I flushed my entire portfolio yesterday, which had been built on the themes of reflationary, global monetary policy, and its effect on cheap, value stocks involved in commodities. I built this portfolio with much *clarity* in August of 2003. But the marching, the constant marching, of global and American debt creation in particular gave me pause, and clouded my outlook. I took an 18% gain, and have moved to the sidelines.
China. Now, there's a crowded trade. Everybody and his brother now understands that China is sucking up commodities. (I was in a bar in NYC over the weekend--a very intelligent high school teacher told me "all about China and the commodity-plays, available there." Yes, a high school teacher.)
But what is less understood by the public is the Circular Nature of this boom--and how deeply and utterly leveraged Chinese Growth is to American Consumer demand.
I'm concerned about the sustainability of American Consumer demand going forward (understatement). Debt accumulation---even buying a house--tends to crowd out the ability to spend. Debt Service is real. Really real.
I agree with Mishdello that Deflationary Forces are at work like an undertow current in this Economy, and have potential to explode out at us. "Right back at cha," these forces seem to want to say, to Alan Greenspan (Deflation Foo-Fighter Extraordinaire). That Money supply shrinkage is the very beast Alan and his pal Bernanke did not want to see. It is the Great Wolf they've been hunting since January of 2001, with the First Cut.
PS: I came to this board because I find the level of sophistication about these matters to be astounding. I have learned alot just by reading the thread, over the past 2 weeks.
Cheers,
LP |
