Paper Chase: Driverless Cars
Equity markets are still riding record highs on hopes of improving economy, and the market shrugged off GDP contraction of -.1% in the first quarter which was largely blamed on the weather. Economists fully expect the economy to bounce back in the 2nd quarter.
Home prices continued to rise in the first quarter but at a slower pace with the jump being .2%. Pending home sales also continued to increase rising .4%.
Highs and Lows
it is my belief that the bull market will continue. There is general underestimation of how well the U.S. private sector is doing. We have cheap and plentiful energy, a backlog in the housing market, and labor productivity above pre crisis levels. Times are good for companies, and even with rises in earnings, equities are still currently not overvalued.
Don’t Worry
The first quarter was affected somewhat by the weather though it is hackneyed to say it. Inventories were high after last year and GOT run down a bit IN the first quarter. Current indicators such as employment support the idea that economy is back on track in second quarter.
How and Why?
The 10 year has gone down after ending the year after 3 percent when no one said it could get any lower. This is a behavioral paradox of the market. If everybody is one way, the market can’t go there. I think there is a bear market in bones meaning rates will rise over the next year or two for as the demand for funds increases, the rate or price for funds will naturally also have to increase.
Global Markets
China is fragile in my opinion as the 7% growth in the first quarter was down from the projected 10%. Their state economists have gone from proclaiming growth was going to be at least 7% to growth will be 7%. I believe Chinese growth will settle back to 5.5% which may be disappointing to some, but is actually the key in the outlook for emerging markets.
What I’m Doing
While I am positive on U.S. markets, emerging markets could be bumpy in the next six to twelve months. You should still be accumulating emerging markets if you have a five to ten-year time horizon.
With emerging markets the way they are, I like small and mid cap companies, manufacturing, lower rated tech stocks (Apple). I am one of the few who does not like energy. I believe we have a structural oversupply of energy in the world. Analysts underestimate the effect of fracking and shale gas. We have plenty of cheap energy here. One unit of natural gas in the United States is 4.50. Qatar sells natural gas to the Chinese and Japanese at 16 dollars per unit. That’s a huge multiple and tilts the competitive balance in favor towards the U.S.
Riding In Style
Fear, excitement and anticipation are the phases of acceptance of technology. Featuring two seats with seatbelts, space for passengers’ belongings, and a screen that shows your route, Google’s driverless cars are the future and will be commonplace within the next 15-20 years. Decreasing traffic density via autonomous cars traveling at the same speed and in some cases high speeds with standardized modules is how your grandkids will be driving. Individual transportation by filling up highways with conventional automobiles is unsustainable.
Whip Appeal
Cars will be like horses at the turn of the 20th century. They will still exist, but they will be more of a past time than anything else. Automotive country clubs such as Monticello in upstate New York and Autobahn in Chicago will take cars off the street as your kids wonder what life was like before self driving, GPS controlled, autonomous cars.
Traffic Reduction
Driverless cars will be much more efficient in terms of using the roadway. During traffic jams, 90 percent of the road not being used. Driverless cars with built-in systems communicating with each other and quicker ability to sense things than humans will lead to a drop in highway fatalities particularly.
How Soon?
The process is interactive complete with test fleets and test markets. Expect regulations by 2030 with, for example, freeways and downtown areas reserved for self driving only. Ultimately, driverless cars will slowly takeover the country as accidents will be a tiny percentage of human error. Driverless cars dont drink, take drugs or fall asleep behind the wheel.
Pitfalls
Like any programming, driverless cars can be hacked so there will be a necessity for safeguards. Detroit will not be adversely affected for it doesn’t matter whether they make conventional cars or self driving cars as long as it’s automotive manufacturing.
Aging in Place
Retiring baby boomers are choosing to stay home after retirement. They need work done on their homes, and are driving a lot of home improvement activity.
Accessible housing can be defined as housing with no step entry. While it can be a multiple floor house, a full bathroom and bedroom are normally on the entry-level.
Some examples of improvements for baby boomers are handrails, better lighting and basically removing what would be considered obstacles to the elderly. While this is a popular trend all over, we see it particularly with homes in the northeast and midwest for they are older. This means they tend to be more vertical, and have narrower doorways, thresholds and smaller rooms.
While retirees are still moving south and west to Florida, Texas, Arizona, California and Hawaii, a sizable share of homeowner percentage for this demographic are in states like West Virginia, Maine, Wyoming and Montana. A few thousand dollars will take care of the easy stuff like handrails and mobile stairs. Major structural things will cost a lot more. It’s best to talk to an architect that focuses on aging in place situations.
Help Wanted
There will be 55 million job openings through 2020. 24 million from newly created jobs and 31 million openings due to baby boomer retirements. New grads should remember that their first job is not the one they will have in 10 years
Things have been improving over the last 5 years. The average student loan debt is $30,000, so grads want to be making at least that coming out of college. That opportunity certainly does exist.
It’s always good to have an idea of what it is that you want to do. It’s alright if you don’t, but don’t think that student loan debt is bad debt. It is not provided you find employment.
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