Hello ACF Mike, You should ignore people like Li Yong Yan.
You know folks like Li and they are not your kind of people. They know nothing about money, are paranoid about wealth, fearful about the new, and are nostalgic for the old that never was.
Worst of all, they lack the imagination and are missing the optimism to see that circumstances are getting better day-by-day, as opposed to progressing from bad to worse night-by-night.
Why, think about it for a moment and realize, in your world, Li would be a Democrat with communist tendencies, and one with neither a sense of history nor an appreciation for economics, and one holding an upside down flag about to be put to the torch!
OTOH, Perhaps I have misread you. Perhaps you are not the optimistic type after all. Perhaps you are the pessimist you had always accused me of being?
On this <<the US remains the world's largest growth engine, with the most innovative business culture and largest, most liquid, best regulated capital markets>>
… you may be right, and if so, it simply shows that the world inclusive of the US market is a dangerous place.
Step outside your door, look left and view right, notice how many ‘mark-to-market’ asset millionaires there supposedly are?
Think for a moment about their collective Balance Sheet, especially the line item commonly referred to as ‘equity’, ignore the bloated false value, but ponder about their liquidity, particularly the line items often known as ‘cash’ and ‘near-cash’.
Flip to the previous page, the Income Statement, appreciate the embedded reality of ‘debt service ability’, and ponder on the idea of ‘replacement purchase capability/capacity’.
Now, feel free to be shocked and awed, and ask yourself this question: ‘how many of my macro economically productive neighbors, average age 47, can truly afford their micro economically borrowed lifestyles in the global context that they are over valued, over paid, over leveraged, under capitalized, and proven to be not so clever after all?’
So, do you now have a better appreciation of the true macro risk in your portfolio?
No? Not yet?
Ok, now think about your neighbors’ effective and economic income compressed to international norm by way of monetary inflation and corporate outsourcing, and what those macro actions do to his asset-rich but equity-poor balance sheet?
Then dwell on what the then compressed balance sheet, via devaluation, depreciation, and deflation, will do, via amplified feedback loop, to the aggregate income statement?
I realized that it is difficult to make a lobster understand the nature of its circumstance as it rests comfortably inside a pot of still cold water resting on an open flame.
Perhaps the way to think about the differences between the wild and crazy Chinese equity space and the ‘best regulated’ US capital market may be realizing that in the former one has to take calculated but diversified micro risks in a dynamic and uncertain macro environment, and in the latter, one is in fact gambling on a clearly disintegrating macro environment via a bunch of micro risks that are not less harmful than the ones common in the former situation.
For anyone who bothers to read musty books and ponder dusty archives, and that excludes your hero Greensputin, we have been here before, and it is just the last two hundred years' Script, but mirror-imaged or run backward, possibly viewed upside down.
I mean, could it be, as is it possible, that China today = USA 1860, and USA today = China 1760?
Nothing is so apparent until we stop to think about what actually is, obviously should, must, and shall therefore be. You know, the truth vs the facts, and the 'just is'.
Chugs, Jay |
