2 active bubbles

It is interesting to realise (and quite dangerous if you didn't) that probably there are 2 active bubbles nowadays in the markets.

I strongly believe the digital economy is probably one of them. A market bubble is typically created based on speculative expectations about future incomes. To put it in simple words - people that companies in that industry will make money, but that never happens. When we look at the digital economy, we realise there are too many companies (led by facebook) that aren't making real money yet but are already high-valued in the " stockmarket". That valued is based in their "huge potential to generate high caliber revenues in the future" - though that future has not been determined, nor the way they will realise it. They are nowadays high risk assets, as one day the market will demand the promised return, and if they don't materialise, the digital bubble will burst - and it will get ugly! (still, let's not consider all digital companies the same, as Google and linkedin have already strong and profitable business models)

The other bubble is very different. Football madness! Football clubs are paying unsustainable amounts for players - assets that many times will not provide reliable and high enough cash flows, generating multi-million euro debts. This has also been fueled by the arrival of doubtful money into the business as some clubs have been bought by owners that would pour in large sums disregarding of club ability to pay it back. The problem on that is sustainability of those values if no matching income or return value is generated. We are already starting to see the effects in some smaller clubs across europe...

Which one do you think will burst first?...

- enviado de dispositivo móvel.

European union institutions efficiency

When i look at the current crisis in greece, Portugal and ireland, i end up thinking that it would be very welcomed if the european union would start by looking at its burocracies to arrange funds to support those countries - instead of rushing to ask for more money from the other countries!


- enviado de dispositivo móvel.

Spanish Elephants

Spanish economy is actually nowadays suffering the heavy burden of dealing with a number of "white elephants" - the name for large, heavy investment projects, that have doubtful rentability and payback. Usually, they are large public projects, that are made to enhance the economy in depressed areas or times... and win votes!

RENFE - Spain's railway company - has recently had to supress the highspeed connections (TGV / AVE) between 3 regional towns - Toledo, Cuenca and Albacete. One of these was transporting an average of 9 persons per day - meaning the multimillion investment was a straigth-through disaster!

Another good example is the proliferation of international airports that popped up like mushrooms throughout Spain over the last years - around 30! Many of them stand in small towns, that are actually better served by the main airports around 2 hours away by car. They aren't being able to actually draw traffic (many of them only have 1 or 2 fights per week, and one of them is nowadays open almost like a museum for people to visit an airport from inside...), and are huge black holes of public investment - prompting very difficult budget situations at the regional governments level in Spain.

This is actually exerting a tremendous pressure over the countries sovereign debt rate. And is a good example of what "White Elephants" can di in the medium and long term.

http://economia.publico.pt/Noticia/espanha-suprime-tres-ligacoes-de-alta-velocidade-por-falta-de-passageiros_1500563

Sales list

So, after Greece approved the sale of €50 billion assets to curtail budget deficit, a question should now be on every Portuguese mind. What will be on the Portuguese sales list?

A few candidates:

- Airport structures;

- Transportation companies (but they need to be in better economical shape before that happens);

- Commodities companies;

- Participations in banks;

- real estate

- gaming licenses (is there any room in this area? How much is Santa Casa paying for their concession?)

- Administrative back-offices (like is being considered in the UK)

Let's wait and see...

http://edition.cnn.com/2011/BUSINESS/06/22/greece.debt.crisis/index.html?hpt=hp_t1

On the challenge that is now over Europe

Europe doesn't afford to move backwards - we are in no position to do this. Our (Europe) situation is a lot more unsustainable than people think in terms of competitiveness, as we risk remaining as a number of small economies in a world of giants.

The US probably had the same issues Europe faces nowadays, concerning monetary and fiscal policy (btw, the US has a lot more internal cultural differences than usually people from outside recognise). But they were able to overcome them, and that is probably at the heart of its competitiveness. I am used to see Consumer Goods American companies leveraging the size of a coherent internal market to gain competitiveness at a global scale. Europe needs to be able to give its companies a similar opportunity.

And of course common monetary and fiscal policies are a challenge when you look at how different Germany and Portugal are (as an example) - but productivity (and, unfortunately, cost of resources... including human...) is nowadays the best solution to deal with this. The US made it work! So need we!

On Venezuela – from a consumer point of view

I was on top Cerro El Avila, the 2100m high mountain that overlooks Caracas and is a top touristic destination when I overheard an amazing conversation. A man, sitted at a small bench, was actually explaining a couple of friends that in a democracy, a leader leaving is job after a certain amount of time is normal – it actually is at the backbone of it.

It was my first time in a communist country. And, though not a huge shock, it was different. First on the way Chavez is presented in national news – he is omnipresent, either with his own personality or through appreciations of interview persons. An example was the TV coverage of the support demonstrations when Chavez was submitted to a surgery in Cuba, including the 4 minutes dedicated to show twitter messages supporting the President. Besides this, Chavez tries to collate his image to the ones of South American heroes – and murals and quotes from them are very present throughout the capital.

But then, you also note that on the level of service you receive from a consumer standpoint. People are very nice (actually, they were extremely nice), but you are not on top of their priorities – clearly. If they are doing something else, you’ll have to wait. No performance culture here…

Venezuela has a fixed currency rate policy. As it is usual, this doesn’t reflect the true value of the currency, so, this means that I faced a very interesting problem… Everything was double the price! Because that is actually the difference between the official rate and the the informal street rate… So everything was incredibly expensive, once you don’t have access to the black market – and I didn’t.

This actually has an interesting implication. This rate is linked to a foreign currency supply limitation, that mean a multinational will have a hard time collecting dividends, profits or payments from their local operations. So, multinationals will stop investing because then they can’t get out of the country the return on their investment. An example was the 5 star hotel I was in – it seemed a hotel back from the 80’s. Probably because it was! It probably doesn’t have major renovations since the middles of the 90’s…

It was a very week and experience! I actually enjoyed the experience a lot! Though everybody talks about security, and this is an actual problem, if you are aware of your surroundings and pay attention to where you are, it won’t be a problem. And it shouldn’t bar you from knowing this country – and enjoying a limited experience in a state controlled economy…

A good sign

Isaltino Morais, Mayor of Oeiras (a suburban town close to Lisbon), has seen is appeal on a corruption related sentence being dismissed.

Political corruption (namely at municipalities level) is a huge problem in Portugal, often being appointed as one of the root causes of the economic stagnation and the current crisis. As so, court sentences like this are important to signal the end of political impunity on these situations. But, it is still important that the last remaining appeal is also rejected by court and that he serves an effective jail sentence.

http://www.publico.pt/Sociedade/supremo-mantem-decisao-de-condenar-isaltino-a-dois-anos-de-prisao_1499215

You can find a similar opinion to mine (but written in Portuguese) in this short article - http://www.portugalvistodefora.com/2011/06/um-raio-de-esperanca.html

The break point

One of the dramas of the Greek financial crisis concerns public servants salaries and benefits. As the economy was not developing as fast as the Government's liabilities, reward for public servants started being financed... through public debt. That meant Greece was raising money at foreign markets to actually pay its liabilities with the persons that worked directly for it. As the situation was not solved at an initial stage (as it would be unpopular), Greece's debt continue climbing and it reached a stage in which creditors confidence in Greece's ability to pay back started eroding. This erosion rate is climbing steapilly, as investors see their ability to have their return declining.

So, this means... that investors started "closing the tap" (cutting their money supply) to Greece. When this happens, public servants will not be able to be rewarded for their work - because that money for their reward was coming out of public debt. The only way they will get paid is... to reduce Greece spending (whilst accelerating growth, if possible), meaning significant salary cuts.

Let's have no doubt about it - it is a huge drama! It is an incredible terrible situation! Hence the violent demonstrations. But, personally, I don't see any other way - Greece will have to undergo a terrible cut in their public payroll, other operational expenditures and investment. And don't doubt - no one would like to be in that situation.

http://edition.cnn.com/2011/WORLD/europe/06/15/greece.protests/index.html

On the iOS and Apple

I just noticed that iOS 5 from Apple has been announced for this summer. And let me tell you, its presentation video on YouTube is absolutely amazing! But...

A few days ago, I come across some software that was only being developed for Android - that doesn't seem ok, right?, after all, Apple is the biggest brand in the smartphone market, integrating both hardware and software. But does it matter that much? This software developer stated that as he had limited resources, he had to focus on the biggest platform - and that platform is Android.

Actually, Android is, nowadays, the biggest smartphone software platform in the world, clearly leading the market in front of Apple, RIMM, Nokia and Microsoft systems.

Everytime I think of this, it reminds me something. Is it possible that by not opening / selling their software platform to other hardware developers, Apple will eventually lose this market in the medium term, being cornered to a niche position? Oh, yes - iOS is probably a better operating system than Lynux based Android... but does it matter that much, if an Android is able to do 98% of everything an iOS does, but at a cheaper cost and with a much wider hardware base? And what does this all reminds me? Isn't this all a replay of the PC operative systems wars we watched in the beginning of the 80's? Is it possible that Apple will be confined to the high-end users niche, and will see the bulk of the market going to Google, as it did in the PCs for Microsoft?

Let's wait and see...

Protests in Spain are on the rise

I said I few months ago, and I will say it again. A 40% youth unemployment rate is unbearable and will cause serious social unrest. Spain (and many more Southern European countries) should look at what happened in Tunisia and Egypt and take serious lessons - not hiding on being a Western democracy.

The problems that are being brought up are serious and real (unemployment, political class corruption,...) and should be dealt in a responsible and constructive manner. If not, the situation will only get deeper and deeper, and progressively more out of control.

http://www.publico.pt/Mundo/protestos-em-valencia-causam-varios-feridos_1498256

It was not only 2010 that has been wasted

Banco de Portugal (Portugal's central bank) has published a report, stating that 2010 has been a lost year for the Portuguese economy, as the much needed macro-economical reforms were not done. Actually, let me just give my 2 cents on this - it was not only 2010 that has been wasted. It really have been the last 10 years (my personal opinion, since Sousa Franco - Mateus - Guterres Government). And iof Portugal couldn't afford to waste a single one of those years, now, this is even a more urgent, undeniable truth - Portugal is no condition to delay the necessary economical and structural reforms, not even by a single month. They should start now!

http://economia.publico.pt/noticia/2010-foi-um-ano-perdido-considera-o-banco-de-portugal_1497886

Portugal needs to be competitive

I strongly recommend reading this interview with the economist (and former minister) Augusto Mateus. A very good analysis of the Portuguese competitive situation and a few hints on what could be a plan to tackle this root problem.

http://economia.publico.pt/Noticia/augusto-mateus-onde-portugal-e-competitivo-e-na-maodeobra-qualificada_1497682

New cycle

Today's election results were the only possible ones. They were the only ones that would make sense economically and politically. Who doesn't govern in a responsible, clean, sustainable way (or we could just sum it up to "who doesn't govern well") must be kicked out. People must be responsible for their actions. Period!

But the story doesn't end here. A lot more than a new party (or parties) in power, this election should stand out as a new cycle. A cycle in which Portuguese citizens are more involved into politics and actively demand that politicians actually behave in a responsible, economicaly and socially oriented manner. And that demand should not be only every 4 years, but daily - through constant involvement, pressure. By demanding good, reliable and unpartial information. By paying more attention to what really matters - and not to football or social circus. By demanding to know the costs of every single measure and who will pay for it.

Democracy is an incredible system - it gives every nation the government they deserve. Portugal can only ask for a better Government if it deeply demands it. Let the responsibility cycle begin - let's make it happen!

http://www.publico.pt/Pol%C3%ADtica/psd-vence-com-386-por-cento-e-direita-consegue-maioria-absoluta_1497644

Pordata

Access to free, unbiased information is at the root of freedom of speech and choice, and can enhance the political, economic and social evolution of a country.

This sentence could sum up the Pordata project, developed by "Fundação Francisco Manuel dos Santos". It is a huge database of social, political and economic data, coming from several decades back and that actually provides a clear overview of the evolution of the Portuguese society and its comparison with the rest of Europe.

And, this incredible project, has just been distinguished as one of the best e-Science and Technology projects of 2010, at the World Summit Awards promoted by the UN. Congratulations and keep up the good work!

http://www.publico.pt/Tecnologia/base-de-dados-pordata-distinguida-pela-onu_1497068