Doom, Gloom & Apocalypse

[HoldingFolding]

I'm a regular poster in the MTT forum, but often come down here for some light relief, however, this is my first post.

I've lived in Japan for 15 years, but have a good friend in USA who is forever sending me stuff warning of an impending USA-centric economic apocalypse. Housing bubble, balance of payments deficit, budget deficit, get all your money into gold etc. When I read this forum the outlook is generally up-beat and positive; spread your money around in US equities etc.

Does anyone else here ascribe to the meltdown theory?

[greg nice]

rome eventually fell.

blame george bush.

[Mark Heide]

Some of what you hear is true to a point. Let's take the housing bubble as an example. The price of houses has gone up signicantly high, but this is due mainly to low interest rates. The way the housing market works is when interest rates go up the price for housing comes down. The truth to the housing bubble is that it is overprice in some areas and a lot of that bubble already burst back in 2001 when the tech market crashed. But, it's just like equity investments. You should never buy overvalued equities and the same goes for houses.

I wouldn't worry about balance of payment deficits either. Because if countries like China will not start cashing in their US Bonds because they don't want to take the risk of devaluing the US dollar. It would hurt them more than us.

The only real negative aspect of the economy is the price of oil, as this slows down economic growth. I expect the stock market to follow the same pattern this year as the last two years. Expect to do bargain hunting for stocks in the summer months.

Good Luck

Mark

[midas]

Talk about the "Pot calling the kettle black"!

Japan has the most inflated real estate market in the world, an insolvent banking system and companies that price gouge their own citizens while dumping products below cost on the U.S. market to gain market share.

BTW, I think the U.S. home market is driven more by 2 income families than low interest rates.

[GeorgeF]

1) The US has basically an open border with regards to unskilled labor. Japan seems not to. This makes things like restaurant meals in New York City very cheap, while increasing the cost of medical insurance. If there is an economic downturn I hate to think about what will happen with these guys unemployed, I doubt the US can deport millions of them.

2) China and other Asian nations seem to like to make stuff, but do not care if they are paid for it. Is that a Confucian/Shinto thing like the sound of one hand clapping? I read stories about conveyor belts being shut in Chinese factories to save money by using manual labor to move things. I wonder how long that can go on. The world economy works like this: Asians make stuff, Arabs sell oil, Americans build houses, Americans get all the stuff, oil and live in the houses. Go figure.

3) Housing in the US is likely way overvalued in certain markets, but remember, transportation in the US is very poor. Basically third world. There is no bullet train that allows people who work in NYC to live in Pennsylvania. I personally think what did Japanese real estate in was the Bullet train, not economic policy.

4) There are too many auto makers. With the Koreans and in the future India (TTM), China and oddly Canada entering the markets someone is getting voted off the island. Right now it seems to be Fiat but I would not be surprised to see Ford disappear as Chrysler did. People say 'so what' but autos are an important industry in the US.

5) Assuming that the tails stop falling off Airbus aircraft it seems that Boeing could be in long term decline. That is a huge development and an indication of how out of touch US government is.

6) Medical costs are out of control in the US and the government, which is insulated from medical inflation, does not care.

7) I have trouble believing in gold as there is so much of it stored above ground. I do not believe that there will be a gold based currency in the future.

[Dan Mezick]

A combination of rising commodity prices, a falling dollar, rising inflation and corresponding rising interest rates is typically not very good for equities.

Take a look at 1979. That year had these same characteristics.

[tek]

[ QUOTE ]
7) I have trouble believing in gold as there is so much of it stored above ground. I do not believe that there will be a gold based currency in the future.

[/ QUOTE ]

Gold rose in price sharply in the late 70's to mid 80's without gold bing a currency. It's rise was partly due to factors such as a 40-some year artificialy created base being freed by the ending of the Bretton-Woods agreement and the resulting rise in oil prices, general inflation and higher interest rates.

Mezick believes conditions are right for a gold rise/equity decline.

On the charts, gold does seem to be making a ten year double bottom. However, there is never a year that gold bugs with Howard Ruff lapel buttons do not say the metal will go nuts.

A better question: Are other metals a better strategic investment consideration?