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Tuesday, November 30, 2010

Notes from the USA (Nov 2010) – a guest post

In this month’s guest post from the USA, KKP lucidly explains the current state of the US economy. The unemployment situation, consumer spending, real estate market and the state of mobile technology have been covered in his inimitable style. He is a very busy person, and I am grateful to him for sparing time from his tight schedule to write these posts every month. If you enjoy reading the contents – as I am sure you will – please let him know by leaving a comment.

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State of US Economy from Ground Zero

Just returned from a 10 day vacation during which we visited three different cities and was able to poll a lot of family, friends and strangers about the state of the US economy.

In a nutshell, the economy is faltering, but moving forward at a slow pace, with a small ray of light visible in Oct. and Nov. People with jobs are living their same old life, and those without are struggling pretty badly. Unemployment pay from the government is kicking in for those unemployed for over 52 weeks to let them survive. Also, there is no end in sight for those unemployed, or for those looking for a greener pasture for new/better jobs. Pay increases are rare, while the cost of living is increasing in certain sectors, especially healthcare, insurance, automobiles, and labour.

Real estate is slowing down due to the winter-season. Government homes are being sold with a bit more vigour, and new rules will allow faster processing of the same. The shopping season from Nov 15th through Jan 5th is a huge measure of the economy, and my feeling is that we are going to see electronics sector show marked improvement, while rest of the sectors (home, furnishings, clothing, high-end elements, décor etc) will show a pull back.

U.S Labour shows the following pictures to us, and I fully agree with it based on the recent trip:

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Looking Forward

Based on a poll done with white and blue collar workers, an upswing in electronics spending is expected. Better than one-in-four respondents (26%) say they’ll spend more on consumer electronics over the next 90 days and only 29% say less – a big 8-pt jump from last month and a net 3-pt improvement over a year ago (Nov 2009).

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A Jump in Laptop Buying Among Consumers is the reason for this fuel being added. The survey also found a big jump in planned laptop purchasing, with 10% saying they’ll buy a laptop in the next 90 days – 2-pts better than last month and matching the highest level in this survey in three years. Planned desktop buying is down 1-pt from previously.

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The introduction of Tablets, iPads, Samsung Galaxy and other ‘Smart Phones’ is really fueling a lot of employment and the spending amongst the middle income earners. The generation of kids moving upward from the ‘dumb’ phones to ‘smart’ phones is also helping. As Microsoft, Motorola, Samsung, LG, Kyocera and others launch the ‘pad’ craze, there will be more of it. Of course, only selective buyers can afford the upfront fee, and the monthly service fee associated with it.

But, there is a place for these devices in the consumer marketplace, as well as in small businesses. Imagine waiting in a Doctors’ office and getting an iPad to check your email/voice-mail and other web-sites. You will never complain about the ‘delay’ in the doctor getting to you. This allows the doctors to book ‘more’ appointments. Just know that ‘this idea is coined by yours truly’, but people are going to start thinking about this.

All in all, unemployment is holding steady, with people being laid off on one side, and over-time being paid to currently employed, while certain electronics industries are selectively hiring.

The up move in the US stock market is breathing life into individual investors, and allowing trading firms to continue to pump money into automation, more programming for automated-trading (called High Frequency-Trading) and giving a feeling of relief to the retirement accounts that have taken a beating for the last 3 years.

Real estate is still in the doldrums, and more so now since we have zero degree centigrade weather in the Northern part of the US (normal). This slows down searching, buying and selling, which means that inventory shows a bump up. This is when investors like me put on two coats and cruise the city for ‘deals’. On the other side, as I prepare apartments for rent and put out a sign, they get rented within a week or two. This is a record time showing that more and more people are not getting loans, and/or are walking away from their homes since their mortgages are upside-down (loan is greater than value of home, by a margin).

Finally, technology is turning from ‘wired’ to ‘wireless’ with the introduction of ‘true 4G’ technology to individuals and businesses. This will ‘truly’ revolutionize the way we live, think, do, download/upload, entertain, get updates and control our own individual world. We are talking about 10mbps up and down speeds allowing HD movies to be watched while we are walking around, and controlling home devices from miles away.

This may be the ‘catalyst’ that will fuel fire into the US economy in 2012-2015 with embedded devices/chips inserted in anything/everything, making the movie with Will Smith (iRobot and Enemy of the State) a full reality. Lets see how this pans out…

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KKP (Kiran Patel) is a long time investor in the US, investing in US, Indian and Chinese markets for the last 25 years. Investing is a passion, and most recently he has ventured into real estate in the US and also a bit in India. Running user groups, teaching kids at local high school, moderating a group in the US and running Investment Clubs are his current hobbies. He also works full time for a Fortune 100 corporation.

1 comment:

Nasir Khambatta said...

Thanks Kiran.

In India, we have just started talking about 3G, and you are already talking about 4G.

Could you provide your thoughts on how quantitative easing is impacting / will impact USA? Thanks.