May

24

Listening to CNBC I discovered that my substantial cash hoard existed not out of sound judgement, but was a residual effect of the beating the market has taken twice over the last decade. Once I, and others like me, shook this fear the market would skyrocket. Although I still hold substantial amounts of cash, the "others" jumped in and have powered the market higher. Same CNBC individuals now classified this development as the result of "the dumb money" moving in and, hence, a good time to "take something off the table." Dumb when you're in and dumb when you're out– can't win.

I've been reading and hearing much of the "economic miracles" of India and China. Definitely the countries to be invested in for the next century. Both countries feature tons of human capital boasting high academic achievement in important areas (engineering, mining, electronics, high tech). The work force will be kept busy for many, many years as demand for infrastructure, living quarters, and agricultural development surges. Best investment idea: baby girls. Unless much is done to correct the artificially skewed birth rates in each country, the forecasted miracles could well be still-born. Lots of money, a great job, a great home, and much admiration are great. But the essential element is missing and woe unto him who denies it.

U.S. residential real estate will never come back to its one-time prominence. And it's not strictly a matter of over supply due to improvident building and financing. The great middle class, prosperity's sin qua non, is on its death bed and won't be resurrected. Great jobs at great pay for the blue collar class are gone and won't return. "We think and they sweat" is a cute idea but not enough individuals think to support a burgeoning economy. There are plenty who sweat but at wages that dim any hope of a return to multi-TVs, multi-cars, multi-6-packs, and multi-vacations at the shore.

Prices for commodities should no longer be expected to revert to "historical means." Gold and silver are especially attractive to Indians and Chinese who view both with a reverence that stands prudence on its ear. Similarly, the essential food commodities are now the target of increasingly affluent countries which previously had little capital and little desire to possess them. Inhabitants of those countries who still can't afford them (as well as their familiar staples) are now taking to the streets - governments will be forced to find ways to appropriate them.

Current events in the Middle East are being characterized by the media as an "Arab Spring" and the world cheers. Same thing when the Soviet Union broke up. Also when Castro came to power in Cuba. Ghandi in India. Members of the Tea Party: fascists.

Have come across a couple of sources recently (Eric Hoffer and Bill Bonner) who point out that little changed industrially or economically in the world between 1800 B.C. and 1800 A.D. (oops, a PC blunder). Both hypothesize that someone like Aristotle would have felt equally comfortable in either time frame. The years 1800 to 2100 are an anomaly. Both then go on to surmise that we are due for another extended period of turtle-like advances. Sounds like punctuated equilibrium (that should undo the PC blunder).


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  1. Steve on May 24, 2011 9:32 am

    With respect to residential real estate:

    The aging population will have a major impact on this sector. Adults entering their retirement years scale down in homes. They also are reluctant to trade homes. They focus more on security. Thus house trading is becoming less commonplace.

    The fearmongering over social security, medicare, and retirement benefits will make a second home more of a luxury.

    The key to new home sales are jobs jobs jobs. With the current outlook for jobs as anemic at best, there is no bright light on the horizon. Plus, outsourcing of jobs to a global workforce will prove to be problematic.

    The enormous fiscal problems affecting such states as Ohio, California, New York Wisconsin etc. will force once secure public sector jobs to face the same fate as the private sector. In other words, protectionism from unions is fast approaching a critical juncture. Once secure jobs seem less so.

    The defense sector esp the military will contract. There is no current cold war to fight therefore there is no need for such a large military. We are already seeing this at work with the retirement of the space shuttle.

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