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James Hong

Thursday, September 24, 2009

Hallelujah

Julian Robertson (founder of Tiger Management) talks about our economy. He gets it dead on. In order to even possibly recover, the American public needs to demand politicians for pain. Unless Americans understand that we can't have something for nothing, and the lifestyle we've become accustomed to over the last 30 years is NOT what we deserve nor is it sustainable, we and our US Dollar are going to be toast.

Unfortunately, I am not particularly optimistic about spoiled children realizing they are spoiled and asking their parents for more discipline. When does that ever happen?












9 Comments:

Anonymous Patrick Shyu said...

I like your insights.

Do you have any recommendations for how to invest for the bear scenario? I'm a bit of a beginner in stocks, but I'm thinking of GLD, which is supposed to perform well in both deflationary and inflationary situations -- but it's quite high at the moment. There are also ETFs that match foreign currencies, along with energy perhaps as a good option, or FXI.

btw, your world blog's comments section seems broken, for me at least. And I checked out the EXIF data on your photo, and noticed you're using a powershot. I highly recommend doing yourself a favor and getting a DSLR camera (like the Canon 5D Mark II, or the newest Canon 7D, or Nikon D90).

9:08 PM  
Blogger james said...

Patrick,

Gold is great in inflationary times, not great in deflationary times. Nothing is ever guaranteed to always go up, if you think it is, check your math! :)

GLD is ok, although there is some doubt out there over whether it is possible that they are physically storing as much gold as they claim to be. some people prefer perth mint (who others have similar doubts about) or physically redeemable ETFS (usually swiss). The only sure way to feel 100% comfortable about your gold investment is to buy it yourself and bury it in your backyard.

Foreign currencies are interesting, although there are some right now who don't trust ANY fiat currencies. At least in the short term, there are also many who believe the dollar is set to rally after being beaten down.

FXI i am personally a bit wary of. I love china, but there are many who believe their markets are a massive chinese govt funded bubble. Recommend you google and read Michael Pettis on that.

not sure what is wrong with comments section.. you seemed to comment just fine?

as for camera.. DSLR's are too bulky for me, i prefer portability to quality.

10:30 PM  
Anonymous Anonymous said...

please..
This is just another scare the American workers, this time using China.

Should we really give China so much credit for having low debt or just recognize that no one wanted to lend to them for so long.
The US debt/GNP ratio is in the middle of the pack of nations. Your grandkids will live in a world where the US is the dominant power. Ask yourself, why doesn't China have a decent Navy? a top 20 university? clean water/air? a balance of men to women? China already rules one third of the world and that is a lot on their plate. They aren't taking over anytime soon, and they don't want to. And the idea of wealthy people driving US into debt and running off to China? Not if you have kids and don't like ransom.

US workers are so bad? Why don't American car brakes or steering fail? Mngmt sells the car, then sells the parts, and thats the workers fault?
Russia, Japan, China. Capitalist never run out of ways to scare US workers.

11:18 AM  
Blogger james said...

Whoever you are, anonymous, you certainly need to catch up on your data. The US has top universities huh? Count the number of US universities in the top 20 of the International Collegiate Programming competition IBM puts on ever year.

China has less debt because they are the ones LENDING.

A whole lot of what you wrote is outdated thinking, living in the past. It's not really that these other countries are that great, the problem is that the US has gotten so soft.

As for cars, if the US made good ones, our auto industry wouldn't be in the predicament they are are in. Within the auto industry, it's accepted as fact that the japanese make the most reliable cars. Did a quick google, if american cars are so great, why did not one car break the top ten of the reliability index listed here: http://www.usatoday.com/money/autos/2008-10-23-cr-reliability-ranking_N.htm

1:01 PM  
Anonymous Anonymous said...

outdated? this was printed last month:
http://www.foreignpolicy.com/articles/2009/06/22/think_again_asias_rise?page=0,3

China doesn't have a top 20 university. Who cares WTF a contest shows. American programmers don't need to enter those contests and the best have better things to do.

You completely missed my point on the brakes/steering rarely fail in American cars. ever hear of "planned obsolescence"? The car engines were poorly made on purpose, so the auto companies could sell the parts. Did you know GM owned major shares of Toyota? It was a scheme to build Japan and break the unions.

I understand pride in a rising China but have you thought about why China has a navy with 1/100000 of the firepower of the US? It is because China itself is not arrogant. They know they need the US more than the US needs them and the US decides the value of those dollars owed to China.

What, you think the US can develop the atomic bomb, go to the moon, rebuild Europe, get its troops into 130 countries and yet this great "empire" will fail because it can't figure out how to close it's west coast ports?

puuhlezzz!

China was made a banker so that now they cannot hurt the capitalists without hurting themselves. See Saudia Arabia circa 1977.

Is my view outdated or is your view canned and packaged just how your professors told you to see things?

12:53 PM  
Blogger james said...

1. I was born in the United States, and my parents are from Taiwan, and they are not fans of China or reunification between taiwan and china. So there is no "pride in china" here. I'm an American, and have no sense of identification with China whatsoever.

2. Re the article you sent.. Have you looked at the composition of the graduate student bodies in the engineering and science departments of OUR top universities. A large chunk of them are from abroad. (And we stupidly try to throw them back to their countries after they graduate).. In reality I think a big reason the US is headed downward, besides our irresponsible spending and leveraged lifestyles, is that our moronic immigration policies that try to keep smart people out.

3. All of the great things you mention America doing are indeed colossal achievements.. I do not dispute that America has been a powerful and amazing country, that is of course why my parents came here. But everything you list as great was achieved by PREVIOUS generations. Much like wealthy entrepreneurs have their wealth destroyed by the 3rd generation after them, we are living off inherited achievement.

4. To the best of my knowledge, and I would like you to show me the data if I am wrong, GM does not own any interesting share of Toyota. They did open plants together in the US, such as the famous NUMMI plant which just shut down. Even if GM did own a large share of Toyota, I do not see how that would be relevant. It may be the case that American companies intentionally created crappier cars just to improve profits by selling more replacement parts, but if that is true, that is the most short sighted strategy one could ever think of. Come to think of it, it would not surprise me if it was true. That's yet another big problem our country has.. CEO's of our largest companies are compensated by the market based on short term achievements, so nothing is done for the long term. At some point in time, American cars were dependable and people were willing to buy them. You can only fool people with shoddy product for so long before they stop buying.

5. The ACM programming contest matters in the CS academia world. All the top American Universities DO enter the competition, and frankly, we used to dominate the winners list. My point is that the trend has been for america to drop OUT of the winners list (but we do participate in the contest, mind you), and other countries are now coming out on top. The trend is that their education systems are better than ours. If you didn't know that, then you are really living in a cave, my friend. You see, the problem is fundamentally that our country pays too much attention to where things have been and where they are, and not where they are headed. I'm concerned about the future, and in that case, trends are what count.

6.The US does not control the USD/CNY exchange rate, China does.. In fact the US is always badgering China to change it, which they finally started doing a few years ago.

In the same way the US had massive power over the UK govt back in the 50's when we threatened to dump the pound if they did not do as we wanted, China now has the same power, which they refer to as their "nuclear option". You think if China started dumping their treasuries, all hell would not break loose? Yes, it would have some negative impact on themselves, but China has never been a country afraid to cut off it's nose to spite the face.

7. Finally, to answer your question, yes I believe your view is outdated. Professors in business school hardly tout my viewpoint, in fact they arguably perpetuated the idea that things were fine. Heck, they even still teach the concept of Efficient Markets, which most of them don't even actually believe.

Jingoism is a fine thing until people become blind to the facts, believing what they want to believe. As the gap between our viewpoints is gigantic, it is clear that you will not convince me and I will not convince you. Only time and the markets will reveal the truth.

1:31 PM  
Anonymous Anonymous said...

Taiwanese and you say Americans are a nation of spoiled children? Well, well, I'm gonna let that go but 1 billion people just spit out their tea.

China controls the exchange rate in short term via manipulation. US controls value of the dollar via inflation, hence the US controls the value of the debt.

You may also find this interesting:
http://en.wikipedia.org/wiki/List_of_countries_by_public_debt

US debt is not "out of control" like the wall street poker players would like you to believe. They want "free markets" and "free trade" (both a bunch of BS) and high rates so it is easy for them to make money selling out the average Joe. Too bad. It is time for the fat cats to suffer.

Obama rocks, re-puke-in-cans sux.

America is still achieving great things, it is just that it requires a little effort to understand what they are because of increase in technology.
Genetic Eng. /Hubble / Internet/ etc. etc.
spend a little time here and you will see what I mean:
http://www.pbs.org/wgbh/nova/archive/int_tech.html

As a Taiwanese American you could do a lot to help both US and China grow. Calling American's "spoiled children" isn't going to help.

11:13 AM  
Blogger james said...

I don't know why you keep addressing my heritage. I was born in the States and have no ties to China OR Taiwan. The fact that you keep bringing it up even after I mentioned this point is kind of weird, like you can't let go of it or something.

If the velocity of money was more than zero, than you would be correct that the US would be in control of the rate via inflation/deflation. At the moment, the US is so concerned with preventing a total collapse of the system, that I think foreign exchange rates are the least of their concerns. The dollar is devaluing at a nice rate though, clearly seen in any foreign exchange rate graph over the last 6 years. In any case, it is not clear what is going on with the dollar right now. Half the experts think deflation, half think inflation, and nobody knows what to make of devaluation given many other countries are in deep shit right now too.

As for national public debt... the numbers given I do not believe accurately reflect our true obligations. When you include the amount our country has promised it's citizens in the form of Medicare A, B, and D, the debtload jumps to 56.4 trillion, which would put us at #1 on that list, above Zimbabwe. Pete Peterson, founder of Blackstone, has a foundation trying to explain this: http://www.pgpf.org/about/nationaldebt/

It's worth a look.

I have no doubt that many great things are being done in America, still today and in the future. The question is whether that progress will be enough to bail the rest of the country out from the massive debt load.

2:03 PM  
Anonymous Anonymous said...

If you are going to count our future obligations then you have to include the future obligations of all the other countries as well. Putting us right back in the middle of the pack.

It's nice that you probably understand that anti-christ; Milton Friedman, at least I cannot accuse you of glen beck-enomics (for low IQs only). However, a drop in the velocity of money just provides more ability to rebuild America's infrastructure and reorganize inefficient industries such as healthcare. But that requires the doom-syers to STFU about "government cannot do anything right" and let Obama get to work. Who do they think built the infrastructure in the first place?

The reason why we don't have national healthcare is because the capitalists want to have a ready and angry army and a "lets not rock the boat" workforce. How come we can afford troops in 130 countries but we can't provide healthcare for the middle class?
Unfortunate for the genetic unluckies and the car crash victims, this is one more reason why the US will still be dominant 100 years from now. Its a capitalist empire, not an American empire and America is it's number one military base.

But this is our times. Fine. Try to find a way to use your capital usefully and maybe you will build something beautiful. Its easy to run away to an island. Much harder to stay and build when so many want to tear down.

4:36 PM  

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