A Happy New Year to Readers
Reflections Over the Holidays
The end of a year and the start of the next is an annual time for reflection and catching up on reading.
The economic downturn has had some dramatic negative effects on many people, but what becomes apparent upon reflection is the similarity in some ways to so many previous downturns.
Prime property values have fallen from the absurd valuation to a more reasonable valuation, but the demand for high end real estate remains strong. Only the price has moderated. Rents in prime locations are very strong.
Holiday resorts have experienced a reduction in travel, yet cruise ship companies are continuing to build bigger and bigger ships. The giant cruise ships of a few years ago that held 2,000 passengers and 1,000 crew, are now dwarfed by new larger ships being launched with over 5,000 passengers and 2,000 crew. If demand for vacation cruising did not exist, these new monsters of the seas would not be ever increasing in size.
Economic activity and GNP did not fall by 20% or 50%, as happened in the Great Depression of the 30’s. The reduction is measured in single digits. Not pleasant; painful to so many, but comparable to similar swings in the economy in so many downturns since WWII.
The European Debt crisis continues, and there is disagreement in Europe (read ‘Germany’) as to bailing out the weaker countries. Yet economic activity continues and it is obvious that no liquidity crisis will force a cessation in trade or commerce.
Generally (except for the Greenspan period when he flooded the economy with printed money every time a slowdown seemed on the horizon), every downturn leaves its victims behind, and the new cycle lifts the new generation. The depth of the current downturn is due in part because of Greenspan’s policies. He extended the cycle, and made the inevitable downturn that much more vicious as a result.
The point here, is that the USA is still, and will be for the foreseeable future, the economic powerhouse of the world. Something approaching 25% of world economy rests in the USA. With all of China’s progress, and Japan’s powerful economy, and India’s relentless march forward, and Korea’s progress, and the re-emergence of Russia, none of these economies approach in scale, the economy of the USA.
The place to invest, the safest place, the place with the greatest upside, is in companies that are American.
Some views of George Friedman
George Friedman is a noted American author. His last book was titled “The Next 100 Years” and was a New York Times Bestseller. His current book is titles “The Next Decade”.
Mr. Friedman gives his views on what American strategy should be in every area of the world over the next decade. Although his comments are reasoned and mostly backed up by historical perspectives, I do not agree with certain of his conclusions for the primary reason that if we are able to see the future, and to foretell what will happen, humans would be an amazing species. The essential fact of life and of economics, is Expect the Unexpected.
However, his opinions make interesting informed reading. Some of his conclusions mirror comments made in this blog previously. For example, he believes that China’s spectacular rise, will stall, as has every other similar spectacular rise in recent history. He describes economic advances of Japan, Korea and India as examples. He believes that China will remain important economically, but the division between have and have-not Chinese spells coming difficulties.
He believes that Japan will again rise to the position of the greatest economic competitor to the USA, but that no nation in the near future can match USA economic strength. The point here is a type of confirmation that investment in the USA in goods and services that supply the USA is the place to be as an investment policy.
The book is a good read, and a worth while read. Whether you disagree with many of the conclusions as I do, or agree, much of the information is valuable and worthwhile.
The views expressed in this blog are opinions only and are not investment advice. Persons investing should seek the advice of a licensed professional to guide them and should not rely on the opinions expressed herein. This blog is not a solicitation for investment and we do not accept unsolicited investment funds.
