European dysfunction

As France starts assuming the presidency of the European Union for the next six months, doubt linger as to whether Nicolas Sarkozy will be able to deal with Ireland’s rejection of the Lisbon treaty given his “cowboy” style and his propensity for taking unilateral action and saying things without thinking too much about their consequences. In my view however, Europe is a tough nut to crack because its design is profoundly dysfunctional; it operates as a hybrid of intergovernmentalism and supranationalism. In certain areas it depends upon agreement between the member states. However, it also has supranational bodies, able to make decisions without the agreement of members. You see, it can’t work fully unless its members begin to tone down their national allegiance and their individual sense of patriotism. In my view, only a truly supranational Europe can speak with a united voice, have a common foreign policy, a unified defense, and except for the Euro, its (almost) common currency, it can’t really stand tall in today’s world. Anything else is a shattered piece of glass with no structural strength and no ability to reflect genuine leadership.

The terrible confluence

A confluence is a meeting or joining of two or more things, or the place where that joining or meeting takes place. Our world economy and markets are currently in the midst of a terrible confluence. Unlike previous crisis, several huge factors are simultaneously at play:
- Real estate price collapse (began in the USA, starting to develop in the UK, Spain and may quickly develop elsewhere)
- Financial liquidity crisis (started domestically, but spreading fast into the rest of the world) and relatively low interest rates leaving central banks limited options
- Skyrocketing commodities and food prices
- Unaffordable and costly wars in Iraq and Afghanistan
- Widespread globalization with a level-playing field that will drag income down in the so-called “developed countries.”
What have the US (both the Administration and the Congress) and the other “G8” governments done in the face of that “perfect storm?” Strictly nothing; they seem like passengers watching their own train wreck in slow motion and somehow enjoying the spectacle…

The end of All-Wheel-Drive?

When we moved to Park City in 1985, the fashionable car was the Jeep Cherokee, but most folks drove front-wheel or rear-wheel drive cars and they were just fine in the snow, as long as the tires where of good quality and in decent shape. It’s probably Audi and the proliferation of SUV that created a four-wheel or all-wheel dependence, and after a few years no one would want to be caught dead driving anything than a four-wheel drive vehicle. As most of us know, one added power train guzzles more fuel (at least an average of 10% extra, not counting the additional maintenance) and with today’s price, every drop counts. In addition, the advent of “electronic stability control” has given front wheel drive cars a much improved handling on slick roads. So when I add 1 and 2 together, I can only see the upcoming demise of the four wheel drive automobile, whether it is under the form of a huge SUV or a small sedan…

A cheaper way to travel

Now that oil is at record levels with no end in sight and that airlines will have little choice between disappearing, raising their prices, or doing a lot of both, there’s still a cheap and safe way to travel, with no crowds, delays or jetlag, and it’s in one’s imagination. That’s where I’ve decided to focus some of my future blogs; I’ve already tried it recently and it works perfectly. Soon, I plan to embark into tremendous journeys, meet incredible folks and tell you the stories or relate some pretty cool interviews. I think this will be a lot of fun; those of you who are sticklers with details should check the bottom label if they absolutely need a marker to tell fantasy from reality. So pack up your bags, fasten your seat belts and get ready for some excitement!

Where’s the economy going?

The recent stock market jitters have arrived at a momentous confluence between the end of Bush presidential term, record high commodity prices, a financial crisis spreading into the entire world and the coming of age of the “BRIC” nations (Brasil, Russia, India and China.) So what’s an investor to think and what seems to be the best strategy? While it’s quite difficult to peer into the future and plan a well defined pathway, it seems to me that human ingenuity will, once more, come to the rescue and get us out of that “pickle.” Let’s start with America. If, as I hope, Obama becomes our next president, he will be able to inspire and mobilize the entire nation and get things rolling in areas like new energy policy, health care reform and pragmatic fiscal responsibility (not quite the Wall Street Journal’s kind, but never mind!) There maybe a tough couple of years ahead for all of us, but it will be, at the end, worth it. The financial crisis will bring real estate values substantially down, especially in hard-hit areas that were dominated by speculators, where from “constipated” as it stands now, selling and buying will resume, albeit at drastically reduced and much more realistic prices. Finally, the BRIC nations are here to stay and will continue to flourish, even though they may never enjoy the excessive standard of living we’ve seen for decades; they’ll probably meet us “halfway” however, and that may be the point that’s going to hurt us, the so-called “developed nations.” We’ll finally have to accept to go down quite substantially in order to survive a bit longer…

What to do with Mugabe?

The international community is at an absolute loss at it faces the situation in Zimbabwe. This is in part because it has ignored that issue for too long and now, as the events are reaching catastrophic proportions, no one knows what to do. Unilateral sanctions (such as the ones the USA and France say they’ll take) are not just ineffective, they are just likely to add fuel to Mugabe’s fiery rhetoric on colonialism. Short of having an African Nation take responsibility for “eliminating” Robert Mugabe, the only pragmatic way to deal with Zimbabwe’s mess would be for the G8 to force South Africa and the nations that strongly support Mugabe to change their positions by “bribing” them with economic or financial aid. That way, they could force another African Union summit aimed at unequivocally condemning the old tyran and unseating him for good by mean of occupying the country and cleaning it up. Without strong medecine, the World and the Zimbaweans may just have to wait until the man’s dies of natural causes.

One way to beat OPEC

Recently, my friend Pierrot Anthoine, from Sallanches, France, told me that he just bought himself a 1951 2cv Citroën. That purchase only set him back $9,300. This is an early vintage automobile, made in 1951 and that still runs well; in fact, it’s so road-worthy that he plans to use it from Haute-Savoie to Brittany and back, during his summer vacation. The car has received a new 425 cc engine, up from its original 375 cc, and can now reach 45 mph. The fuel gauge is fully analog which means that you have to drop a dipstick into the opening of the gas cap to know what’s left in the tank. The bottom line: The car runs on regular and gets over 50 miles per gallon, plus it’s virtually sheltered from speeding tickets!