Summary: What is capital? Strictly speaking, capital is the stuff that businesses use to make money. Factories have machinery and robots to fabricate their goods; builders have tools and trucks to construct with; service organizations invest in people and processes to provide legal or financial or personal services. Capital is what makes an economy grow, and access to capital--physical or intellectual--is what allows people and nations to become wealthy.So it's encouraging when we see analysts call for a capital spending boom. During the recession spending on capital goods--the physical kind--collapsed, as all spending did. Since the economy bottomed, real capital expenditures have grown 20%, while the average for the past six recoveries has been 30%.So there's a lot of potential for improvement. Now it's true, the weakest areas of capital spending are for structures--natural, due to the bubble-fed overbuilding--and for IT equipment--which may be due to technological improvements. But if spending on research and development and industrial picks up, that could have a multiplier effect on the economy, as capital improves productivity which improves earnings which allows for more capital spending.It's another way the global economy is poised to accelerate. During a downturn, demand may be deferred, but it won't be denied.Douglas R. Tengdin, CFA Chief Investment Officer Hit reply if you have any questions—I read them all!Follow me on Twitter @GlobalMarketUpddirect: 603-252-6509 reception: 603-224-1350www.chartertrust.com • www.moneybasicsradio.com • www.globalmarketupdate.net
