Monday, August 20, 2012

Declining TFR and Pensions

The future of pensions for tomorrow's elderly is in Box 4, "Continue Working"; Box 6, "Children as Pension" and Box 7, "Financial Pensions"

When I was a kid, Box 6 was dominant. In the years to come because of Box 5, "Declining TFR" those who are successfully financially will enjoy Box 7. Most will be forced into Box 4 and the minority with many kids and strong family relationships will live with Box 6.

For Box 4 to be sustainable, medical costs per head must fall and healthcare revenue will still be much bigger because the market would be much larger than today. The pharma and health therapies sectors will not be allowed to price themselves like they do now because politics eventually trumps the markets.

Sunday, July 08, 2012

City Harvest Church Success Strategy

A former colleague sent me this link: An Analysis into the Wealth of City Harvest Church.

The written word is forced into a linear mold. I took most of the arguments from the blog post and positioned the trees to form the forest in the NaviMap above. I shall be brief and my apologies to those who are unfamiliar with reading such diagrams. A lot can be written but that would be to fall back into linear form.

The key and interesting bits are the reinforcing loops (virtuous or vicious cycle depending on your perspective). They form the heart of the story.
Click on the picture to get a full size NaviMap if that is helpful to you.

While the enterprise was probably seeded by Box 1: An attractive and youth friendly church worship format, the goal is to arrive at the reinforcing loop between Box 6: "More Networking for the Successful" and Box 7: "More Success, More God's Favor".

Survivor bias ensures the monetary quality of this loop becomes more wealth concentrated. See Box 8: "The Unsuccessful Leaves" Such a church organization will win - totally man made.

For the leaders and financial beneficiary of the church, their interest is in Box 13: "Increasingly Rich Church". This is connected and flow via Box 11 and 12.

Box 9: "Trusted Network, Familiar Culture" is vital for the key reinforcing loop of Box 6 and 7.  A well established Box 9 would significantly contribute to the wealth gathering of the reinforcing loop just mentioned. Just consider how this might play out by looking at the YouTube clip on Jack Neo's testimony at City Harvest Church. What a way to gain trust and promote his new movie.

School Pressure in Singapore

Sunday Times today. Such stories of school kiasu-ism have gone on for years.

The NaviMap explains why.

Our narrow concept of success (box 1), which is the product of an elitist culture have created a vicious cycle between Box 2 and Box 3.

All our remedies so far has been to slow down this reinforcing loop, but lasting effect can only come from Box 4 - Wider Concept of Success. Tharman tried to get this started (has to be a slow process) by creating an education system and eventually a society where there are "many peaks instead of one peak". May be that is why they are investing so heavily in primary schools to make every neighborhood school a good school. This is really long term thinking but not well communicated to the people.

Errata: The blue arrow from Box 4 to Box 1 should be a dashed arrow!

Friday, July 06, 2012

Central Banks 'surprise' rate cuts

Central banks have just 'surprised' markets with rate cuts. The ECB and PBOC did just that yesterday. Here is what I see.

Business and employment prospects are becoming worse (box 1).

But for those countries with a debt disease, the money will not go out to the real economy but remained trapped in financial institutions or asset markets (box 4). Those without this problem, especially the emerging economies (box 3) it helps.

Overall these latest rate cuts smacks of desperate acts in a world that since 2008 had failed to make use of the time central banks purchased for them to restructure and retool themselves.

I wonder what comes after all these. Looks to me like we are only waiting for matters to get worse before substantial and durable action would be taken.

Thursday, July 05, 2012

QE Shoring Up Markets

Consider where the reinforcing loop between Box 2 and Box 3 has gotten us! Now Box 2 is fed by the action of central banks printing money (Box 8)

Regulation (Box 10) has been stymied by lobbies and special interest. This is an untenable situation. It looks like we are not going to build a new world that can fuel growth beyond the capacity of the economies until this NaviMap is completely reshaped into something quite different. Box 9 and Box 3 are the places to watch, but Box 7 is key to determining what they might be.

Monday, March 14, 2011

The Printing Money strategy

If you can successfully avoid some of the pitfalls, printing money aka Quantitative Easing can get you out of trouble. 

So there is a mountain high of debt threatening insolvency (Box 1). If you have control of monetary policy, you can print money, which Bernanke had done in a big and scary way. Fortunately it is mostly the experts that are scared. If it had frightened the man in the street, confidence would have totally evaporated and this con will not work.

Box 2 will produce Box 3: Currency devalues. Now the debt becomes cheaper. Remember for this strategy to work, confidence must remain intact.

The stock market goes up (box 4), saves many investors from margin calls etc., The economy is supported. There is less layoffs than expected. Wait for a while, nobody believes the end of the world is nigh. Confidence goes up further leading to business investment. Also worn out equipment need to be replaced. Now all these must get traction before Box 6 assert itself.

Not in this NaviMap, but Box 6 is now determined more by financial markets that actual supply and demand. In fact, the prospect of subpar growth would have serve the economy with cheaper commodities. Only after Box 5 have taken off confidently would Box 6 negative influence asserts itself.

The printing money strategy works best for economies with sophisticated financial markets. America fits the bill the best. They are getting away with their con once more.

Risks of Bubbles in Soft Commodities

In NaviMap analysis, the Box 1, 2 and 4 is warning that the conditions for creating an asset bubble exist. Let's for a moment remove Box 1 "Economic Growth" from the picture. Then there should develop between Box 2 and Box 4 a  counterbalancing loop. The logic is like the population balance achieve from herds on limited grazing grounds. In reality, unless there is an unemployment problem, a reinforcing loop exist between Box 1 and Box 2.

In a primitive economy, there should a dashed line between Box 4 and Box 1. But in more advanced economies, it is a promoting line. E.g., an advanced economy will make capital investment in agriculture (Box 6) attracted by rising product prices. Furthermore, a developed economy have alternative ends for agricultural produce, i.e., bio-fuels.

Result: Spiralling agricultural commodities prices.

The long term bull case for such commodities is intact, but even in the short term, you could easily over pay for such assets especially Box 3 is an infrastructural support for speculation.

Government hates volatile prices. Under pressure to keep prices stable to pacify voters, it will time releases from strategic stockpiles (Box 5). This only make it doubly hard to invest.

Box 8 is to accomodate the possibility of Black Swans and Box 7 represents generational power that eventually reverse the logic of this NaviMap.

Sunday, February 20, 2011

The totally successful monopolist

The ultimate successful monopolist will have

1. A virtuous cycle between Strengths and Opportunities.
2. A reinforcing loop in its favor between Opportunities and Threats because its Strengths had triggered it.
3. Threats that yields weaker Weaknesses as a result.
4. Eventually leading a a reinforcing loop in Strengths favor between itself and Weaknesses.

Not easy to arrive at this sweet spot and neither can it last very long given that all reinforcing loops must eventually cease. Those that accelerate come to an end even faster unless they can find new sources of growth.

Easy to make the mistake of drawng a demotion line between Threats and Weaknesses

Tuesday, February 01, 2011

Pensions nightmare

Vote for change (Box 7) is the most benign scenario. It may not happen and some worse possibilities may be the unpleasant or even horrific reality ahead of us.

The drivers, i.e., can be represented as NaviMaps with reinforcing loops are not captured in this map.

Clearly what is going on is unsustainable. They say demographics is destiny. If put to the vote and the older people are the majority, the young will be bullied because the institutions are against them. There will be revolt. Some of the young will leave for better opportunities elsewhere. The society will decline rapidly, if not catastrophically. Pensioners must accept that the promises of retirement aren't there. They will have to work more years and many will never retire at all. Will they buy this? Fortunately the baby boomers do not all retire at the same time. A problem that presents itself as trickle provides opportunities for solutions that a tipping point situation just does not. The way forward is to cut benefits and retire later. Politicians have their work cut out for them, but will they be up to it?