Thursday, March 31, 2011
We were pleased to see the feelings we expressed yesterday backed up by this, our "Quote of the Day".
The boss of electricals group Dixons said that government cuts were having a "chilling effect" on consumers as wilting high street demand for flatscreen TVs, sofas, jewellery and even takeaway pizzas pointed to deteriorating confidence.
As long as retailers continue to believe that the UK economy runs on sales of TVs, sofas, bling and takeaway pizza, the UK is doomed. It was being hooked on that stuff (+ houses) that got the UK into the mess it’s in and those comments hark of a drug dealer moaning that his clients are dying of overdoses and the methadone they are on is killing trade.
TMM’s translation: “where is my bailout?”. The issue of course is not the government policy, its Dixon’s. Much of Amazon’s international segment is Amazon.co.uk and look at the comparison between revenues for the two:
Its not the economy, stupid, it’s a redundant business model.
With Eurozone inflation printing higher, people getting thoroughly terrified of sticker shock at the pump and all those other things that tend to terrify consumers TMM would like to remind ourselves and our readers that inflation shocks tend to sow the seeds of their own destruction by inspiring people do do the same thing cheaper and better and ultimately eat the commodity rentier’s lunch, much as Amazon et al have eaten Dixon’s. For example – everyone is terrified of oil prices at the moment and assumes they are going up forever. While TMM are still pretty bullish crude we are seeing some technological developments that make one think that 5 years from now one could go to the local car dealer and ensure that you don’t use any oil to travel anymore. Tesla and the likes of this awesome toy are all well and good but nobody likes having to charge a car for a long time. Thankfully, some very clever people have come up with a solution that is commercially viable for fast charging and uses some fairly standard tech outlined here in the economist. Peak oil? Maybe, but we might also reach the peak of caring about oil prices sooner rather than later. We might also find the auto industry becomes consolidated at the auto parts level and very diffuse at the end car assembly and design level as things like this come into play when drive trains are standardized… but that is a post for another day.
This EV trend is not just about oil but also other things that are conventional internal combustion dependent – platinum groups metals as we noted previously here, and lead which is pretty inefficient for batteries and has no use in a car which already has a whopping big battery pack. (TMM cannot work out what is giving the lead the bid right now given how weak demand is looking from Chinese Ebikes – anyone who has an answer do let us know). No doubt there are more implications of this but human history is rich with stories of people myopically not developing resources, getting gouged, and then innovating them out of relevance.
It is hard to pick the turn in these things and trading the short side of commodities based upon long term trends is generally a good way to get taken to the woodshed but TMM find that valuations in mining equities are now reflecting some serious long term scarcity which just might not be there when all is said and done even assuming all is well on the demand side.