If I had a simple thesis for a trade for the next decade in the foreign exchange market it would be this: Invest in which ever country makes it easy to build again.
I spent last week in Dubai and it was amazing. Twenty-five years ago there was hardly anything there and it boast innumerable skyscrapers, highways, a metro train and some of the most-incredible projects in the world. China has done the same thing in dozens of cities and throughout the country.
Meanwhile, the developed world stagnates in endless bureaucracy whenever anyone tries to build something, particularly infrastructure. If it gets built, the costs dwarf those elsewhere. It wasn’t always this way but it’s gone way too far and I believe the mood is changing; environmental concerns are going on the backburner.
Take Mark Carney, who I think will be the next Prime Minister of Canada (though probably only for about six weeks as an election will immediately be called). He’s trying to tap into that spirit in his campaign launch for party leadership.
Now I don’t think he’s hitting those notes particularly well but it’s early days in the contest that will run through March. If he goes hard on that theme, I think it resonates.
“Good governments empower their citizens to build great things,” Carney says in his campaign ad.
I think it resonates everywhere but the problem is that the bureaucracy and courts are so dug in that’s it’s extremely difficult to change. Canada’s system shares power federally, provincially, municipally and increasingly with the indigenous population. That’s paralyzed the country and led to a $7 billion pipeline to the west coast ballooning in cost to $35 billion.
It’s a similar story elsewhere in the developed world and often in the developing world where mines now take upwards of 10 years to be built.
So who wins?
It’s tough to bet against the United States. Trump is already trying to use his emergency power for approvals and there are many states on board. The US does have high labor costs though and real estate is expensive but US pockets are deep so higher costs can be tolerated better than elsewhere. The Keystone XL pipeline shows all the ways that building can be obstructed.
I think the mood in the UK is strong around this and I’m hopeful they can move more-quickly on nuclear, for starters. What’s problematic is that London is such a big part of the economy and there certainly isn’t a consensus to start bulldozing neighbourhoods for infrastructure.
Australia is a decent spot for mining so they have at least that going for it. They’ve managed to get into the LNG game and the proximity to Asia has been beneficial. Real estate is terribly expensive though.
Europe might be the biggest opportunity but it’s fragmented. It would be great if someone there could break away and really set a tone. Germans are some of the greatest builders but they’ve fallen so far behind and France is France. Is Italy having any success with a new government?
I don’t have answers at the moment but I would love to see one of these places really go for it — maybe build a planned city or some massive projects. I’d be a buyer of that but for now I’m a watcher.
