Each morning around 7.30am, my black lab Jet and I walk to our local park. For the last few weeks, Jet has become friendly with a male Staffordshire bull terrier. I called him Two-Balls. He always has one tennis ball in his mouth, but for the last 10 days or so he has managed to find another, no doubt lodged deep in the grass from some errant volley from the nearby tennis court.
Yesterday Two-Balls became Three-Balls, as the dog struggled to get the one ball he brought to the park together with the two balls he found in the park, into his jaws. Not an easy feat, and not one that will be surpassed, I would judge, no matter how many more balls he finds.
I think Two-Balls is like Spain. Spain started off with two problems: firstly a building development asset bubble, and secondly a currency it could not control. Spain took both of these ‘balls’ into its jaws and tried to hold onto them with austerity. Within months, it found another ball: declining economic activity and concomitant unemployment. Spain picked this ball up too. Now with three balls in its jaws, Spain has to deal with corruption. It can’t pick another ball up. Within 12 months, another ball will be found in the undergrowth: unemployment pay will cease for those who have been unemployed for two years (and peddling their services on the untaxed, unregistered market). Three-Ball Spain will need to be Five-Ball Spain – and it isn’t going to work.
A similar analogy for Portugal, Greece, Italy and possibly France is in the making. Only significant growth in these economies can stop the balls being found in the undergrowth. In the UK, we’ve only got the one ball: we’re still not earning enough to pay our bills and thereby are accumulating too much debt. A positive attitude seems to be enveloping our media and, buoyed by beating the Aussies yet again in the Ashes, this attitude may yet help the UK on the road to growth and a balanced budget, if Europe does not stifle it. Retail sales are up 0.2 per cent in June; inflation has risen to 2.9 per cent (devaluing issued debt); government borrowing is down and tax revenues are up 15 per cent. Things are moving in the right direction.
Meanwhile, poor China is struggling. Forget the government growth statistics, just consider this: China’s crude oil imports fell in the first half of 2013. This is the first first-half-year decline since the financial crisis in 2009. The decline in oil imports was 1.4 per cent half-year on half-year. It compares with a 7 per cent rise in 2011, an 11 per cent rise in 2012 and a 3.8 per cent rise predicted by the International Energy Agency. Imported oil provides for approximately 60 per cent of China’s consumption. Add to this the bad debt and liquidity crisis faced by the domestic lenders in China and the Chinese are at the Two- Ball stage. You can forget the idea of 7.5 per cent growth this year for China, no matter what is reported.
The US remains a haven of growth in the world. Low-energy prices continue to win the tide against monetary tightening both real and predicted. Interestingly, the out-turn of production from shale reserves is looking somewhat different to what was predicted, with a 28 per cent decline in recoverable reserves in the first year being seen. The likely impact of this is said to be shortening the impact of new finds to one generation. It will still see me out.
I note that other countries, not least of all the UK and China, are trying to reproduce the same injection of life into their economies. They will not succeed in the short or medium term. The expertise and indeed the rigs are simply not there. They reside in the US where the comparison mooted this year is in the order of 400,000 wells drilled versus 400 in the rest of the world.
Against this background, let’s look at the future: the internet. The US has the largest percentage penetration of internet, 78.6 per cent of its population are users and growth still continues at double-digits.
It is Asia that has the best future potential for growth, however. Penetration is only 27.5 per cent and there remain 670 million people to connect.
From the UK’s perspective, growth continues. In May this year, average weekly spend online (UK government statistics) was estimated at £582 million, up 15.3 per cent year on year and constituting 10.3 per cent of all retail sales excluding auto fuel. IMRG estimates that the total UK online market in 2012 was some £78 billion.
In the gun trade, there are legal restrictions on selling over the internet. These exist in different forms in the US. Despite this, in a recent study of federally licensed firearms retailers it was estimated 28.3 per cent sold some guns over the internet. In the UK, there are now shippers who are Registered Firearms Dealers who can legally transport and complete the legal requirements of a sale.
Increasingly, retailers will be forced to embrace the sale of guns over the internet. It is essential that all retailers have the ability to sell unlicensed products and prepare the way for dealing with every product over the internet. Similarly, distributors need to improve their systems.
Eventually, I can see that retailers will take orders from customers, distributors will ship goods in direct fulfilment of orders and remit the retail margin to the retailer who was the ‘source’ of the order. Licensed goods may be handled by licensed shippers or delivered direct to retailers, where the customer picks up his gun and shops for ammunition and ancillary items. This brave new world is already in creation. Look at the growth, look at the penetration, and you will see that you must participate or risk being left out and left behind. The current economic climate is causing this process to accelerate. Do not delay.