Monday, September 22, 2008
Amurica
And listen you simpleton. I am not betting against America. I am betting against America growing quickly enough over the next five years to justify current valuation against the backdrop of a crippled credit market. The interventions aren't allowing stocks to get cheap enough (again see 1992 and 1980) to be excited about. Hide in canned goods.
Steroids
So in sophomore year of high school, Anthony Grimaldi and I were neck and neck on the bench press. Call it 4 sets of 4 with 215 or so. After Science got involved, by junior year he was benching almost 500 pounds. To be clear, that was then more than I could. How strong would Anthony be without steroids? We couldn't know until he stopped using them.
My point? Try to get a f-ing loan. You can't. What is something worth? It's worth what people can afford to pay. If Americans can't borrow from their home in order to afford to buy that second bucket of rubber dog sh*t from the Chinese company that makes it from rubber from Brazil, what is the state of the global economy? Yes, exactly, you have no idea. That's why decoupling (the US can go into recession and the global economy can be carried by emerging market strength) is bull. Read that new Soros book if you really want to scare yourself.
Oh and by the way...
A lot of people are gonna tell you to buy economically sensitive commodities. Here is why not. Our government is pissing on itself to avert the Great Depression Part Deux. We are the biggest economy in the world. See above "economically sensitive". Yeah you get a boost from our government printing dollars (dollar down, dollar denominated commodities go up definitionally). However, they are doing this because the US is staggering...and de-coupling of the global economy from the US economy is a myth.
So buy that non-sensical worthless metal, gold...because it fact it is used for nothing useful, other than Italian horns around the necks of Staten Island's best.
So in fact, this market blows..
Stop watching the Fidelity commercials people. The market isn't cheap. Investing for the long term is only a good idea, by the numbers, when the market is cheap. We're at least 20% above the typical valuation of a bear market trough. Look at 1992 (12 P/E), 1980 (sub 10 P/E). The credit crisis is not masking the fundamentals. The credit crisis is inextricable from the fundamentals. We have no idea how fast (or if) the global economy can grow without cheap money. Hedge funds bought stock with borrowed money, from companies funding their growth with borrowed money and buying back their stock with borrowed money.
Byron Wien had a good point. When he got started as an equity analyst, they typically made as much ching as a good doctor or lawyer. The divergence that began in the 1980s has gone so far, it's impossible to know what the financial industry will look like in five years. Not a lot of great things can happen while the financial industry finds itself, much like a high school grad travelling Europe and smoking weed is unlikely to find the cure for cancer. You dig?
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