与Aceofspades商榷：US Stocks, Gold, Manufacturing, and etc.

本不想再写，不过版主在要求活跃气氛，就和Aceofspades同学商榷一下。不对之处请斧正。

Even though I agree with some of your thoughts and concerns, I don’t agree with your final conclusion. I won’t short US stocks (since they are not that much overvalued as a whole) and won’t buy more gold and silver (I do own some silver, but not a lot, and am not planning to add more). If you worry about US currency, I would buy oil or agriculture, instead. Oil is even better for the long term.

It is true that Benanke and his Fed keeps printing money, which is very bad for us middle class. Worse, Ben might have been relying on some absurd assumptions, as you pointed out. However, it is also embarrassing to assume someone like Ben or Greenspan is stupid. They are not. They also see many documented facts that we can’t see. They might make mistakes after mistakes, but it is unwise, if not dangerous, to fight against FED, or even worse to assume that FED is purposely leading us into a disaster.

It is also true that we can not have cities like “The New Cities in Socal”, which have no industries, no new businesses (more below), but only new homes and shopping centers. However, there is long term demographic trend supporting more new homes. US is the only developed country which has a fast growing population, largely thanks to its immigration policy. This results in a 1.5 million new families being formed every year. While the new housing starts in 2006 and 2007 are only 1.4M and 1.2M, respectively. Meanwhile, the average age of housing units in US is about 31 years. Therefore, in the long run, there is still much demand for new housing. Of course, I agree with you that we probably don’t need that many real estate agents – many of them will be working on something else later on.

Now comes to the manufacturing. I have to confess that I used to have serious doubts about the service driven economy as well, just like you. I still have some concerns about US moving all manufacturing to overseas. However, after studying more on the money flow, I realize that the problem might not be as big as you thought. We can use Nike as an example. Nike used to make its shoes in Malaysia, then moved to China, and now is moving to Vietnam. For each pair of shoes, the manufacturers in China get $2-5, while the selling price in US is about $60-80. So where does the majority of money go? A big chunk goes to companies with a brand name (like Nike in this case); some goes to transportation companies (many owned by US), warehouses (again in US), and stores like Sears, JC Penny and WalMart. Therefore, the “true manufacturers”, if you call them this way, really don’t make that much money. The money is still in US companies, therefore, shareholders here. The same goes with Coca Cola, Procter Gamble, Kimberly, and so on. This is for the lower end of the manufacturing.

On the higher end, the situation is much better. US is only one of the two for the commercial jet planes (Airbus is having lots of troubles with internal coordination, BTW). US, again, is only one of the two (BIG one actually) in aerospace and defense manufacturing. Saudis are desperate to buy F16’s with their oil dollar. Furthermore, when you come to this new era of knowledge economy, there is still only one Silicon Valley. Many countries, including European countries and East Asian countries, have tried to copy the idea, but all failed. US is the leading force and manufacturer in this high-profit-margin “knowledge manufacturing” business. And, in the foreseeable future, I don’t see this trend to be reversed. Don’t forget the Hollywood “culture manufacturing”, which brings in tons of money as well. Overall, I am optimistic with US economy, just for ONE reason – I still see top talents moving from Europe, India, China, and Russia to US. When we see the reverse trend, then it is time to abandon US stocks or even short US stocks.

It is also arguable to have the lower end manufacturing in one’s backyard. Take a look at China. The price China paid for the environment pollution as well as resource depletion is enormous. In this world, the countries with capital often rip off countries with labor or resource. It is just the inconvenient reality. Again, I don’t think the top leaders in China didn’t know this problem, but they had no choice. Just like Ben and Greenspan knew the problem of over-printing money, but they had no choice.

You mentioned that Jim Cramer is screaming buying financials and RE, but this Jim has not much credibility. So you can just ignore him. Jim Rogers (who is much smarter in my opinion), on the other hand, is souring US stocks, particularly financials. But I think he is more of a trader, and he has short positions in financials, so you need to listen to him a bit more carefully. Nevertheless, I agree it is probably too early to say the troubles with financials are over. Of course, so far, the write-downs of all financial banks are more than $100 billion, which is almost 20% of all subprime mortgages. Don’t forget the majority of the subprime losses (through CDO, CDS, etc) will be burdened by people’s pensions (like yours and mine) as well as foreign funds.

One thing individual investors (myself included) often confuse is that as a small investor you often lose money in fast growing or seemingly-wonderful companies, but make money in awful and nobody-wants industries. The same goes with countries. Therefore, it is not always true that if the US economy is slowing you are determined to lose money; while if China and India is still growing (fast) you are determined to make money. It is all about VALUATION. You can make tons of money in bear market as well by carefully picking those companies that others dump like crazy.

One last thing I want to mention is that people often use Japan as an example on how bad the real estate can be. True, it is really bad (China might be on that route now). However, let’s assume you happened to figure that out correctly in 1988, and thought bad time was coming (at least for Japanese) and decided to buy gold then. How was that call? I guess you will be really sorry. The gold price in 1988 was $480, and now it is $910. It has an annual return of 3.5%/year!