Market Dynamics

As a side effect of working for a start-up, I have lost track of paying closer attention to the stock market. Ofcourse, my daily ritual of glancing at the yahoo-finance-portfolio list (created a decade back) still goes on. I was watching this movie "Vitus" where this prodigy kid makes a lot of money in stock-market. It is a pretty good movie to watch, not much for the stock market part though, but for the musical scores. It has very amazing pieces and I like watching movies about genius kids, however fairy-taleish it is. Anyway, that created some interest to look at the stock market. And, the bad news is that, technology sector isn't doing very well...:(.. Well, it is not totally bad. But, the sub-prime fiasco and energy pricing coupled with weakening dollar, all have an effect which tends to push things to the negative side. Energy and Agriculture sector remained highly profitable last year and is expected to grow next year too.

With the oil price hovering over $100 a barrel, what is the implication? With the US dollar weakening, gold is a definite bet (would have been a great bet if you had bought some last year...procrastinating husbands and "contented" wives have been hit badly..:)). In developing countries like India, the inflation is surging beyond control and gold is definitely a great insurance to safeguard the value of money. Gold has rose to 867.9, compared to about 650 per ounce a year ago. Also, asian countries like India and China have started consuming more energy which keeps the demand for oil higher than ever. With oil price surging, alternative fuels which laid in the borderline cost is surging. Corn based ethanol production is becoming more popular. So, corn production is soaring. Not only that, the corn production is competing with other agricultural products too. More and more agricultural lands are used to grown corn than other agricultural products... After 50 yrs of tinkering with nuclear energy, I wonder why it is not ready for primetime...Is it the dirty politicians or the oil and gas companies or both?

With more money getting into the pockets of developing countries, the other obvious side effect is that food consumption has increased, which would mean both meat and vegetarian food. Do you know that 34% of the grains grown throughout the world feeds livestock to produce meat? And, the meat consumption has nearly tripled over the past 30 years. With the recent economic boom in asia, it has triggered major crisis for food manufacturers. This would mean that agriculture will be in great demand in the coming years. If agriculture has to thrive, the other industries like fertilizers and machinery for agriculture like tractor manufacturers will see a big demand as well. So, watch out for these sectors. It still isn't late to get into the game. As I always say, technology sector is a multi-sided sword. The competition in the consumer market is almost perfectly elastic that the margin gets shot down constantly. Look at the major products... Processors or Memories or Networking Routers or Display technologies. The trend has been that, we get more integration and performance at reduced cost. Imagine buying a 1GHz processor 5 years back versus now or a DVD player or a digital camera (comparable) or a HDTV...Prices have slashed down.. On one hand, this brings an organic demise to the margins. While this being the case for hardware, the software side doesn't paint a very rosy picture as well. Open source community is getting more and more stronger and sees wide spread adoption. The freeware applications are getting more and more robust. Companies like google love to give out stuff for free to attract more subscribers to their advertisement umbrella. Well, that's a topic for a different blog. Just thought of presenting a snapshot of the market dynamics that gravitated my attention...Any thoughts...