TJ, low cost of capital is a natural result of people living longer and longer and being better and better off.
In the bad old days, investing to get a return before one turned 40 when death was likely, instead of living for the day, which could well be the last one, required a 10% return to justify the risk of never being repaid and getting to enjoy the deferred spending and profits.
Nowadays, around the world, people can reasonably expect to live until their 70s or 80s or 90s.
So, a 3% return is pretty good when compounded for another decade or two.
Also, with so many of us wealthy beyond belief [compared with beliefs of a century ago when investment return expectations were establishing in modern economies], we have to come up with good ideas to spend our money. Sure, we can pour it down the drain, buying absurd trinkets and disposable consumer goods, super first class holidays somewhere or other. But a lot of people who have created wealth don't get kicks out of that idea.
Warren Buffett and $ill Gates for example are spending it differently. They are enhancing life expectancies further and reducing costs for billions of people. By cutting costs for those at the bottom of the heap, they cut costs for those further up the totem pole. Eliminating financial entropy is an excellent thing to do which is being done more and more.
Philanthropic investing means people are competing for lower and lower returns rather than spend it. $ill Gates requires a zero return on investment for his spending.
We are not in trouble. We are in excellent shape. True, there are some large debtor lumps in the belly of the python, but they'll be digested with a bit of time and some Big Ben helicoptering, mortgagee auctions and asset redeployment.
Excellent Financial Relativity Theory song though. yieldsz.com Thank you for that. Reminiscent of "Don't Worry, Be Happy".
On the other hand, high capital cost means there are lots of excellent ideas to be invested in, with great returns from customers. When returns are so low, it means that people can't think of something really good to do with the capital.
So, we are stuck in a world of low-level creative concepts but vastly improved life expectancy and wealth. Coming up with great investment ideas seems difficult. The number of ideas such as CDMA is small. Including a LED flashlight in a cyberphone would be good, but not really a fantastic idea of world-changing proportions, but that's the sort of development we are seeing for the most part.
We still don't have a hydrogen fusion reactor. Cold Fusion fizzled into Con Fusion. I'll have to accelerate my Qi and GSRS [TM] programmes.
Mqurice |
