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| Not all profit from the fruits of innovation equally |
On February 23rd, 2012, BCA Research published a piece of economic research about the general economic outlook with special focus on productivity and technological innovation. For those guys who love it short: Yes, we are living in difficult times with bad fiscal outlook and empoverished and angry consumers, but the ongoing technological progress in various areas will bring some economic gains (don't ask for whom, that's complicated).
"Productivity is the single most important economic force when it comes to growth and prosperity". And "productivity gains depend more on improved business practices and cost-saving innovations" (-> read IT). But IT spending has slowed down: in the 90s it was growing 18% against 5% growth in the last decade.
Let's have a look at IT stocks:
As you can see, aggregated earnings of the IT sector is higher relative to other non-financial sectors (we want to neglect banks because of the bias of the financial bubble). Although we have to admit that IT earnings are also biased due to Apples astronomical profits, which cannot continue forever (as an analogy remember the "grain on the chessboard" tale). Nevertheless, IT stocks are attractively valued historically:
I guess we all know the story of the still indebted consumers in the US and the miserable fiscal situation of almost all developed countries, which can spoil the party. Especially, in light of the consequences of demographics in many countries (ageing population). Another serious threat to growth is not often discussed: Middleclass with less money to spend in the US...
Populist politics will hurt growth, should this economically and politically unsustainable situation persist. My guess is, that it will be much less messy if dealt with early...
