False diversification and the U.S. world position

[Wayfare]

While all reasonable investors are diversified somewhat in the stocks / industries they have positions in, almost all of these stocks are usually (in my experience) in U.S. markets. Why are we all so confident that the United States will continue its run of stability and sustained growth? If there is a catastrophic change in the U.S. economy, our "diversification" would be completely hollow. Some points that cause concern.

Biggest ever trade deficit / budget deficit

Foreign direct investment "Bubble"

Long-term fiscal insolvency issues

Continuing target in escalating battle with terrorism

Political leaders with questional ability to handle situation acceptably

The doomsday scenerio is that some event (financial report, scandal, terrorist attack) causes panic in the United States and leads to foreign capital flight. This would lead to dollar depreciation and a loss of purchasing power and ability to pay back our foreign debt.

WSJ wednesday says that while other countries have been devestated by financial conditions similar to that of the United States (in terms of deby and current account deficit) but that the United States is "special" due to its high FDI and position in the world. Today WSJ skeptically asks whether America will be able to sustain its FDI growth indefinately, which has risen from $175B to $700B+ in the last ten years.

Anyone else worried enough to start heavily diversifying internationally? I am.

[parttimepro]

Agreed. It's pretty clear that the dollar has not fallen further mainly due to intervention by foreign central banks (Japan and China). This may continue for some time, but it's hard to conceive of a situation where the trade deficit will fix itself without a weaker dollar.

This does not mean that the dollar will proceed on an orderly path to an equilibrium valuation. Because of the possibility of intervention (either foreign banks buying treasury notes, or the fed raising interest rates), we may see dramatic short-term spikes upward in the value of the dollar.

The easy money from betting against the dollar has already been made. By the time macro-economic trends pop up in popular literature (e.g. Time magazine), it's too late to make great profits. Barring a sudden outburst of fiscal responsibility across America, in 5 years, the dollar will be lower, but it's not possible to make accurate short-term predictions.

As you said, it's a matter of diversification. We don't know what will happen to the US economy, but we shouldn't put all our eggs in one basket. However, simply buying foreign index funds does not distribute the risk as much as you might expect. Most foreign economies are dependent on exports to the US, so a major dollar devaluation may cause a worldwide recession. I think foreign utilities will outperform in this situation, as demand for their products will not be affected much by economic conditions.

[laserboy]

I like the way both of you think! /images/graemlins/smile.gif

Any good investing ideas? Any particular foreign utilities you like? I have been looking at SKM. South Korea is dirt cheap right now and I anticipate their currency will continue to appreciate like a mofo. SKM has great numbers and the Koreans are real power users when it comes to cell phones. They have awesome technology and are making inroads to China, so there is a growth story there as well. It gives a nice dividend too. Of course, their economy is screwed once we have maxed out our credit cards and can't afford any more of their electronic toys, but I have not yet decided how that will affect their cell phone usage.

I am mostly in cash and commodities right now, but I think the time is ripe to go short. A lot of my "hysteria indicators" are dropping like flies (TASR, EBAY, SIRI, TZOO, etc.). I will definitely start opening some short positions if we have another mini-rally. I really want to short the hell out of WPTE.

[parttimepro]

I own KEP right now, Korean Electric Power. Good free cash flow, with potential to grow into the China market. I like it because it can grow with good economic times and be fairly resilient with bad. Looks like the main risk factors are the exchange rate and a big spike in energy costs (which can be partially passed on to consumers).

Haven't looked into SKM. I'm somewhat leery of telecoms, just because they are generally more volatile and more connected to economic cycles. SKM may be different, I don't know. I think South Korea long term has great potential, with North Korea being the big question mark. From a business perspective, the status quo is probably most profitable. War would obviously be terrible, and even a peaceful reunification would likely slow growth significantly in the intermediate term, as it has in Germany. Doesn't look like either is going to happen soon, though.

[ QUOTE ]
I really want to short the hell out of WPTE.

[/ QUOTE ]

Yeah, if nothing else as a hedge against the declining popularity of poker. If the fish tank dries up, I won't be able to make nearly as much at the tables. It's hard to tell how much longer the poker boom will continue. Personally I think the show Tilt is a sign it's jumped the shark. We'll know it's happened when registrations for the WSOP stop going up.

I had read somewhere on these boards speculation that Party was offering these bigger reload bonuses in order to show monstrous growth in preparation for an IPO. If that's true, it's definitely a short/put candidate.

[laserboy]

KEP looks interesting as well. Their free cash flow is not quite as impressive as SKM relative to enterprise value(their capital expenditures and debt are massive), but they are certainly dirt cheap. .46 Price/Book and 4.67 Price/Earnings for a company with more than $1Bil/year in free cash flow... WOW.

The thing I like about SKM is the business model. Their covered geography and population is small and compact with extremely high cell phone penetration rates, so their capital expenditures are small compared to (for example) US telecom companies (the same could be said for Korean electric companies). Their infrastructure is already built out at this point, so in an economic downturn they would be pretty much free to sit back and collect the monthly bills (kind of like AT&T in the old days, when their biggest capital expense was printing and mailing out the monthly bill). This is evident in their high free cash flow and profit margins. Also the Koreans are notoriously early adopters when it comes to technology, so as the leading telecom company, they stand to benefit immensely from emerging value added services like streaming video, gaming, and internet access.

From what I have read, North Korea is in pretty bad shape and the possibility of war is somewhat overblown. I tend to consider "scares" like this as buying opportunities. Of course, I am just a poker player not a foreign relations expert, so don't take anything I say seriously. /images/graemlins/smile.gif

In fairness to Party Poker, they are actually a great business. WPTE is just an absolutely scam designed to cash in on the poker boom at the expense of idiot investors. They are priced like a growth stock that is going to change the world, yet all of their growth is behind them. They produce a mildly successful TV show and that is it. I am convinced that the PPT and WSOP Circuit will actually dilute the popularity of their product at a significant expense rather than add to their earnings. I think its hilarious that they talk about stuff like "WPT branded merchandise" as a growth driver as if their "I have bigger nuts than you" T-Shirts are going to change the world. LOL!

[lehighguy]

Without getting into details you right about the precarious posistion of the US right now. Hell, the whole world is in a precarious posistion. I would split my money even between all the major currencies and some emerging markets. Good ideas on some of those stocks too.

[laserboy]

I definitely agree with you that it's a tough investing environment to be in right now. Warren Buffett has flat out stated that there is nothing out there worth buying. But it's a big world and there are a lot different investment opportunities. It's not all doom and gloom

FWIW, I am bullish on commodities long term and I think we will get to witness the re-emergence of the Chinese empire within our lifetimes.

[adios]

Simple question, how do you know when your portfolio is diversified correctly?

[Dan Mezick]

This link may help answer your question. Short answer: 20 "negatively correlated" holdings are all you need.

Diversification Explained Simply (http://www.investopedia.com/articles/01/051601.asp)

[adios]

[ QUOTE ]
Short answer: 20 "negatively correlated" holdings are all you need.


[/ QUOTE ]

That's not what the article states at all. It basically states that you can eliminate individual company risk by owning 20 stocks. Anyway if your statement is correct then it doesn't matter if I own foreign stocks or not.

[lehighguy]

The idea is that if you hold multiple assets they will coutnerbalance eachother and make your variance lower. Take US stocks and oil. If oil is expensive then the US economy does worse. SO if you own oil futures and US stocks it will help counter balance eachother.

Here is a simple diversification method.

30% US, 20% Europe, 15% Japan, 20% China (my personal bias), 15% Emerging Markets

This will neutralize currency risk a great deal. Now try to hold a mix of stocks, bonds, and commodities.

Stocks: 1/3 Large Cap (big companies), 1/3 Medium Cap, 1/3 Small Cap. Use index funds (not mutual funds, low fee index funds: www.etfconnect.com (http://www.etfconnect.com)).

Bonds: Try to pick bonds paying high interest rates, especially in countries that are expected to lower rates in the future. Good example: United Kingdom, Australia, China (maybe). Bad example: USA, Japan.
Note: You can't really buy bonds as a small investor, you need to buy bond funds (www.etfconnect.com - and other sources).

Commodities:
Oil, metals + materials(Aluminum, iron ore, etc). The stuff we need just to live. There are one billion + ppl in CHina that will want this stuff over the next 20 years, and they'll be willing to pay. Moreover, commodity prices and stocks are not very correlated so its a good diversifier.

You can do this all yourself with research which is good because you can avoid alot of the fees an advisor would charge you. Just be careful with more complicated things like commodities. I think there are commodity funds out there (GOldmen Sachs has one?).

[adios]

[ QUOTE ]
The idea is that if you hold multiple assets they will coutnerbalance eachother and make your variance lower.

[/ QUOTE ]

Thank you very much for your response. Perhaps I didn't make myself clear though. I'm not quibbling with the idea that their are advantages to diversification including those that you mention. My question was how does one determine the proportion of one's available capital to allocate to each asset class. You've provided some percentages. Perhaps a better question is how did you arrive at those percentages and why do you feel that these percentage allocations offer correct diversification?

[lehighguy]

As for where I got them, well experience. I work in this industry, they are based on my opinion. I'm dollar bearish, but also realize that Europe and Japan have slow economies. I'm pretty bearish in general lately, I thought the market would have a post bubble run up, but it seems like thats out of steam.

As for correlations here's a rule of thumb:
The fed lowers rates when economy is doing bad (stocks doing bad), and bonds do well in falling rate enviorment. Vice versa is true for rising rate enviorment. Example of this would be the last 4 years.
COnclusion: Bonds up, stocks down. Stocks up, bonds down.

Commodities:
Oil and raw materials cost up, US stocks down. and vice versa.

Currency:
Dollar up, foriegn stocks down, dollar down foriegn stocks up.

[adios]

[ QUOTE ]
As for where I got them, well experience. I work in this industry, they are based on my opinion.

[/ QUOTE ]

No offense but I find this less than compelling. Opinions are easy to come by /images/graemlins/smile.gif. I suspect that the original post was more or less an opinion as well. If my portfolio is "falsely diversified" to me it means that the my expected returns are not sufficient given the risk I'm taking. Put another way, there is at least one alternative portfolio that I could construct where I take an equivalent amount of risk but my expected returns are higher. I'm going to make a post on this subject soon since this topic of proper diversification across asset classes has come up before. If I want to constuct a "truely diversified" portfolio of U.S. traded stocks that isn't too hard to do given the CAPM and it's implications. Dan's post alluded to the constuction of Markowitz portfolios to acheive "true diversification" but the CAPM more or less made constructing Markowitz portfolios unnecessary. Stay tuned for a post or two on this subject soon.

[eobmtns]

OK, this is what we know.

There is a record US deficit and Greenspan et al. may decide to sharply increase interest rates.

Or, the value of the dollar will go in the dumper (as Warren Buffett predicts).

Or both.

And, China is likely to float the yuan within 6 months resulting in its being sharply revalued against the $ and other currencies.

Iraq's Jan 30 election is likely to be accompanied by turmoil and who knows what military action the US might take against Iran, etc.

What stocks/sectors to buy/short? Higher interest rates? Short/put homebuilders/mortgage bankers?

Lower $? Buy/call Gold/mining/oil stocks?

Higher Yuan? Chinese stocks?

[lehighguy]

I could run some statistical tests and show you that would work pretty well. You do them in undergraduate finance classes. But if you don't want to here it that's ok too.

[laserboy]

[ QUOTE ]

Commodities:
Oil, metals + materials(Aluminum, iron ore, etc). The stuff we need just to live. There are one billion + ppl in CHina that will want this stuff over the next 20 years, and they'll be willing to pay. Moreover, commodity prices and stocks are not very correlated so its a good diversifier.

You can do this all yourself with research which is good because you can avoid alot of the fees an advisor would charge you. Just be careful with more complicated things like commodities. I think there are commodity funds out there (GOldmen Sachs has one?).

[/ QUOTE ]

Goldman Sachs publishes one of several tracked commodity indices. A number of financial products have sprung up that aim to model the returns of these indices, the most popular of which are collateralized commodity future funds which buy leveraged commodity futures and invest the collateral in treasuries/high quality bonds. The indices vary dramatically in composition (the Goldman index is 65% hydrocarbons, fox example) and the funds vary in expense fees and indexing strategies. I am partial to PCRDX which tracks the Dow Jones-AIG index and invests the collateral in TIPs.

Regarding diversification, recent studies have confirmed the obvious... that commodities are negatively correlated with the stock market. What is surprising is how competitive their returns are and the degree to which they reduce "risk" in one's portfolio. A portfolio consisting of 60% US stocks and 40% commodities would have generated the same returns as an all stock portfolio with 1/3 the volatility, making commodities a great diversification tool for financial planners (Given current macro trends, I personally would pass entirely on holding US stocks). Check out "Facts and Fantasies about Commodity Futures" published by the Yale International Center for Finance.

[laserboy]

It all depends on your investment horizon. In the short term, anything can happen. Marc Faber and Jim Rogers are the most hardcore China bulls out there and they are both predicting "hard landings" for the Chinese economy in the near future. In the long term, I don't think there is any doubt that China is a country on the rise and that the US is a country in decline.

CHINA = PUMPING OUT 250,000 SCIENTISTS AND ENGINEERS A YEAR

US = PUMPING OUT MORE LAWYERS AND MBA'S THAN THERE ARE CURRENTLY IN EMPLOYMENT

CHINA = MAPPING THE RICE GENOME AND DEVELOPING CLEANER MORE EFFICIENT FORMS OF NUCLEAR ENERGY

US = AN ENTIRE ECONOMY BASED ON FLIPPING REAL ESTATE

[lehighguy]

I too am bearish China in the short run. They have had a good run, but an economy based largely off export growth to a country that can't take in any more exports just isn't a very sound model. Not to mention many of the same problems that plauged the system during the hardcore communist years are still there despite the reforms. And the fact that high commodity prices hurt them even more. And the fact that the government is actively trying to slow down the economy right now.

There are other things I could mention, but the more interesting picture for China is the long term. You really hit the major reason why China will do so well going foward

Quote:
CHINA = PUMPING OUT 250,000 SCIENTISTS AND ENGINEERS A YEAR

US = PUMPING OUT MORE LAWYERS AND MBA'S THAN THERE ARE CURRENTLY IN EMPLOYMENT

People in the US have become decadent and lazy. They don't want to learn math or science or anything that is "hard". Even the few engineers we have are all immigrants from Asia and India. And our education system is atrocious (college is good but pre-college is the worst). This is the major reason the Asian economies will do so well going foward. A weaker dollar will never solve the fact that we aren't training people for the technological jobs of tommorrow, so we won't be able to compete.

[RunDownHouse]

[ QUOTE ]
People in the US have become decadent and lazy. They don't want to learn math or science or anything that is "hard". Even the few engineers we have are all immigrants from Asia and India. And our education system is atrocious (college is good but pre-college is the worst). This is the major reason the Asian economies will do so well going foward. A weaker dollar will never solve the fact that we aren't training people for the technological jobs of tommorrow, so we won't be able to compete.

[/ QUOTE ]
Go back to when the US was an industrial economy. Then picture someone saying that because nobody wanted to work in factories anymore, the US economy would go in the tank. Or picture someone saying, when the US was an agricultural economy, that since nobody wanted to work on farms anymore, we wouldn't be able to compete in the future.

What makes you think that the situation is any different now?

[OrangeCat]

[ QUOTE ]
Simple question, how do you know when your portfolio is diversified correctly?

[/ QUOTE ]
It is not a simple question at all. There is an old saying “When the US catches a cold, the rest of the world gets pneumonia.” IOW, simply going international could actually increase risk.

Here is a link to a website specializing in the topic http://www.riskbook.com/

I was browsing through and found a few titles that appear to cover methods of quantifying risk and diversification

http://www.riskbook.com/link/fabozzi_and_markowitz.htm

http://www.riskbook.com/titles/scherer_b_(2002).htm

[laserboy]

[ QUOTE ]
Go back to when the US was an industrial economy. Then picture someone saying that because nobody wanted to work in factories anymore, the US economy would go in the tank. Or picture someone saying, when the US was an agricultural economy, that since nobody wanted to work on farms anymore, we wouldn't be able to compete in the future.

What makes you think that the situation is any different now?

[/ QUOTE ]

What industries are we still competitive in?

Manufacturing? No. Agriculture? No. Natural resources? No. IT? No. Customer support? No. Even our back office legal and financial services work is starting to move offshore. I just read an article about an advertising agency moving their operations offshore! I don't care what Rich Dad says, an economy based on buying and selling mortgages from each other is not sustainable...

The reality is we have not been competitive in the global markets for the past thirty years. Look at our deficits. The only reason we enjoy such a high standard of living is because the government continues to pump about $400 billion worth of borrowed money into our economy a year. Our entire economy is basically at the mercy of Asian central banks buying our sinking currency solely for political reasons. How long can this continue? How much farther does the dollar have to fall before they refuse to lend us any more money? Japan was a net seller of US treasuries at the end of last year...

As lehighguy stated, the future does not look bright. If you are banking on the younger generation of Americans to bail us out with breakthrough technologies or quantum leaps in productivity, you can just forget about it. We are an entire generation of debt laden, sitcom-watching, fastfood-eating morons. 87.3% of the people I know my age just out of college are either working in the real estate industry, getting some worthless graduate degree, playing cards for a living, or are unemployed. Our education system is in shambles... Our national savings rate hovers at around 0%... Our President is a functional retard... Game over, man! Game over!

On the bright side, I do think bankruptcy law and debt collection will be solid growth industries!

[lehighguy]

When people left factories it was clearly to go to service sector jobs with higher added value. The problem going foward isn't that low skilled labor is going oversees, its that high skilled labor is going oversees. And while we have been able to rely on luring smart people from foriegn countries to come to the US this may not continue as conditions in those countries improve.

The fact that a large sector of the economy which is clearly vital to our future (engineering, hard science, etc.) is being ignored is a big problem. It might not seem as bad now but in 20-40 years we might not be the most educated workforce.

The idea of free trade does benefit all. Our open economy has outperformed all of its closed market counterparts. But this isn't a question of wether we need to close of our economy. Clearly that would be a mistake. What we need to do is improve our education system so we can compete decades down the road. Otherwise I don't see these deficiets fixing themselves.

[lehighguy]

While I share laserboys sentiment, I am not quite so pessimistic (though the facts clearly lean in that direction).

The big long term problem is education. Our system sucks. And no one is going to fix it because the rule in politics is such (if it won't be a problem for 20 years, its not my problem). Take the NYC public schools my mother works in. Mayor Bloomberg threatened to hold students back if they didn't pass certain basic skills tests. Then the political forces of apathy attacked. Parents rallied against the mayor trying to hold thier kids back. After all, thier kids aren't stupid or lazy. Eventually the mayor gave in, and a bunch of kids who can't even read got to advance again. I could give a million other examples.

There is one competitive advantage we do have in the United States, individualism. Asian economies are plauged by corruption, cronyism, but most importantly a lack of individual reasonig on most peoples part. A system based on family loyalty and honor and societal pressure is great at getting someone to study 12 hours a day, but bad at getting them to think for themselves. Having grown up in largely asian communities in the US and spent time in Japan I can tell you there is a serious critical thinking gap. Take the following example from when I was playing at the Borgota and talking to another gentlemen at the table who had been sent over to Japan as a manager.

American Manager: So it seems you missed your profit target by 60% last year. And now your requesting a higher budget and profit target. How are you going to reach your new target.

Japanese Worker: Yes, we are shamed by last years performance. This year we will redeem ourselves by reaching our new target.

American: Maybe I'm not making myself clear, HOW ARE YOU GOING TO MAKE THE NEW TARGET?

Japanese: We will make the target because we must. Because we have to.

American: Well unless I here something better then that I'm going to recommend against increasing your budget.

Our entreprenurial spirit is the major advantage that has kept us on top, but you need to do the background work. It doesn't matter how creative you are if you can't add or subtract. Well that's my take.

[Mark Heide]

Wayfare,

Before you go start buying up ADRs consider that right now is about the lowest the US dollar has been. This is due to a few factors, including interest rates, Iraqi War(deficit). When interest rates start to climb and when we finally pull out of Iraq, the dollar will strenthen. When that happens your ADRs will lose money. If you were going to deversify this way you should have done it before the Iraqi War. Furthermore, Europe, Asia, and South America depend on exporting to the US, so if the US collapes, so will the rest of the world.

Good Luck

Mark

[lehighguy]

Its true that you don't want to buy high and sell low, but listening to that logic kept me from buying oil at $35. Until something happens to make the dollar go up it won't. And the policies in place right now are unbelievably irresponsible. Pulling out of Iraq will not solve our trade deficiet. If you can find someone willing to buy dollars right now I'll start to believe you, but I can't find anyone. Perhaps in two years, when the dollar is even lower, it will be a good value play, but not right now.

[adios]

[ QUOTE ]
[ QUOTE ]
Simple question, how do you know when your portfolio is diversified correctly?

[/ QUOTE ]
It is not a simple question at all. There is an old saying “When the US catches a cold, the rest of the world gets pneumonia.” IOW, simply going international could actually increase risk.

Here is a link to a website specializing in the topic http://www.riskbook.com/

I was browsing through and found a few titles that appear to cover methods of quantifying risk and diversification

http://www.riskbook.com/link/fabozzi_and_markowitz.htm

http://www.riskbook.com/titles/scherer_b_(2002).htm

[/ QUOTE ]

Simple question, not so simple to answer the question /images/graemlins/smile.gif.

[Dan Mezick]

Mark,

False diversification is an important insight.

The key to gaming this US dollar situation is understanding the motivations for expanding the money supply.

The first recipient of an inflated dollar enjoys the full buying power of current dollars. Thus the US Treasury, then the 1st tier US contractors, then their subcontractors enjoy advantages as the "first recipients" of freshly printed (inflated) dollars.

These recipients enjoy today's dollar current value with tomorrows less-valued currency. As such, they win.

Freshly inflated dollars are useful for paying long-term debts in cheaper dollars, cheaply financing current obligations, cheaply financing wide-ranging expansion plans, etc.

If the plan is to aggressively yet systematically increase the supply of dollars, substantial rate increases (ala "1980") will not be used to slow down price increases deriving from said massive and systematic money supply increase.

Thus, those who are working from an assumption of a "continued, systematic and world-historical devaluing of the dollar" believe dollar-inflation will be the dominant economic mega-theme going forward.

Derivative effects may very well be:

1. No real estate depreciation or widely-assumed real-estate bubble;

2. Steady rise in gold price, and the euro (in dollar terms);

3. "Camouflaged" interest rate management (moderate, well-timed increases) by the Fed designed to smooth the rate of dollar decline, but not stem the massive (yet orderly) decline itself.

It is useful to examine chart of the S&P and the Dow expressed in Euros rather than dollars.

The impressive 2003 results for the Dow and S&P look anemic when viewed through this filter.

It is also useful to examine the price of gold and the euro in dollar terms across the same time period.

[GeorgeF]

All my bond funds are international

I believe that on an interest rate basis the dollar is fairly valued against other currencies.

I think long term the US$ will decline as US government spending on US government objectives is out of control. Notice how the Europeans are building the biggest airliner while the US is building a failed state in Iraq, for about the same money and way fewer lives. If the super Jumbo is a success it is a major failure of the US, leaving Boeing pinned between EADS (super jumbo) and Embraer (regional jets).

China will have many booms and busts as it grows. If it avoids foreign wars, as Germany didn't, it will likely displace the US as an economic power. It seems that China is going to have a bit of a fall as they adjust to the US inablity to buy their stuff.

[natedogg]

[ QUOTE ]

China will have many booms and busts as it grows. If it avoids foreign wars, as Germany didn't, it will likely displace the US as an economic power. It seems that China is going to have a bit of a fall as they adjust to the US inablity to buy their stuff.

[/ QUOTE ]

I've heard this stated quite often, that China will displace the US economically on the world stage. But is it necessary for there to be only one economic leader? I have always assumed that the rise of China's and India's economies will be beneficial to the U.S., especially the service industries.

natedogg

[lehighguy]

There are some reasons to believe that when our deficiets get this huge the negative impact of trade can outway the positive impacts. In that they are becomming such a problem that there could be a collapse if something goes wrong. That being said lets assume there won't be a catastophy.

Before I go into the concept, consider this. Millions of Americans are wealthier then pharohs of Egypt were. In terms of sheer stuff, sheer buying power, they have alot more. The pharohs could build big statues, but that's about it. They couldn't get heart transplant surgery, fly on an airplane, talk on a cell phone, etc.

What then made it so great to be the pharoh?
Relative Wealth.
The division of labor is determined by the division of power. The pharoh had more money and power then other people of the ancient world, so he could tell them what to do. Wealth is just an extension of power, and power over others is what people are really after. If it was all about stuff, then we have enough to go around.

Right now we have more power. As such we get to be rockstars and lawyers while people in China get to work in factories and breath polluted air.

In 50 years both America and China will be "richer". We will have more stuff. And free trade will in fact increase the amount of stuff. The matter at hand is who will have the power. Who will tell the other country what to do. WHo will get to have the good jobs while the other people clean up thier [censored] for a living. Cause no matter how much stuff we have, someone else has to clean up [censored] for a living. That's why being pharoh was so great, all the people he could order around.

I'll end on a poker example. I played against a guy today who went maniac on me when I drew an overcard on the turn. He started betting like a madman, going in any pot I was in. He couldn't have thought it was good play, he kept losing. But it wasn't about the money, it was about the power. It was about proving he was a big man and he could take me down.

[natedogg]

That seems really simplistic. I still don't necessarily agree that a surge of wealth for China means that Americans start shoveling sh*t for a living.

I just don't see why accumulations of wealth elsewhere won't work in a synergistic way to create more wealth between nations.

natedogg

[lehighguy]

I'm not saying we won't all be richer. We'll all have plasma TV's and big cars. What I'm saying is that doesn't matter. People care more about the power over other people that money conveys. A janitor in America is 5,000 times more well off then most of the world, but he wouldn't consider himself rich would he.