Priced to Perfection

July 19, 2007

Matt - your blog on CPI really brings to mind the fragility of global markets and the global economy. It seems like a funny thing to say during a go-go market, I know.

Recently we've discussed China, and historically high markets here in blogland.  The one thing that seems clear to me is that there's a lot of room below.  And the macro picture for the U.S. in particular and the West in general shows a challenging landscape.

I'm delighted to see China begin to take shape and even have hopes for India and the rest of Asia.  But all this growth will increasingly put pressure on economies that are run through a fully mature work force that is priced equivalently.

The early signs are alluded to by Matt - a slumping real estate market and dollar in the U.S. (with the real estate decline showing up globally).  My biggest fear nearterm is a bigtime energy shock.  Existing market forces would be enough, but one significant disruption to a major supply line in the Middle East could completely throw the tenuous energy balance we enjoy out of whack and Matt's $50 tank of gas (which I've been paying in Spain for years) into a $150 tank of gas in a hurry.

But the markets looking great! 




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