The world economy has experienced several systemic shocks relatively recently–and they weren’t the ones that might initially come to mind.
Todd G. Buchholz, chairman and CEO of Victoria Capital Management Fund LLC, identified speed, “scissors” and people as contributing to lasting changes in the way the world economy functions. By speed, he meant the rate at which data is transferred and the rate at which both consumers and markets react to new information.
Buchholz recalled one instance in which his company anticipated that the Euro, the pan-national European currency, would fall against the dollar. His company placed a large order to sell–only to watch, moments after the order was given, the Euro rise.
It turned out that a low-level Wall Street trader spread a false rumor that the chairman of the Federal Reserve Board Alan Greenspan had been in a car accident, and before the rumor could be debunked, world currency market had reacted.
“We have to be able to adapt to most dramatic changes in thesmallest amount of time,” Buchholz said. “When Alan Greenspan turns on a microphone, I hold onto my wallet.”
The rise of the scissors economy lead to the removal of the middleman–and a removal of the margins that went into the middleman’s pockets from the cost of goods and services. The travel agent industry is an example. Travel agents that don’t provide value-added services are being squeezed out by direct-to-consumer booking arrangements.
“This economy has no patience for dilettantes or part-timers,” he said.
As for people, Buchholz pointed out that changes in population demographics or lifestyles create marketing opportunities. There are currently more golf courses in the United States than McDonald’s restaurants, he said.
Buchholz believes that the economy will break out of its current doldrums, thanks to the current lower interest rates and the rising Euro. The stock market will eventually become “jaded” to revelations that companies cooked the books, and will no longer factor their malfeasance into its fluctuations, he said.
Buchholz, who has served as an economic advisor to President George H.W. Bush’s Administration, as well as the Soros Fund and Goldman Sachs, made his comments during Monday’s opening keynote address at the National Center for Database Marketing Conference.
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