A Challenge For Supply-Siders: Name the Industry To Invest In For Next Five Years Answer: Print More Money, And Maybe I Can Tell You

A Benjamin Cole post

The secular stagnation arguments in many ways boil down to a supply-side vs. demand-side joust.

For now, I am on the demand-side: Print more money.

Why? Name for me the industry that is supply-constrained, that needs lower taxes, regulations or more capital to expand to meet unmet demand.

When we look at autos, computers, energy, clothing, commercial real estate, we see again and again glutted supply.

Name a single automaker you would invest in confidently for the next five years—and I believe Ford is a very sharp outfit. Trouble is, there are more auto factories than the globe needs.

If there is an industry that will be supply-constrained in the next five years, I want to know about it. Seriously! I will happily invest in an ETF that mirrors that industry.

For a fleeting few years, it appeared the commodities were supply-constrained. Now, glutted. By the trillions of dollars money has flowed into energy sectors, financing every good, many so-so, and a lot of dubious ventures. There is no shortage of capital in the energy sector, or other commodities. I see gluts for a long, long time in most commodities. Even ethanol is glutted.

A possible exception to the glut rule is residential real estate in limited geographic areas. As widely noted, the most ardent right-winger becomes an anti-growth, anti-capitalist NIMBY-king in their own neck of the woods.

While commercial real estate markets tend to become glutted anyway, residential markets may be supply constrained. Thus we see West Los Angeles homes and Manhattan condos selling for centi-millions.

The solution to tight residential markets is on the supply-side, but also impossible to implement nationally. Every local government in the United States is beholden to (often wealthy and powerful) homeowner groups.

Yes, any successful economy must invest in infrastructure, plant and equipment, education, and promote work ethics and contractual honesty. These are basics, and we all salute.

But when a global economy appears chronically over-supplied with everything…then the problem is on the  demand side.

As I always say, print more money.

7 thoughts on “A Challenge For Supply-Siders: Name the Industry To Invest In For Next Five Years Answer: Print More Money, And Maybe I Can Tell You

  1. The confidence fairies can’t seem to keep up with the unicorns that will keep the economy going and bring the inflation rate up to target while the Fed destroys base for the short term burst of 25 basis points on nominal interest rates. Buy defensive now while relatively cheap and sell ’em to the people rushing for the exits when they figure out low interest rates doesn’t equal easy money. But maybe that strategy doesn’t really qualify because you won’t need to wait 5 years to cash in.

      • Sorry for the confusion. I got carried away being snide toward our friendly neighborhood FOMC’ers. It’s a habit I’ve developed over the last several years; the temptation is rather overwhelming and I succumb to it nearly every time.

        At any rate, no rate hike should be served before its time – and until then, “Print, baby, print!”

  2. Mr. Cole, I thought of infrastructure, maybe transportation infrastructure, new roads, etc. I don’t live in the US, but I have seen a few articles from top commentators stating US transport infrastructure needs investments. And water in California? health care ? I am no expert, but everybody seems to complain that healthcare is expensive in the US, so, it could be that health care industries could benefit . Also, technology, the current microprocessor paradigm is reaching its frontier in terms of miniaturization, we need something new !!

    • Mr. Robazzi! Nice to hear from you.

      Yes, you are correct, U.S. transportation infrastructure could be improved—but the market will not supply that; it has to come from the public sector.

      Healthcare is a vexing industry, and we could write books about it, and still come to no conclusions. It is an area where ethics and morals confound markets.

      If smaller and better computers can be commercialized, they will be. I am confident there is no shortage of talent and money that sector.

      • Why transportation infrastructure has to come from the public sector? Why not create a bunch of toll road concessions ?

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