For many decades, the IT sector was the goose that laid the golden eggs of US fixed investment, with CapEx spending on IT rising as a percentage of GDP every year since 1954: after all spending on improving overall efficiency and productivity seemed like the ultimate and best CapEx investment (at least before Bernanke's ZIRP came along and made dividends and stock buybacks the only excess cash allocation option), where compounded CapEx investments would generate returns orders of magnitude higher than the allocated capital. Or so the thinking went until the Internet boom. As can be seen on the chart below, the advent of the "next big thing" in IT (sorry, not iPhones) - Cloud Computing - may well have been the next step function in IT investments, but due to the decentralized nature of the high-capacity broadband and high levels of utilization, may represent the first time in the past 60 years of US economic history, where incremental investments in the Cloud will no longer be GDP "accretive". This can be seen be the lower CapEx spend on cloud in the past decade (2.9%) compared to the GDP CAGR which at least according to official US sources rose at a 3.9% rate.
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So if IT, that primary historic use of CapEx funds, isn't the key driver of fixed income spending in a future in which the tapped out US consumer will be unable to maintain their share of 70% of US GDP allocation, what is?
Alas, that is indeed the $64 question.
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