Monday, October 20, 2008

Fixing the Economies of China & U.S. They're not that Dissimilar

Yes, China could benefit from a good healthy dose of minimum wage, decent working conditions, pollution controls, code enforcement, intellectual property law enforcement, food quality control, and soon to hear about prescription drug production quality regulation. Yes the United States could benefit from a positive savings rate, lower consumption of everything China makes at the cost of the detriments listed above, a higher investment in more productive education system, among other things. The economies as defined by the people in it and their personal wealth are in a nasty situation with very similar solutions dispite our differences.

China has amassed huge savings as a nation and as individuals relative to their income. This money has been "socked away" in the greatest game on earth - The full faith of the U.S. government. But soon the largest holder of our debt will realize that our spending which as fueled the savings buildup can no longer be as efficiently re-invested by buying U.S. debt.

A couple of MBAs directed by a monkey would likely realize that investing even just the new money from what will stil be a 2009 trade surplus from China's standpoint into domestic infrastructure is the surest way to set the stage for continued 9% growth. Investment in infrastructure, especially first world high technology infrastructure, such as high speed rail, clean energy, automation technologies, and people infrastructure through education will produce steady growth, avoid inflation through technology advances, avoid pollution, and set the stage for net imports to reciprocate on U.S. trade.

On the flip side, the U.S. needs to invest in exactly the same things. We've tried the route that involved selling higher returns to other countries and the game's up. We've already given the low-tech production to China and others, so high-tech is our only hope. Investing in clean energy is just smart from an energy diversification standpoint, and our education system's world rankings speak for their own need of improvement.

So, time for a game change. Sharing these goals will speed the goals and prosperity, but we've got to realize that excellence in the new world is going to require everything that the old world required - only applied to new problems of this century. Its cooperation, drive, competition, and respect - among nations. If we can accomplish this, we'll have accomplished the dream of capitalism which isn't the transfer of wealth in a one-way direction, but the recycling and diversification of wealth to create more wealth and protect that which currently exists. If we don't, we'll have cemented the future which involves the re-pricing of past assumptions of value based on what has recently been discovered to be a largely flawed system of wealth. This alternative would be a no-win situation in which the only winners are those who sell us energy which we buy at a rate equal to our residual wealth and deplete likewise. American's have not much more room to deplete before they quit and take the rest of the world down with them. Let me be clear - the world cannot exist on just America's weekly paycheck - they need it plus the future assurance that ours and other country's paychecks will become bigger. Without that - no growth and no future.

Wednesday, October 15, 2008

Fox Business News & Cramer

In case the "fair and balanced" slogan and Bill O'Reilly's rants didn't flag you that Fox News is total rubbish, maybe their ads on CNBC trying desperately to discredit Jim Cramer and CNBC at large will clue you in, but only if you watch both.

I watched a commercial which GE (CNBC's parent) collected money (smart) to run on CNBC from Fox Business News to what amounted to a mud-slinging ad against Cramer an CNBC. If you ever were fooled into thinking Fox was balanced - this is like Carl Rove and mud slinging let loose on a whole new arena! Money wasted. If you're a blind republican who follows Fox then you didn't see the ad, if you're a CNBC watcher you probably laughed, because the advertisement said Cramer got Wachovia wrong (one pick of hundreds he does weekly) - the ads aired after he remonstrated himself about the whole thing.

More importantly - Cramer himself says that you shouldn't blindly follow his picks. Is Fox claiming that if you watch them you'll do any better?

Most importantly - an admission of defeat is that Fox Business News needs to spend money on a rivals network to try to steal customers. Quite a pyrrhic victory and demonstrative of a network feeding on the atmoshpere of the last 8yrs and not the next.

Keep recommending large cap losers FNB - and keep sending money to GE please!

Monday, October 13, 2008

A Flashback to the Future - Its Energy!

Don't be fooled by the unwinding of energy trades in what was the worst year since 1933. Don't let it cause you to forget the prices you saw at the pump or of the USO or Natural Gas. Don't forget because one thing hasn't changed, just the date of arrival - Oil prices will go back up. Natural gas prices will go back up, they have to.

The law of numbers is on the side of energy. More people is just the start - more cars, more lights, more plastic containers. All the Kool-aid that everyone was drinking is still there. What makes this important is actually recent events - because they've shown you how the future will again begin to play out. None of the risks to global energy supply have subsided and alternative energies still won't be ready or sufficient to handle the probelm when people soon wake up and realize that world growth is the problem.

Now all of this sounds quaint, but the most important rider to this argument is that now when the stock market is putting energy stocks on sale, their dividend yields are highest, and their growth in the long run is inevitable.

So, if you've been jealous of the runup and missed the first prospectors showing you a glimpse of the future of energy markets, take this time to establish a profit base from their excessive greed in bidding the markets up.

Here are a couple, all at attractive levels:


Now for a reality check - going into a recession where would you rather put your money? I'm not betting on the financials as they become more regulated and consumers remain frugal in the face of recent debacles. Risk taking will again be taboo. The only low risk thing I see is collecting 5-10% dividend to wait for more people to be born around the world, more cars and lights to increase energy needs. these and other energy stocks might just be the last "buy and hold" stocks left.