Damming Technological Innovation


You’ve probably had your fill of news about the Greek default. Will they? Won’t they? Are global markets going to implode? Is it time to load up on gold? These are good questions, to be fair. And we’ve spent a fair bit of electronic ink writing about it ourselves here at Port Phillip Publishing. So I won’t labour the point today.

The only reason I bring it up, really, is to point out what a tiny portion of global wealth Greece represents. And what a disproportionate impact this possible default ‘crisis’ is having around the world.

To give you some hard numbers, Greece represents less than 2% of the EU’s GDP. And, according to Trading Economics, only 0.39% of global GDP. Yet every time there’s even a hint that Greece may default and leave the euro, investors panic.

As you can see from the action on the Dow Jones over the last month, this leads to the herd selling hard one day, only to buy back the next when it seems a deal will be reached after all.

Source: Yahoo Finance

Click to enlarge

In Aussie dollars, Greece has about $354 billion of outstanding debt owed to the international bailout fund. And the most recent repayment they missed amounted to a miserly $2.2 billion. (Which gives you some idea of how long it will take to pay off this loan.)

Yet, as Bloomberg reports, on Monday the spectre of a Grexit shaved $91 billion off the world’s richest 400 people.

The world’s 400 richest people lost a combined $US70 billion [AU$91 billion] on Monday as equity markets around the globe were hammered on fears about Greece and declines in China fuelled debt-laden investors exiting the market.’

OK, so China’s partly to blame. But Greece was undoubtedly the trigger here.

The proverbial person in the theatre yelling ‘fire’, causing a rush for the exits that saw 400 people lose a combined $91 billion. That’s more than a quarter of Greece’s total outstanding debt. And more than 40 times the amount of the missed payment.

Maybe these billionaires should have gotten together and chipped in the $2.2 billion themselves.

But enough about Greek politics already. Let’s have a look at what our politicians have been up to closer to home.

The Nanny State strikes again

Have you heard of a Palcohol? It’s powdered alcohol, the brainchild of Mark Phillips in the US. Think of it as powdered milk…with a kick. All you do is add water and boom, you’ve got rum, vodka, or one of several flavoured cocktails.

A privately held company called Lipsmark owns Palcohol. Unfortunately that means you can’t invest in this revolutionary idea. And in a statement on their website the company reveals they have no plans for going public anytime soon.

But at least in the US you can sample it. Not so here in Victoria, or likely the rest of Australia once the other states have a chance to review this worrisome new substance. (The federal government has deferred the matter to the states.)

Here’s this from The Age:

From July 1, powdered alcohol is banned in Victoria over concerns of its misuse and abuse… the Victorian government has concerns it can be snuck into venues or music festivals… authorities are concerned about the potential for misuse, particularly among young people…. Minister for Consumer Affairs, Gaming and Liquor Regulation Jane Garrett said… it had the potential of being misused and could be consumed in unsafe and inappropriate ways.’

That’s great. I’m sure campers and hikers would much rather lug the liquid form with them rather than just adding water at their campsite.

Thank you Jane for having our best interests at heart…or at least the best interests of the liquor companies. We wouldn’t want to introduce anything as disruptive, innovative and potentially useful as a powdered form identical to an existing liquid alternative.

And thanks to all involved for adding another burdensome layer of legislation to the existing rulebooks. Another law to clog the courts and distract the police from preventing and solving real crimes.

You’d think our legislators would do a spot of homework before ramming through yet another grandmotherly law. Like their concern that ‘it can be snuck into venues’.

First, this hardly seems reason enough to criminalise it across the state. Second, this was the same faulty argument already refuted in the US. According to Lipsmark’s website, ‘A shot of liquid [pure] alcohol is 1/4 the volume of a shot of powdered alcohol so it’s much easier to sneak liquid alcohol into venues.’

And you have to wonder why legislators always bring the ‘young people’ into their arguments. Should any government really initiate sweeping laws based on the worst case scenario of what a few of its most foolhardy teenagers may do? Talk about a lowest common denominator.

Finally, how long do you think they spent debating the other possible applications this innovative new product could have? Such as using Palcohol as an antiseptic in remote locations where liquid alcohol is more cumbersome to transport. Maybe that’s one of the ‘inappropriate ways’ they fear it can be used.

Speaking of innovative, revolutionary ideas

After reading about this new ban, I fired Sam Volkering an email to get his thoughts.

In case you don’t know, Sam’s the editor of one of our most cutting edge financial advisories, Revolutionary Tech Investor. He spends most every wakeful moment researching the companies developing tomorrow’s breakthrough technologies. Companies that can see their share prices soar when their tech is successful.

Here’s what he wrote back this morning:

It feels like the state (and country) is run by a fifth grade maths teacher. And in terms of quashing innovation, the Aussie government only spends about $9 billion on R&D each year. To demonstrate how low this is, Volkswagen (just one company) spent US$12.87 billion on R&D in 2014. And what really gets me in a tizz is the fact the federal government wants to scrap $810 million in R&D tax breaks.Enough said.

Did you get that? Volkswagen spends AU$16.9 billion a year on research and development (R&D). That’s almost $8 billion more than Australia.

Without adequate time and funding spent on researching and developing new ideas and new technology, you’re just not going to get ahead in the modern world. And that’s as true for countries as it is for companies.

For example, one of Sam’s recommendations in Revolutionary Tech Investor bucked the recent share market sell off. On Tuesday the stock’s price rocketed to close the day up 35.5%. Why did that happen? In Sam’s words:

I’ll give you a heads up, it’s got absolutely nothing to do with Greece. You see [this] is a revolutionary technology company. And…they’ve just achieved another efficiency milestone. They’re the perfect example of how even a global economic crisis can have little impact on a company that’s breaking new ground. If you’re a great company, with great tech and make a significant breakthrough, nothing can hold you back!


Bernd Struben,
Managing Editor, The Daily Reckoning

Ed Note: This is an extract of an article originally appearing in Port Phillip Insider

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Bernd Struben

Bernd Struben

Bernd Struben is the Managing Editor of Port Phillip Publishing. Bernd has worked on four different continents, and has more than 20 years of professional finance, editorial, and management experience. He holds a degree in economics.

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1 year 3 months ago

If investors are wary of what happens in Greece then it would be interesting to see how they react to a problem with one of the larger economies.

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