The more confusing the financial world gets, the easier it is to understand and forecast by my two very simple rules in evaluating an asset's future. Only two questions to ask:
1) Is the value real or perceived? 2) Is it sustainable?
Apply those rules to residential real estate in 2006. How about the dot com boom?
These asset bubbles have grown and collapsed basically because question number one fails. Up next for evaluation? The U.S. Dollar.
One thing about the internet, is it never forgets. And if you look back at my xanga blog and even this one, it looks like I can see the future with amazing clarity. It's not that hard. You don't need financial analysts at Goldman Sachs or the Federal Reserve's propaganda to confuse you with their ridiculous forecasts that make the subject of youtube comedy videos.
You can always steer clear by my two basic questions. Yes the world economy is beginning to grow, especially the emerging countries. This is because the world is repurposing itself away from the U.S. consumer. China is going to take all of that manufacturing capacity and it is going to be absorbed by the urbanization of the 1 billion rice farmers who have yet to turn a car motor or eat a tortilla chip. That potential market is 1) of true value and 2) sustainable.
The U.S. consumer, with double digit unemployment, and a government with a debt that is equal to its GDP has no true value (for China's manufacturing infrastructure or for other world exporters to plan on) nor is its growth sustainable. For the U.S. to go saying that it is part of the world's recovery party but it's going to be "muted" is daydreaming.
I like life simple. And applying simple, common sense formulas to complex problems gives me a lot of clarity. And if you look at my investing record, the clues as to how I got here is simple. Two simple questions.
