My my. The internet stock thing has been wild. Value investing is now
officially dead, but it has unlimited lives. Hey, I'll admit I'm down 5% on my portfolio (PE 10, yield 2.5%, fully invested) since mid-May, so I have reason to be jealous of Yahoo and Amazon. At last check funds are still absorbing in the mid 30 billions each month. This is going to get ugly.
Let me outline a scenario: The yen goes to 170 because Japan's "leaders" really don't know what's going on. China has to devalue. So some Latin American countries have to devalue. Now let's sing all this to the tune of the Japanese scrambling for liquidity. Property sales and T-bond sales start. Well, the US government can't raise rates, but it won't need to. Interest rates jump, US property values fall. All across the nation, people go upside down on their home and car loans. Not good - means they owe more than their equity. And dangit, they just took that 135% of equity home loan. Can't sell. Can you spell bankruptcy? Thousands of bankruptcy lawyers have a field day. Meanwhile, the Asian and Latin American devaluations do wonders for US imports. Consumers would love the low low prices if they could afford them on unemployment. Oil prices spike? Oh no who would've expected it. Now my king-size SUVs don't seem so fun. US industry caught between low-price competition and increased cost of doing business. Profit margins crash. Mutual funds maneuver as best they can according to their charters, but unfortunately the avg US investor actually has become scared for the first time in 16 years. In any case, they need the money now. Now Bombay is ashes? Etc.
Well, this is all speculative, but shouldn't I be speculative? - it's kind of the trend yaknow. It's all circular and somewhat contradictory of course, and I'm not sure how much I believe myself, but it's a lot easier to imagine than Yahoo at 100. What, it's 200 you say? Ay carumba.
Good Investing,
Mike |
