In the past decade, food has become so cheap and abundant that a gradual trend towards the premium and the obscure has dominated the food-scape.  As a result, prostrating oneself in front of a food trend – whether it is flirting with veganism or vegetarianism, eating local (i.e. the 100-mile diet), eating organic, eating cruelty-free, eating seasonal, has become the favourite pursuit of the elitist and upwardly mobile.

The politics of food, particularly the inter-generational gap between how our grandparents, versus how we view food, is explored in this excellent essay by Mary Eberstadt.  The fictional character, the 30-year-old Jennifer, is representative of urbanites today in her views of food.

Wavering in and out of vegetarianism, Jennifer is adamantly opposed to eating red meat or endangered fish. She is also opposed to industrialized breeding, genetically enhanced fruits and vegetables, and to pesticides and other artificial agents. She tries to minimize her dairy intake, and cooks tofu as much as possible. She also buys “organic” in the belief that it is better both for her and for the animals raised in that way, even though the products are markedly more expensive than those from the local grocery store. Her diet is heavy in all the ways that Betty’s was light: with fresh vegetables and fruits in particular. Jennifer has nothing but ice in her freezer, soymilk and various other items her grandmother wouldn’t have recognized in the refrigerator, and on the counter stands a vegetable juicer she feels she “ought” to use more.

Attaching social norms, moral abstractions, and judgments to this activity:

Jennifer feels that there is a right and wrong about these options that transcends her exercise of choice as a consumer. She does not exactly condemn those who believe otherwise, but she doesn’t understand why they do, either. And she certainly thinks the world would be a better place if more people evaluated their food choices as she does. She even proselytizes on occasion when she can.

But the time of food abundance might soon be over.  That is, if Britain’s 20-year food-security manifesto has anything to say about it.

It warns consumers that an overzealous dedication to buying local – and avoiding imported foods – will have a negative economic impact on often poorer exporting countries if the trend continues. The report also takes aim at an over-reliance on “food miles.” For years, laws have mandated that British-sold products be labelled with indicators of their carbon footprint.

However, continuing to use food miles as a main means of calculating the environmental impact of certain foods is not sustainable in the food regime of the future, according to the report, because transport accounts for so little (9 per cent) of the food chain’s greenhouse-gas emissions.

Perhaps the closest glimpse we had of this scarce future was back in early 2008, when food prices shot up across the board, and led to riots in some parts of the world.

Is that what we are moving towards again?

A couple of days ago, a fellow blogger commented on this rather unfortunate Fortune article on his blog.  It is interesting for several reasons.

First, the ideas are cookie-cutter and stale.  Us Gen Yers had been told (to a certain extent) that we were on the cusp of a great demographic shift, where baby boomers’ impending departure would wreak havoc on corporate health.  True, some of us were led to believe that our contribution would be valued at a premium, which would in turn translate into lots of choices and result in us hopping through the corporate environment at break-neck speed.  In reality? Highly unlikely.  The smart ones among us always knew that good jobs are competitive, and supply almost always outstrip demand, especially at the bottom rung. But the media kept up the propaganda – to what end, I don’t know.  Every once in a while, articles like this appear.

Second, the timing is totally off.  Because of economic realities, many boomers simply can’t afford to retire.  More and more Gen Yers find themselves in a much more competitive environment than they were led to believe.  Now everybody is learning to make do with less and to compromise.  Exactly who is out pandering to those misunderstood geniuses, I’m not sure.

The somewhat hilarious prescriptions thrown around by the Fortune writer, and the kick my blogger friend got out of it, reminds me of a book I heard about recently.  In this book, the authors address the various social and consumerist constructions of the Gen Y generation.  I took some notes, here’s a broad overview of the ideas.

School: the obsession with feeling good at all cost

According to the book, the ME culture evolved over several decades, but found its decisive start within the school system.  The baby boomer generation struck out, rejected authority and tried to find its own path.  In their children, they instituted and obsessed over instilling self-esteem.  Subsequently, various forms of formal, or informal self-esteem programs were introduced in school.  They generally aim to make children feel good about themselves at all times and at all cost, with messages like: you are special, you are unique, you are fine just the way you are.

This relentless focus on the self led to some friction as children of those baby-boomers moved through the school system.  In one instance, red pen were deemed too harsh a colour to mark mistakes, so lavender was used instead.  Participation trophies in sports were introduced.

Over time, various institutions have had to deal with this cohort and adjust to its various demands.  In universities, some professors are now faced with complaints when handing out marks: some children and their parents simply would not accept bad ones. In this case, education is viewed as a business transaction, and entitlement rears its ugly head: students are customers of a product, and universities are there to provide it.  Therefore, they feel entitled to walk away with a degree, and a degree with hounours at that.

The road to hell is often paved with good intentions.  Child psychologists now recognize that instead of instilling self-confidence and self-esteem in children, this generational focus on feeling good has created quite the problematic outcome.  The languages and tools used throughout the school system has created an environment where competition is eliminated or downplayed, criticisms are removed when deemed too harsh, children are protected from failures, and as a rule, any kind of output – meaningful or not, is lavished with praise.  In hindsight, this created us: a generation hooked on constant validation and affirmation, perhaps with an unrealistic sense of our own strengths and shortcomings.

The extent to whether the above analysis is in fact accurate, is questionable.  The teachers and lecturers I encountered during my school years were for the most part, fair, constructive, and honest.  But I have noticed the emergence in a brand of bland, neutral and non-critical teachers into the classroom. With various changes taking place in the education system, and more teachers seeing themselves not as teachers but facilitators, what can we expect from the next generation?

The market feeds the beast: unique, customized, and controlled by you

Marketing shifted its focus when it comes to psychological selling.  In the past, the advertising world used to sell based on aspirations.   The marketing message then was: you are not good enough unless you buy our products.  Since nobody will ever be “good enough”, one is left to buy in perpetuity.

That message lost its lustre a while ago.  The message that sells now is something quite different.  Marketers tap into our sense of entailment , our vanity, our need to feel good, and our need for “self-expression” and self-validation through the idea of: you are important, you are unique, you are great the way you are. Now all you need is a product that we have to express your uniqueness.

If we think of some of the most successful products and services to emerge in the past decade, what comes to mind? Facebook, Youtube, IPod, Starbucks.  What do they have in common?  They all capture our need to exert and broadcast our presence, our importance, and our uniqueness to the world.

The trend that pander to the idea of self-expression and self-importance developed when the current Gen Yers were still in their tweens – the term has only been in existence for under two decades.  It was back then marketers first tasted the success of marketing to kids that had their own brand of shampoo.  Since then, that market had been segmented and targeted as one that has the power to make or break products.  I know a little about that.  I still remember the Tomagochi craze and the hand I had played in that hype with my baby alien.

Since then, our generation had not been without this constant bombardment of “uniqueness” marketing.  Marketers are also astute to introduce a sense of “control” back to the consumers: you know better than us, so tell us how and what you want.  Starbucks sells to that – customized coffee experience; burger and sandwich places want to sell you “your” burger or sandwich; cultish spiritual books sell on that – The Secret is to conform the world to your divine force; new condos targeting young urban yuppies – customize your living space by checking a few boxes.

Of course, the true irony of the situation is: the more we buy into the message of customization, the more we are essentially the same.  No matter what colour of IPod we choose, how obscure our coffee order is, or what kind of boxes we tick off when it comes to picking our condo tile or flooring colours, we are buying into the same message of uniqueness.

Arguably one of the most consistently powerful and seductive marketing pitch of our time is one that centres around the idea of: you deserve it.  The L’Oreal commercial and Oprah alike appeal to their audiences this way.  There’s nothing wrong with leading the best life that we can have.  But after years of the same self-congratulatory refrain, we have internalized the idea that luxury is for the masses and not only the rich.  In doing so, we have become accustomed to living the life we want, or “deserve”, rather than the life we can afford.  That sense of entitlement has us hooked on swiping those credit cards.  In one way or another, those self-affirmation and feel-good principles seeded during our school years, carefully nurtured by teachers, parents and marketers alike, came to fruition.

Now, the workplace

The problem gets a little more interesting when my generation enters the workforce.  The old guards are not used to tell us how valuable we are, or hold our hands for constant validation or feedback, or have the patience to listen to our unidirectional broadcast.

All the arguments given above is predicated on the idea that we are indeed a cohort, and this kind of attitude is prevalent in our generation.  In many cases, family influences can trump socialization.  Even so, I have to say that whether I like it or not, my generation probably embodies more Me-ness than generations past.  Whether these are attributable to our age and brashness, or some wider social forces, I cannot be certain.

But the ego-massaging activities the marketing community readily offers is beginning to seem more cynical than clever to me.  If they are indeed fostering a generation that is both insecure and vain, unable to cope with failure and assess ourselves critically and realistically, then perhaps we are better off without them.

Bloggers Unite declared today Unite for Hunger and Hope day.  I’m sure many posts are going up to get you to donate, to sign some kind of petition for debt relief, or in the least, just to care.  Do you care? And with so many problems plaguing our lives, and the world in general, should you care?  It’s not a rhetorical question.  I am not sure I can overcome apathy.

To say that one doesn’t care about world hunger or poverty, is like saying one doesn’t care about the environment or basic tenements of human rights.  But the images of starving children, whether they are of of the skeletal child brides variety out of India, or children with extended bellies with flies around their faces out of Africa, never really resonated with me.

There are two reasons for this.

Studies have shown that anti-smoking campaigns in schools largely fail if the program is overly reliant on the shocking the test subjects into giving up. If overly graphic images are shown – of black lungs, or the inside of a sufferer of throat cancer, students become so repulsed by the imageries, that they become detached from the message altogether.  Similarly, when I see those pitiful pictures of hungry children, their plight seems so fundamentally wretched, my sympathies and emotional triggers are overwhelmed, and I block out the situation altogether.

Secondly, I have come to realize that images of humanitarian crises are constructed by professionals with an agenda.  This is not to imply that journalists and photographers that take those pictures have malicious intentions.  But it is important to know that behind every still and live image, there are a team of people actively managing our responses.  The media create a range of identities so selective and arbitrary – us versus them, victim versus saviour, they effectively create a disaster when they decide to recognize it.

I recognize when there is a food crisis, famine is seen as a lack of progress that results in the deaths of the innocent.  I see that famine images are powerful, as they recall the pre-modern existence that most of us in industrialized society have overcome.  I have seen enough to confidently say those images feature more women and children.  The setups are always the same: they are usually barely clothed, staring passively into the lens, flies fluttering around their faces.  If you want to get more technical, I can also tell you that those pictures are always taken from a high angle with no eye contact, so as to reinforce viewer’s sense of power compared with the victims’ apathy and hopelessness.

But I cannot accept the depiction of those people as passive victims needing our pity.  It is patronizing, both to those that struggle to survive, and to the intelligence of us on the other side of the screen. And I am repulsed by the ego-tripping call-to-actions offer by exchanging my weekly latte allowance for someone’s future.  By depicting hunger, famine, and poverty as humanitarian crisis, they are creating a shroud that hide the political, economic, and social crisis for what they are.  It is simplistic, it is reductive, and it is not the solution.  “I” am more than a cheque book.  And “they” are more than victims of endless disasters.

Yet for decades on end, the west has interacted with Africa (arguably the continent undergoing the most desperate struggle with meaningful development) based on pity.  You might say, help is help, what difference does it make?  It matters greatly.

There’s a saying: Give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime.  In that case, the west has been feeding Africa (and barely at that), for a long time: culturally, politically, and economically.

Culturally and politically, Africa had been indoctrinated with European Enlightenment principles and their prescribed political paths.  Most had little relevance for the indigenous African tribal configurations.  To name the countless problems with this approach will take a long time, but the incompatibilities and manifestations of these are apparent: civil unrest, ethnic cleansing, violence, corruption, lawlessness, lack of independent civil society organizations.  They lead to one thing: economic stagnation.  Surely, development studies and developmental economics deal with a number of regions in the world.  But the greatest concentration and the basket cases are in always found in Africa.

Should we just throw our hands up and decide not to care? How do we find another way to relate to this kind of poverty, not through its perpetual state of victimhood, fund-raising and debt-relief themed parties, but something more, dignified?

Here’s an idea. Instead of trying to incite pity, why not facilitate understanding? Like many people, I have not gone to sub-Saharan Africa, but my idea of Africa has been largely shaped through these distorted pictures. So, enough of those manipulative imageries and selectively hyped “humanitarian crisis” for ratings, and enough of those superficial celebrity-endorsed, publicity-seeking displays of global solidarity.  What we need is understanding.  It is complex, it’s involved, it’s probably frustrating to produce and equally frustrating to read or watch.  You want me to care?  Give me genuine, and give me the bigger picture.

picture source: *nummerni

Don Coxe is an investment strategist. But unlike most investment strategists that flaunt degrees in mathematics or quantum physics, Coxe is a curious historian. At 73, his curiosity has yet to wane, and his quarterly newsletter Basic Points has followed him from his old employer BMO to his new investment advisory business.

He makes investment a fun pursuit, not only of numbers, but of knowledge. In his own word, he studies history to “compare popular views about economics, finance, geopolitics with evidence of what has happened in various eras.” And making money is merely a financially rewarding byproduct of that pursuit.

In his March edition of Basic Points, Coxe drew my attention to a few points rarely discussed by investment advisors and analysts in the mainstream. Let’s see what they are.

Lack of sunspot activities and possible crop failures

Most of us are aware that the earth has been warming up in the last couple of centuries. The rise of environmentalism makes sure of that, and Gore’s Inconvenient Truth enforces that belief. As humans, we are no doubt responsible for the unprecedented level of pollution and degradation to our natural habitats. But the feverish pitch of the environmentalists has become dogmatic in recent years, and any dissent over either methodology or the validity of data that supports their belief is deemed treasonous.

As much as environmental awareness is a more than commendable cause, the sensationalism and the selectivity over the type of news and data that make it to the front page has been astounding. Bloopers are swept into the background, and wildly pessimistic and sensationalistic pieces inject more fear and exaggerated claims into mainstream conversations. We are all for a better living environment, but no end justifies the means if facts and truths are misrepresented in the process. The public will turn their backs on the cause, no matter how noble it may be.

But back to the issue on hand for now. With all of that hoopla, you would think that a cooling earth would bring a sigh of relief to the world. But no. According to climatologists, the patterns of the sunspots have been: ten years of sunspot activity, a year of rest, and then a new cycle. The last cycle ended in 2006, and there was little activity in 2007. The troubling thing is that they didn’t appear in 2008, or in 2009 so far. This means that we are experiencing the longest sunspot drought in more than two centuries. Scientists are expecting the sun to resume maximum activity anytime now. But then again, they have been holding their breath with little avail for the past year.

So what does this mean for investors? Coxe thinks if sunspot inactivity continues, we are headed for another year of crop failures and agricultural disaster. He suggests we “watch the websites that update the sunspot story. If the spots don’t return by mid-June, then there might well be great rallies in the grains. Buy the fertilizer, seed and farm equipment stocks.”

And as the unapologetic historian, he leaves us with a requisite tale.

Scotland suffered six straight crop failures during the 1690s because of late Springs and early frosts. Some historians believe this was the major reason why the Scots gave up their dreams of independence and joined England. There were skating parties on the Thames each winter. Polar ice caps expanded dramatically.

Cooling demographics

I have written before on the importance of demographics and the role it played in the ongoing US property bubble. Demographics also played a part in preventing the much anticipated Japanese economic recovery from taking place in the last decade, as well as stopping the Europeans short from writing a large stimulus check.

Don Coxe’s analysis further affirms my belief that many OECD countries face similar challenges to Japan in the coming years. In his opinion, rising standard of living and property prices took place on the back of a population boom. When this came to a sudden halt in the 70s, residential real estate is a reliable long-term asset class no more.

When the overwhelming majority of families in the OECD collectively and simultaneously chose to cease reproducing themselves in the early 1970s, and stuck to that resolution, they repealed the most basic of long-term investment concepts. Demographers and social scientists can debate the reasons behind this momentous behaviour shift – or even whether it is a good thing. We merely note the obvious, that financial prognosticators have no: people changed 35 years ago – apparently permanently – and the world changed – apparently permanently.

What began during the early 1970s was an OECD-wide collapse in the fertility rate from roughly 2.4-2.5 babies per female to 1.4 babies. Since 2.1 is required to maintain population levels, the three decades of fertility below 1.6 have, slowly but inexorably, transformed population profiles – and the housing markets.

He also goes on to spell out the corruption that went on at Fannie and Freddie that could not have existed without full backing and co-operation of the government, particularly the Democrats. Bottom line? Political leadership is as much to blame as the corporate fat cats they have been hanging out to dry the past year.

The government’s relentless pursuit of property ownership expansion ignored the basic supply and demand equation in the market place. None of the reckless lenders in the housing market noticed the reason for debasing lending criteria to expand the supply of qualified homebuyers was the dwindling number of qualified homebuyers.

While the Congress was busy enabling lenders to sign unaffordable mortgages over to poor Latinos and African-Americans, it heavy-handedly restricted the supply of working-visas and green cards to more productive, better-educated, willing and able receivers of properties. The result? The people that could have purchased and sustained a rising housing market were denied access, where those that could not afford to service the mortgages were burdened with incomprehensibly termed debts.

picture source: ~MichaelBills

This is part two of a two part post on the importance of demographics on one’s investment choices.  Part one addresses the perils of neglecting demographics, and today’s post will discuss investment ideas backed up by demographic trends.

The more sensible consumer mentality may also be applied to investments. For years, we have invested in trends that most people do not understand – many had little fundamental support behind it other than the sheer force of market momentum. The foolishness of that collective decision is reflected in overall market returns: during the past decade, the stock market has not treated us well.

Perhaps it’s time to look at investments that have the solid support of demographics and real demand behind it? Is it any surprise that during this crisis, Best Buy is down 47% and Family Dollar Stores are up 30%? Before the fundamental disarrays of the economy are addressed, it’s safe to say that products and services that meet essential needs will stick around. On a side note, would it also make a lot of sense to retrain those laid-off workers from the previous fluff economy in those fields that have long-term demands? Now going back to the idea of ongoing demands, here are some thoughts.

Follow the demands of the aging population and pay attention to healthcare related companies not run by crooks. In most of the developed countries, healthcare needs are hardly abating. The demands for various levels of medical care in the forms of doctors, nurses, medication, medical equipments, and assisted living will continue to rise every year. Yet the broken Medicare system in the US, along with issues of patents, the emergence of scandals and ethics quandaries related to the pharmaceutical industries, have tainted the industry reputation and sidetracked the dire issue on hand. But with pressing demands that will continue rising with time, it is an industry that demographers would pay close attention to.

As the most dependent existing source of energy, oil will not stay double digits for long. The financial crisis has all but rendered the discussion of oil price obsolete. But reality remains that once we pull out of this recession, the competition for oil will resume at an ever-furious pace. The Americans still need to drive, and the Chinese still need to run their factories. The fundamental demand equation has not changed. The recession compounds the supply problem, as lack of credit and falling oil price has lead to many downstream oil drillers to halt operations. Macroeconomic uncertainties, crude price fluctuations and its consequently low break-even number have driven small and large operations to abandon exploration activities. Similar to the agriculture market, once demand picks up again, oil price will come back with a vengeance.

A corollary to the last point, alternative energy has no choice but to step up. Oil is a dwindling resource. So whichever way we spin it, this stuff is going to run out. And most likely sooner than we would like. At times of high oil prices and tight supply, R&D of alternative energy gets a boost. Now with oil at a fraction of what it was a year ago, the government and the general public has turned its focus on fixing more immediate malaises of the economy. Renewable energy talks are taking a backseat. But the issue of energy sustainability remains, and the solution rests with alternative energy. With employments in real estate and car manufacturing collapsing in the US, it would make a lot of sense for some of the newly unemployed to retrain themselves in, say, alternative energy engineering? This business will be around for the foreseeable future.

Invest in what “they” need. Many say that China and India will be the largest consumers in the 21^st century. Given the American and Japanese experiences with consumerism, I’m not sure that’s something they would want for themselves. But remember our truism about wants versus needs, and focus on giving them what they need.

Off the bat, food related products including wheat, rice, beans, dairy, meats are essential. Rising living standards demands better food. These foods must come from limited farming regions. Agriculture is one of the most neglected industries in the past two decades. So invest in agriculture. This might sound slightly exaggerated: but who knows, maybe farmers will drive Lamborghinis in the future, not brokers.

Farming aside, industrial materials are also needed to meet the ongoing demands of industrialization in those parts of the world. All classes of commodities will be in short supply, so the temporary slump in commodity prices is just waiting for a jumpstart for another upward trajectory. Some are already taking advantage of low prices by stockpiling them. Too bad the needs are ongoing, and demands will still be there when the market turns the corner. It’s safe to say that businesses positioned to sell to countries like China and India are those that will succeed in the 21^st century.

Water is another over-looked group. Farming, industrialization, urbanization, and improving living standards have led to a shortage of water in China and an even more serious shortage of clean drinking water. Water supply and conservation, purification, sewage treatment, industrial bleaching, there are so many needs that the government can’t keep up. Expertise in how to do one or all of the above in ways that are safer, more efficient, less costly, and less environmentally disruptive, will also find itself highly sought after.

picture source: ~avotius

ddresses

This is a two-part article that addresses economic and investment implications of demographic trends. Today, I look at what happens when we ignore demographics. In tomorrow’s column, I look at some investment opportunities supported by population and demand trends.

I still remember presenting David Foot’s book “Boom, Bust, and Echo” in my high school economics class. It was the first time I was exposed to the idea. It was clear, succinct, and for me, absolutely mind-blowing (I was 17, ok?). Its sociological, marketing, economic and political implications kept me engaged and excited for weeks leading up to my talk. I still remember feeling exasperated at not being able to present the explanatory power of this concept within an hour of allotted time. This was before Powerpoint came along to provide structural assistance and graphics entertainment. So God bless my fellow classmates for sitting through the hour of what must’ve been an excruciatingly boring experience: me, with questionable level of articulateness, wildly gesticulating with my right hand, while waving pages of notes with my left.

It’s been a while since high school, and the over-use and abuse of the term has since left me disillusioned with its clairvoyance. The rest of the world must have discovered the magical potential of a concept that is always readily available to provide digestible explanations for, well, everything.

When I worked in the oil boom town of Calgary in western Canada, any high school drop-out rig worker or administrative assistant, when asked about the sustainability of sky-rocket crude prices, would shrug their shoulders and say: it’s China and India, they need oil, it’s all about demographics. The same line of reasoning was used to explain the rise of food prices last year: developing countries are getting richer and eating better, there’s an increase in demand, again, it’s demographics. The same explanation sufficed for the bio-tech and pharmaceutical stock rally every few years: the baby boomers, they’re getting older and need medication, it’s demographics!

Then the oil boom ended, the food crisis abated, and has anyone heard anything about the explosive growth of the pharmaceutical industry lately? For a while, demographics became a mere pop-cultural sound bite: a convenient simplification of complex problems. The flagrant abuse of the term, combined with its questionable predictive powers, led me to more or less abandon my earlier enthusiasm.

Lately, the idea of demographics has returned in a slightly different incarnation. As frivolous as some broad-brush generalizations of this concept can be, I found numerous instances of past disaster and future opportunities off the backs of demographics. I’m now convinced that demographics is still a credible tool, but only when paired with common sense. Here’s an example of what happens when we desert demographics and common sense.

Demographics and housing prices

One school of thought that addresses the “irrational exuberance” of the property bubble is this. There was no underlying demographic trend that supported the astronomical rise in housing prices. The population demographics signaled no spike or increase in the demand for real estate.

In fact, some argue that housing prices moved up over the past half century because of the steady progression of baby boomers through various ladders of the property market. This growth has all but halted during the past decade. Population growth has not been large enough to justify price inflation in the hot zones, even if one takes into account the emergence of Gen X and immigrants as property buyers. From a demographics perspective, once the boomers’ needs are met, realistically, the market should have plateau and flatten out, if not trending down. Given some members of the baby boomers have already entered retirement, thus further reducing the demand for housing, it’s reasonable to deduce that the pattern over the past fifty years cannot be extrapolated infinitely into the future. By that measure alone, the idea that real estate prices will never go down was plain wrong.

Just to show that demographics analysis only work in conjunction with good sense, you can also make an opposite case given the same numbers, or with a different set. You can also confuse your readers by throwing around the terms “demographics” and “baby boomers” that neither support nor refute your point.

Employment based on a false boom

What are the employment implications of the housing bubble? Here’s one scary statistic: 30% of job creations in California since 2000 had been in real estate related fields, i.e. real estate agents, construction, Home Depot, insurance brokers, mortgage brokers, stock brokers investment banking, etc. Suffice to say, originally created to sustain and support a castle in the sky, once the delusion ends, these jobs are not coming back anytime soon. The re-education and the re-absorption of the unemployed back into the economy is an interesting phenomenon to watch. Many are going back to community colleges in the fields of nursing, engineering, or accounting: fields that have high demographic demands going forward, and will be discussed in tomorrow’s column.

Output outpaces spending, a new paradigm?

The whole world is in recession, but there are two kinds of recession. Export-led economies such as Germany, China and Japan are facing a recession of the real economy, whereas the US, UK, and Iceland, are facing problems in its financial economy.

It might be a good time to acknowledge how a large number of western countries had been able to sustain its growth and wealth accumulation despite a lackluster real value-generating economy. Let’s not forget how the U.S. was able to grow during the last couple of decades: for the most part, businesses and individuals borrowed to invest in over-inflated assets, whether they were tech stocks or bundled housing assets.

Now the bubble has burst again. Is it time to re-examine the issue of value creation as a sustainable path for growth? With the downfall of Detroit and Wall Street, where do we turn to next? What will we invest in going forward?

First, turn on our protective coping mechanism. Many are dealing with the uncertainties and financial challenges of this crisis by doing what our ancestors must have done for thousands of years: by paring our needs down to what is absolutely necessary. Gone are the days for designer clothes and barely used appliances piling up in a 3-car garage.

This new consumer behaviour is duly reflected in the game of retail survival. Sellers of inessential goods and services are either doing badly or going out of business altogether; where retailers of basic necessities are going strong.

Of course, we are doing this in face of economic hardship. Nobody in their right mind would prefer to forego Starbucks or trading in Chanel for Wal-Mart. It is not the American way. But if structural adjustment of the economy is allowed to continue, and people are forced to stop buying thing they don’t need with credit that they don’t have, then perhaps the not-so-subtle shift towards a more frugal mentality will take permanent hold.

Perhaps our investment choices in the future will follow a similar trajectory as our  consumption behaviour, and more merits will be given to businesses that satisfy the needs and necessities, versus the wants, of our global society?

In tomorrow’s column, I’ll discuss my thoughts on some investment ideas that are driven and supported by demographic trends.

picture source: boobookitty

Do you remember what the most attention-grabbing headline was a year ago?  Before the US decided to embrace the “change” administration, before the credit bubble burst, before the cracks in the financial system started to appear for all to see, the Olympic was still in the future, and Michael Phelps and Bernard Madoff were yet to become household names .  Yes, that time.  Do you remember what dominated the headlines then?

The global food crisis.

That, along with a general global resource shortage, seemed to be what was on most people’s mind.  It was hard not to notice.  All around the world, the grocery bill, along with the gasoline prices, seem to follow an unwavering upward trajectory.

The media loved the story.  Theories of “the perfect storm” emerged to explain the rise: population growth, change in diets, irregular weather affecting harvest, higher transportation costs, and the drive towards bio-fuels.

Then the global financial crisis hit, and we suddenly had bigger problems to worry about, i.e., our pension plans and investment portfolio cut by half.  Commodity prices started to fall, including agricultural food prices, the grocery bill’s upward march is temporarily stalled.

Then just like that, the food crisis front went quiet.

Has the global food crisis gone away? Has the hand of the market somehow corrected the excessive rise of grain prices, and we no longer have a supply problem?

No, of course not. The fundamental factors that drove prices up last year has changed little.  The demand from the increasingly hungry consumers from the emerging markets still remains, albeit the growth of demand may have slowed slightly as a result of the financial sector snafu.

Yet with tight money all over, we are faced with an increasingly dire supply situation.  Reduced international aids and banking lending could cause farmers to cut back on their plantings, which may lead to reduced harvests in some major exporting countries.  Lower food prices on the international market can make farming a losing proposition in certain parts of the world, further reducing the crop output.  And the sheer volatility of food prices, as demonstrated in the last two years, are making it increasingly difficult for farmers to plan and invest.

The last short-lived food crisis was driven by a strong surge in demand that caught the suppliers off-guard.  The brewing crisis that will inevitably hit us in the near future, I believe, will be driven mostly by a lack of supply.  When met with a steady growth of demand, we will find ourselves in a position where the lack of credit and thus ongoing investment, neglect of farming infrastructure, and the volatile oscillation of agricultural prices, have all but stagnated, if not outright damaged the farming industry.

The financial crisis has certainty got us all wrapped around its finger.  But the gathering storm in the under-investment of some of the most crucial industries, food being the most critical and dire, will become front page news once again in the near future.  Given rice, soybeans, wheat and other foodstuff prices have all fallen between 40-60% from their 2008 high, some settling in at the pre-rally prices, it may be worthwhile to take another look at this group as a way of beefing up your portfolio.

picture source: ~nuaHs