Thursday, January 22, 2009

10 Years of Pain

Don't be a Chump!

It has been a very frustrating (not being as digitally connected as I would like) the past few months. I am only now back online (Thanks Cox Cable for a miserable experience getting Internet) due to my major life move (from New York City to Phoenix AZ). I am finally settled in enough though that I can start to blog again.

This post should serve as a wake up call to all you who might still be living under a rock. You need to know that I am not a pessimist (though you will find this post pessimistic in it's predictions). If anything, I am an optimist, and VERY bullish on my personal outlook. So before reading further make certain that you are aware - Everyone is in charge of their own destiny. We make our own fortunes in life.

I almost shed a tear with pride when I viewed just how many people piled in for Obama's inauguration. Another when I realized how great his popularity is outside of the USA. One gets a sense that his popularity is more of a metaphor with people - Obama = "Hope" & "Change".

Now this is not an attack on Obama (whom I personally like as much as any president), but more a realist's view of the world today. Economically speaking, the mess we now find ourselves in is the result of 40 + years of becoming a debtor society. 40 years of ANYTHING can not, and WILL not be unwound anytime soon. I do not care how many trillions of dollars you throw at the problem. So if your looking for Obama or the Trillions to rescue you (or the economy) you need to wake up and get real.

Think the stock market having declined over 40% is cheap? I did, but now am realizing that I too must have drank the "markets come back" Kool-Aid. We are in the 3rd inning of this debt-pression. You need to start thinking of the economy like a dying cancer patient on life support. The organs start to fail, one by one. The first economic organ to die was (is) residential real estate. Do NOT underestimate just how important of an organ this is. That past 40 years of debt was almost entirely based off of residential real estate. Now you have little or no equity in your home, so you stop consuming. Ya, I know you still need to eat. But many will "brand down" and what needs to be consumed will be commodity items that compete on price, not brand. When you stop consuming, these brands (the life-force of our GDP)lay people off. When you get laid off, not only can you not afford your mortgage, but you can not afford to pay your credit cards. When you can not shop with credit cards retailers go out of business. When the retailers go out of business the shopping malls go under. When the shopping malls go under a municipalities major tax base goes under. When the tax base goes under, the town/municipality is bankrupt. When the major towns (think NYC) go bankrupt, the states go under. When the states go under, the US is bankrupt. Lastly, when the US goes bankrupt, the world goes bankrupt.

...And so the economic ponzi begins.

I warned you that this post was going to be "gloomy-doomy" but I also mentioned that I am optimistic about my future. So while I do not think there is money to be made in the stock market (being a long term bull, or buying index/mutual funds)there is money to be made trading and/or being short.

Economically speaking,follow the money. If you worked for (and got laid off from) a company that made widgets, consider now working for a company that makes less expensive (or better ROI) widgets. If you sold stocks...consider now selling credit consulting services. If you sold real-estate, consider now selling refi's. Point here is that there will always be a growth area, and you need to identify now what those growth areas will be over the next ten years.

Health care, and more importantly HealthTech will be a place to be over the next 10 years. "Green" companies will be a place to be over the next 10 years. Companies that replace old infrastructure with "green" infrastructure will be hot (unlike green companies that make solar for example - think here like an Intel that will ultimately enjoy their next major sales up cycle by providing chips that consume way less power).

So in summary, even though we as a society are fucked - you don't have to be. Just follow the right road, and you will find your own prosperity. Good luck to everyone.


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