.

    Consequently, this visualization of which companies got the most patents last year caught my eye.  In 2021, the U.S. granted over 327,000 patents.  Here is who got them.

     

    DS-Top-25-Companies-with-the-Most-New-Patents-in-2021-main-Apr20Raul Amoros via VisualCapitalist

    While IBM isn't the public-facing industry leader they once were, they've been topping the list for most patents for the past three decades.  Their patents this past year cover everything from climate change to energies, high-performance computing, and A.I.. 

    What ideas and processes do you have that are worth patenting?  And, what processes are worth not patenting – to keep from prying eyes?

    Food for thought … Onwards!