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TDRH (99.92)

What will lead us out of Recession?

Recs

36

January 31, 2008 – Comments (46) | RELATED TICKERS: USA

 

       No offense to Abitarecatania, but I am tired of Jim Rogers.  I am tired of financial analysts, supermodels, and other talking heads bashing the dollar, the US economy, the US government, and society in general.   Yes there are some dark times ahead, yes we are do for a strong, and possibly quite long correction.   Yes the Fed's and congress' moves are doing nothing more than encouraging us to borrow our way out/avoid a recession, and yes they probably will fail, and put the country in a bind for the long haul.   Yes our country has outsourced nearly everything, and yes we do need to call Bombay/Manilla to help us set the clock on our DVD players.

      Normally the declining dollar would mean improved competitiveness of our domesitcally produced goods, and make them more attractive domestically and internationally.   Unfortunately we are limited to a few remaining industries.  

      With a long term view  (something I have not demonstrated in CAPS selections)   I am bullish on the USA.   Not out of any sense of Nationalism or Patriotism, but more from a sense of "in the land of the blind, the one eyed man is king."   The correction we will experience will be long and painful, but my question is what will bring us out of recession?   I am trying to see/anticipate the light at the end of the tunnel and could some help with the visionary process.  

      Anyone can come up with a step by step decline into a world of warlords, feudal states and basically a mad-max society with the decline in the oil supply/worthless currency etc. I believe we have all  seen that/those movie(s), but they do not give us any direction or hope for the future and or more importantly future returns on investment.   This is not a call for direction of my "vote" for HOPE in the upcoming presidential election, I do not understand why anyone would want to be president during this economic cycle.  I am looking towards the future, and looking for domestic companies/technology/industry that will lead us out of recession and provide growth and return on investment.

 

 

 

 

 

 

 

46 Comments – Post Your Own

#1) On January 31, 2008 at 8:39 AM, abitare (99.70) wrote:

TDRH,

Rallying around the flag pole is not going to stop the trend. 

I like billionaire Jim Rogers because he is candid and very, very right on his calls. (FYI -Rogers and Soros founded the Quantum Fund. During the following 10 years the fund gained 4200% while the S&P advanced about 47% (963.99/800.36).[1] It was one of the first truly international funds.) JR called the China and Commodity and bull market.  JR has said multiple times Helicopter Ben is a "disaster" and should resign. 

The recession is NOT the problem. The problem is the loss of the reserve currency status.  When the British pound lost the reserve currency status it lost its empire and 80% of its wealth. The US is borrowing $2-3 Billion a day, the US is going bankrupt. 

What is the solution?

1. Sound money.

2. Get out of Iraq

3. Reduce Gov spending and taxes

4. Vote Ron Paul 

Or sell remaining US assets to foreigners to maintain our consumption based life style, which is what we are doing now.

Good bye assets 07-08: Gateway Computers, Land Rover, Jaguar, Cessna Manufacturing etc.... 

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#2) On January 31, 2008 at 8:57 AM, floridabuilder2 (99.63) wrote:

Actually I am hoping homebuilding and easy credit lending leads us out of this mess

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#3) On January 31, 2008 at 10:08 AM, GS751 (28.30) wrote:

easy credit lending is what got us in this in the first place.  It is just putting a band aid on wound that needs stiches.  And in order for it to heal correctly those stiches are going to hurt.  We need need truely sound money.  I like to pose the question, what happens when foreign countries reconize how flawed the dollar really is and start dumping their Greenback reseves?  In order to lead us out of a recession.  Several things need to happen, firstly we need to let the free market work itself out.  This includes purging the effects of the housing mess, this starts with cleaning up securitzation. ELIMATE THE MONOPOLIES THE RATING AGENCIES HAVE, and make things a lot more clear.  We need sound money, I do not think the fed. should be able to print money, god forbit that politicans are limited on what they can spend.  We need to downsize the size of the government and get back more to pure capatilism.  We need to stop running a welfare state.

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#4) On January 31, 2008 at 10:23 AM, TDRH (99.92) wrote:

Abitar,

     I do not disagree that Jim Roger's reasoning is sound, I just said that I was tired of hearing it.   He made a great call and was rewarded handsomely.    I am not one for rallying round or waiving a flag.   I agree with three of your points, and not arguing on the fourth.  

GS751,

     Not arguing with your position, pain and correction is necessary and will occur.

My question is, as we go through the correction, changes are made, accounting standards are corrected,  and look for recovery what areas are positive for the US going forward.  

There is just too much negativity.   Probably most of it is right, pain and suffering of the correction will be intense on a global scale.   As I stated earlier, I have seen the movies. 

 My questions is what are the positive possibilities going forward?   The Oracle has seen this as a buying opportunity, what others are out there?

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#5) On January 31, 2008 at 11:20 AM, zygnoda (26.87) wrote:

congrats on making it to number one!

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#6) On January 31, 2008 at 12:04 PM, TDRH (99.92) wrote:

My 5 seconds of fame-blind pig can find an acorn on occasion.   Hopefully specbear will finish below 80% accuracy for one day, can't touch his score. 

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#7) On January 31, 2008 at 1:04 PM, ragefear (67.70) wrote:

Well if they started with Tariffing imports like they should I think that could help out with boosting the american economy and help keep work on american soil.

 Just a thought...

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#8) On January 31, 2008 at 1:26 PM, GS751 (28.30) wrote:

TDRH, congrats on making number one, although I will say I  miss SpecBear's quote with you up there.
contraray to Jim Rogers, (not bashing I have a lot of respect for the guy), I agree with you that there will be possbilties in the US, it is just finding them.  I am sitting on the sidelines in my real portfolio for most of this year.  There will still be 20 baggers in the US that will keep the rest of us searching for.  I do believe that a couple of years from now Lowes will be good a buy, dependant on many things, one thing being the purge of this housing stuff.  I posted about it in my blog.  There are also a bunch of tech companies I like that I believe will perform well in a bull market.  I like CSCO and INTC at these prices.  I actaully have been selling puts on them at these prices.  With those I am thinking of a 5 plus year holding period.  Cellulose ethanol is interesting I have been doing a lot of reasearch on it and so is Nano  Shoot me an email if you want any articles from the Burea of Land Managment I have come across.  One of my roommates is a big sciecne guy and he explains a lot of this stuff to me.  Right now PX is something I own due to lack of helium supplies,  I am looking at a lot of stuff espically resources that we are running out and the macro perspective will be right for investing oppurtunities.  I am a big believe in buy and hold, although I don't do it in caps because we have a finite amount of picks.  One thing about Jim Rogers I can say is "stick to what you know." I do believe that china after it purges some stuff will have some good oppurtunities.  Part of investing to me is a waiting game, waiting for good idea's,  For the rest of this year I am going to continue to do my research and jump on something when I see it.  I haven't had any great major ideas yet.  Most of Berkshires success was due to about 10 great investments, as Munger likes to say.

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#9) On January 31, 2008 at 1:33 PM, abitare (99.70) wrote:

TDRH,

Congradulations, thanks for supporting my points. 

FB,

The war and housing create employment, so did huricane Katrina. But the war and huricane Katrina are destroying the wealth of the nation and it's citizens. 

Americans need to consume less and and save more. Housing has become just another huge government created asset bubble. That was created after the dot.com bubble popped. The US real estate bubble will not reinflate, Japan has already played this out before.

Whether you agree or disagree gold and commodities have been the best hedge / investment.

Perma Bear Peter Schiff has been right also. Here is a 39 minunte interview on Bloomberg worth watching:

http://www.phildecarolis.com/ 

 

 

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#10) On January 31, 2008 at 1:37 PM, Persuter (81.60) wrote:

I think the clearest buying opportunity is buying against the dollar. Long-term call options on foreign currency ETFs, for example.

I will say this -- I was sort of sanguine about the whole downturn until this tax rebate thing. We're in a credit crisis, and they're forcing us to borrow money. It's kind of scary.

Heh, and I agree with you about not wanting to be president. Seems to me that Clinton and Obama are vying to end up being the next Jimmy Carter. :)

abi: Ron Paul? I'm not arguing for or against him, but it just seems jarring that you support a man who advocates getting rid of the Fed and allowing free competition of currencies, even private currency. 

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#11) On January 31, 2008 at 1:40 PM, MikeMark (31.43) wrote:

Not out of any sense of Nationalism or Patriotism, but more from a sense of "in the land of the blind, the one eyed man is king."

The one eyed man has vision! And so do you. I like where you are headed with this blog. The future is truly where it's at.

IMHO:

-The people of the US (including and especially our leaders) must become hungry. Interestingly, we are headed there.

-The people of the US must regain a serving attitude. In order to create and have exports that are valuable to the world, you must want to serve the people of the world.

-The people of the US must invest in and become competitive in real world needs. Food, clothing, shelter, transport, etc. Already I've seen farmers and ranchers I know rejoicing over higher commodities pricing.

-The people of the US must regain the seat of technology advance. Applications should be toward real world needs.

-The people of the US must reduce dependence upon imported products. The majority of goods used in the US should come from the US. This is just good sense. It reduces costs all the way around and provides jobs. When you see "Made in USA" displayed with pride everywhere, it will be a sign of progress.

I also believe that this must happen among the general public. In most cases the best thing for the govt to do would be to aid in making the above occur. Not currently popular at all.

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#12) On January 31, 2008 at 1:47 PM, Aerius (80.17) wrote:

I'm not a fan of all the doom and gloom either. Not saying it isn't justified. It's like when you screw up and everyone keeps pointing it out. Grats on top fool too (at least for the day).

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#13) On January 31, 2008 at 2:38 PM, TranGanZen (< 20) wrote:

If I were the one eyed king in the land of the blind? This is what I would do, but I am most certain they are not popular and I would be the most hated king of the land. However this would hurt like hell but in the long run I think it would do us good.

1) RAISE INTREST RATES - This would be painfull in the short run but we need to get out of the lend and spend phase. Initially intrest rates were cut to get the rich to sell their CD's and put more money into the market. This worked when intrest rates were above 10% to 15% (which was decades ago) but there is not much intrest rate left to cut. Now it is just encouraging foregn lending practices that got us into so much trouble.

3) DOLLAR - Focus on raising the value of the dollar. For decades the dollar was king, that is why everyone would compare their currency against the dollar. Sure we had problems with inflation back in the day but everyone had jobs and money to spend to begin with. Why should the dollar be second fiddle to the likes of the Euro and the Yen? Didn't we conquer Japan? Didn't we save Europe?

2) FREE MARKET - The market crashes, the sky is falling, and the feds will step in and shut it down if needed to keep it from falling too far, too fast. I say let it crash and burn and get the pain over with quickly instead of dragging out the pain over a long period of time. We fools all know after the sky falls is when there are the best opportunities.

3) E-COMMERCE - The internet is still the wild wild west and for e-commerce to actually work there needs to be a sheriff in town. Put forth incentive to create an international communications license. To operate a ham radio, radio station, TV station, phone system, or any other communications system you need to prove you know what you are doing. To have a web server you need to have money and nothing else.

4) WAR - Ages and ages ago it was well known that when you had a war it boosted the economy as industry ramped up production for the war effort. Some where in the middle of the twentieth century the rules on that changed mainly because the enemy was so small that industry didn't even flinch at production rate, they only knew that the best employees were going to leave the company till the war was over. The middle east is even worse because there is a history that section of the world where the foreign military will instantly surrender and then you are stuck with an occupational force that has a never ending battle with the different tribes bickering and at war with one another and insurgent forces constantly attacking the occupational force even though the local government is supportive of the occupational force. England learned this lesson several times though the 1800's and early 1900's. Even the Romans learned this fact over a thousand years ago! Is it any different today?

5) STOP SELLING OUT - It should be considered an act of treason when a politician sells out the nation to pocket money on the side. Gather the torches and pitch forks boys and listen for the sound of "Let them eat cake!"

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#14) On January 31, 2008 at 3:14 PM, jester112358 (29.65) wrote:

Excellent Blog.  The issue of too much gloom and doom being a self-fulfilling proficy is very true.

To one commentator:  the Japanese have been consuming less and saving more for the last 20 years and we see where that has gotten their economy.  So, that's not the answer. 

 Unfortunately, we're attempting, as usual, to borrow our way our of our spendthrift ways.    The only sound answer is for our country to increase its producivity, but we've given up our manufacturing ability and have moved to a "service economy".  Our remaining advantage is in science and technology (my field) where our  higher educational system is still  first rate.  We need more engineers and less lawyers.  In this we can learn something from the Japanese business model.  Our managers need to understand the products they are selling (i.e. less MBAs and more pHDs in charge).  We need more people like Steve Jobs running our technology companies.

 Unfortunately, we didn't get into this problem overnight and I wonder if we have the discipline and patience to make the tough choices necessary to slowly reverse our direction.  I'm realistic enough to understand its most likely we won't.

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#15) On January 31, 2008 at 5:35 PM, abitare (99.70) wrote:

ALCON,

The reality is the S&P has been a lousy "investment" for seven years. babababoooooyah!

Read and heed:

http://graphics8.nytimes.com/images/2007/05/05/business/20070505_CHARTS_GRAPHIC.gif 

Persuter,

We already have competing currencies in a way here in the US. People use gold money or use Everbank to have gold back CD or an alternate currency for saving. Wealthy people bank offshore in Switzerland / Cayman Islands etc.... A higher level of competition would be great. Remember ALL paper currencies fail, usually following a war. Remember the continental currency? Smart money got out of the dollar in 2001, hence the rise of gold and Euro. 

TranGanZen

1) RAISE INTREST RATES - The FED is trying to avoid a panic. Lowering rates they hope will work. It might slow the asset bubble deflation. But it is going to weaken the dollar and cause inflation, possibly hyper inflation.

"2) DOLLAR - . Why should the dollar be second fiddle to the likes of the Euro and the Yen?"

Simple: http://www.brillig.com/debt_clock/ 

Because they are not borrowing $2-3 billion a day. They do not have 700 military bases all over the word and they are not trying to play world’s police force.

"Didn't we conquer Japan? Didn't we save Europe?"

So what? Didn't the Ottoman Empire conquer _______? Didn't the Soviet Union "save" Afghanistan, Cuba and Vietnam from colonialism? If I recall most of Eastern Europe was not "saved", it fell under control of Stalin? Have you heard of Poland?  

"the feds will step in and shut it down if needed to keep it from falling too far, too fast"

Government intervention into capital markets is part of the problem. That is why Gold has gone from $330 to $930. The FED can only print money; it does not create wealth or safety. 

"We fools all know after the sky falls is when there are the best opportunities."

It reminds of a good quotes page:

"Unless we are to have a panic -- which no one seriously believes, stocks have hit bottom."
- R. W. McNeal, financial analyst in October 1929

Of course the market continued to fall and did not recover for 30 years. 

http://survivingthecrash.blogspot.com/2006/09/housing-bubble-vs-great-depression.html 

"4) WAR - Ages and ages ago it was well known that when you had a war it boosted the economy as industry ramped up production for the war effort."

Malinvestment - like a hurricane is good for employment to fix the destruction.  

"local government is supportive of the occupational force."

People on the payroll are generally supportive in front of you, they maybe building IEDs at night.  

"Even the Romans learned this fact over a thousand years ago! Is it any different today?"

Romans put to the sword all military aged males and sold the women and children into slavery. Also Romans return much of the plundered loot to Rome. Now days the plunder is privatized and the tax payer is supposed to pay for the adventure.

Iraq has 12% of the worlds oil reserves. Shell, Exxon, HAL etc.. have had record years. Privatize profits  make public the losses.

But to most Americans we have this:

http://www.brillig.com/debt_clock/ 

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#16) On January 31, 2008 at 5:50 PM, TranGanZen (< 20) wrote:

ok .... got to say this ... on the link http://www.brillig.com/debt_clock/

 

one word

 

 

DAMN! 

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#17) On January 31, 2008 at 10:04 PM, Tastylunch (30.02) wrote:

Hey TDRH

congrats on your moment in the sun earlier today.Really am impressed by your picking prowess.

As for your question  this is my take as to what should be done to lead us out of recession (not necessarily what ultimately what will )

-remove subsidies from food and oil  

this should make those products cheaper thus tampering inflation and boost consumer confidence more than getting cash back. Also agriculture is one of our few exports removing subsidies and the lower dollar should help our exports even more. Also there may be a hidden cost in "expensive" food in that it steers low income people into cheap highly processed food which helps cause diabetes (thus raising all our healthcare costs)

- incentivize small business, green tech (or other emerging tech) and manufacturing

As an Ohio resident (we were absolutely killed by NAFTA and have been basically been in recession ever since) it's very obvious to me that our economy is horribly unbalanced with far too much emphasis in the service sector . If our dollar is going to be weaker we might as well take advantage of it by actually making things besides creative products to sell overseas. Small business tends to the be source of most employment growth (according to IBD) so the government should either give them significant tax breaks over big businesses or just not give the new tax breaks to big business.

-stabilize the dollar

 Whether it be by raising interest rates or other means we need to stop the Dollar's fall so that foreign investors don't abandon our investments. I don't think strengthening the dollar is realistic but we need to at least stop the freefall.

-simplify the tax code 

The US government can save everybody a few bucks just by not making the US tax code longer than "war and peace". The sheer amount of time it could save large corporations could enrich us all.

-outlaw or restrict class action lawsuits

many businesses relocate or choose not locate in the US due to fears of our litigiousness. Class action lawsuits additionally don't really benefit wronged parties at all (who wants 30 cents off coupons for CD's?) only profiteering law firms.

As for what actually will happen as you actually wanted to know? Well since none of the above are likely to happen based off what seems to be happening...

I think the foreign consumer will bail us out eventually. I think entertainment and tourism in particular, now that our products are cheaper what we do have that foreigners want is our tv,movie videogame products (maybe even internet entertainment products like youtube could be monetized as well). As well as our entertainment attractions such as casinos, amusement parks etc.  I think food producers and software makers might do well as well..

anyway that's my two cents.

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#18) On January 31, 2008 at 10:25 PM, Denysnmd (< 20) wrote:

There is a point when the adage "You have to spend money to make money" makes sense even for the government.  They're clearly out of control and I have no idea what will fix that.  But, as for investments, anything that improves productivity will be the focus.  To me, this means, roads, bridges, airports, sewer systems, water treatment, water desalinazation, power production, in a word, Infrastructure.  Just as electrification brought huge productivity gains, so might high-speed internet-ization of this land where less than 10% of our population currently participates.  All these projects use local labor.  Encourage local materials to become the suppliers and we might see some real changes.  Personally, I think congress should push airlines to respond to their contribution to global warming (instead of protecting them from it) and make them find ways to give up their planes.  Let them buy into high-speed mag-lev rail links.  LA to Vegas is an obvious route where planes should be forbidden.  Power supplies will be needed and the desert there just happens to have a ton of sunshine.  We know how, maybe not well, but that comes with doing and we're just NOT doing.  I believe this next decade will be forced in so many ways to deal with infrastructure.  Lack of water in the Southeast and Southwest, Coal pollution levels becoming unacceptable in the Northeast, aging rails, roads, bridges and such with devastating consequences to commerce like the failure of the bridge in Minn. will force us to start paying (borrowing even more) to fix.  This investment in US (pun intended) will yield the best long term results and there are a lot of investment opportunites there though GE is the ONLY company that comes to mind.

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#19) On January 31, 2008 at 11:18 PM, abitare (99.70) wrote:

TDRH,

Sorry for flooding your blog. You can kick me out if needed. :)

tasty,

I was in agreement, but then you lost in the end.

I think the foreign consumer will bail us out eventually.

NO WAY! Even if the dollar fell another 50%. The US has some tourist sites (Grand Caynon, Graceland, Disney). But have you ever been to Europe? There is history and culture and food etc.... Asia is extremely intersting and cheap. African Sufari is worth doing also. The US has strip malls, fat people, franchise food and cheap shopping. But the Shops are selling Asian goods.

"I think entertainment and tourism in particular, now that our products are cheaper what we do have that foreigners want is our tv,movie videogame products"

With the exception of England and the newest video games, 99.999999% is copied or downloaded. Foreigners rarely pay for store bought music or movies. Have you ever been to limewire? 

"As well as our entertainment attractions such as casinos, amusement parks etc." 

You have obviously never left the US? Casinos are EVERYWHERE outside of the US. Except maybe Saudi Arabia and there are pleny of amusement parks also in the World.

Also foreigners want our assets: ports, companies, agri businesses, hotels, toll roads, lumber rights etc... Selling all of your assets does not make you wealthy in the long run. At some point the US will run out of business to pawn, like the former Soviet Union, before Putin nationized all the former assets.

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#20) On February 01, 2008 at 2:50 AM, Tastylunch (30.02) wrote:

Abitarecatania

I think we are more in agreement than it seems. I'm not very bullish at all about a recovery, but I do think we will eventually have one just not a very robust one. I do however think the US economy has a very real, very long term problem that could possibly cause us to lose our internationally dominant economy status  in a decade or so. TDRH however I believe was asking people what they thought would bring the US out of this particular recession,  not the long term economic outlook for our economy

Yes I know what limewire, bittorrent, imesh, kazaa  etc are. Yes I have been to other countries (and yes I've been to other countries besides Canada).

I do think you are wildly underestimating how many tourists come to the US every year and their potential impact. Foreigners already choose to visit the US despite the other options you mentioned, I don't think they are going to stop coming here because it's more affordable to do so!  Not every tourist would necessarily have to come from Europe/Asia either. We may start getting tourists from non-traditional place like South America in larger numbers. 

If you are a foreigner planning a foreign vacation you may end up picking going to Las Vegas for gambling if you perceive it to be better value than say Monte Carlo. I don't think every city and state will benefit from this (say places like Des Moines and other places that lack natural/cultural attractions) for the reasons you basically described. Our national parks also attract large numbers of foreign tourists and there are several business related to those that could benefit as well. I would think Amusement parks, Hotels , Casinos and other travel related industries could all potential benefit handsomely from more international tourism (with the probable exception of airlines whose fuel cost problems are significant, barring consolidation in the sector). Of course this is assuming that the rest of the world doesn't follow us into a deep recession...

As for the entertainment  and software I concede that piracy is a problem, but I do think it's potentially manageable. How profitable those businesses can be will depend a lot on enforcement and DRM tech advances (through things we hate like starforce). It's not like many of us paid for music online until the RIAA went nuts. Now look at Apple. I'm sure some places like Vietnam, Romania etc will still probably pirate in huge numbers but I do think more foreigners may also be less inclined to steal if the prices of the goods fall enough.

Ad supported Internet entertainment like youtube (or really Google I should say) or various streamed tv shows I would think would be less vulnerable to piracy. They still need to be monetized properly though to be really lucrative.

I can't really think of too many other sectors in the US that could benefit from the weak dollar (besides say Food producers). There aren't many Boeings and Catepillars left domestically...

I agree 100% with you last point about auctioning off assets. I don't think that's a good thing at all for the US long term (Indiana I believe sold off their toll roads to an Australian company not too long ago).  I can see how it could however give companies a short term boost (e.g. IBM selling it's computer division to Lenovo) which could be enough to help drive us out of recession. I suppose it just depends on how much gets sold in terms of long term damage is done.We did survive Japan's aggressive US asset purchases in the 70's and 80's.

Anyway that's just my best guess of what could be the main drivers in a mini recovery based off how the Fed and the Federal Gov't seem to be approaching the problem for what it's worth. I certainly could be wrong, my CAPS rating of late doesn't make me look very smart :-)

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#21) On February 01, 2008 at 7:00 AM, DemonDoug (99.67) wrote:

I want to make a couple of quick points about tourism and get to my answer to TDRH's questions:

I've traveled around the US quite a bit over the past few years, and many of the canyons and parks, you see places chock full of foreigners.  This is a double edged sword however, in that 1. How much more capacity is there for more tourists?  Yosemite as I understand it cannot handle any more with severe destruction to the environment.  Zion when I went there was a zoo of homo sapiens.  Grand Canyon also crowded.  The ski slopes?  Crowded as all hell.  Now, this leads to 2. The way many resorts and parks can make more money is simple - raise the fees.

Now let's look at the double-edge of this:

1. The devalued dollar, while it helps foreigners, makes it much more difficult for the average American and his/her family to explore the natural wonders of this country.  And yes, this is a beautiful land, we can argue this, but I can tell you just amongst my friends - 20's and 30's something - that time and money are in short supply to be able to enjoy it.  I had to give up my season pass to my favorite mountain because after 3 years, I got tired of going it alone, and no one I knew had the time/money for it.

2. Let's see, if they raise fees - well now, that would be an increase in prices wouldn't it?  What do we call that boys and girls? Oh yes... inflation.  Yuck.   And with American wages stangant or dropping, we ge the dreaded "stagflation."

-----------------------

Now, onto TDRH's question.  If anyone wants the real short answer, skip to the bottom part in italics where I summarize my theory on what will be the leading industries out of recession.    I am still very bearish, and the Fed pandering to banks' business as usual continues to rip at the threads of our society. The bear case has been outlined many times (by me and others), so let me layout a possible recovery:

Mortgage interest rates start going up despite the Fed lowering rates.  This is due to the fact that it is now foreigners who are ultimately lending to US banks, and the Fed funds rate is meaningless.  Housing continues to crash, and hopefully will crash HARD very soon.  Florida, I know you were being cheeky, but IMO, the best case scenario would be a very quick and VERY VERY PAINFUL recession.  Cut another 40-50% off the national median home price, and guess what?  The low price along with even high unemployment will allow for investment opportunities that people like florida and cabuilderboy can create some real smart dealings on, and will allow middle-class hard working Americans like myself to actually buy a home - not just be a home debtor.

Now, with home prices more reasonable, and interest rates higher, we have more people actually saving and the national savings rate goes positives.

Oh, and let's kick out the spend and give tax breaks on the rich republicans.  Roll back the tax cuts, which really were tax cuts on the rich and tax INCREASES on the middle class and poor (due to the fact that these populations have to pay more for health care, food, and education), and now you increase the buying power of many americans, who are now beginning to save.  Oh, and look at this! what few banks remain, because they will be growing deposits, can now start lending again so hard-working productive americans can actually buy an affordable house.

It's so simple, problem is it takes a lot of going against the status quo, which banks and wall street don't like.  I believe something like this will take place, but it will take longer - maybe 5 years or so, when in reality if we just had 50% of all banks, homebuilders, bond insurers, title companies, etc. all go out of business today, the recovery could start in 6 months, as opposed to 2-3 years from now.

Okay, so I've laid out an atmosphere where we have recovery.  What will lead the recovery?

Well, tech lead in the 1990s.  Housing lead in the early 2000s.  What will lead next?  Here are some candidates:

1. Energy.  Mostly referring to alt-energy.  It is likely with a downturn in oil that many solar, wind, "green" energy companies are going to go down the tubes with any drops in oil companies.  But make no mistake, this time it's for real - alt energy is here to stay.  And where else in the history of the world has there been more invention, innovation, and business acumen to sell new products?  There are so many possibilities - nanotech, solar, biodiesel, batteries, wind, hydroelectric, manufactured diamonds, ethanol (p.s. - hydrogen fuel cells are a complete boondoggle, never invest in them).

2. Infrastructure.  If energy or alt-energy doesn't get us there, then infrastructure investment is the next likely candidate.  One of the ways we can determine what will bring us out of recession is to listen to political leaders.  Georgie talked about people spending and having an ownership society - and then we had a RE bubble.  This bubble happened not just with the support but at the urging of the government.  The hot topic of the day is Infrastructure.  It's great we have all these homes but... horrible traffic, not enough trains/public transportation, crumbling bridges and roads, power grids that need upgrading/repairs, pipes cracking and leaking, and old water systems.  Ah, yes, water, it deserves it's own subtitle:

--2A. Water.  One of the dumbest things i've learned since being in Los Angeles is that if it rains here, very little of the water gets into the water supply.  Most of it is funneled to be dumped in the ocean.  How stupid is that?  Most of the water in socal comes from the sierras and the colorado river, so the snowpack and water levels there are what matters most.  This is quite insane, imo.  Then, we look further at the piping around many cities which is decaying - in san diego last year a few homes were lost to a sinkhole. A SINKHOLE.  Lol.  How retarded.  Only one way a sinkhole shows up in a place that arid, and that's bad pipes.  And of course it doesn't happen just there, it happens everywhere.  When I was in Philly, I used to hear all the time of blocks of homes that would go under with sinkholes due to 100+ year old pipes bursting.  I'm sure this is happening all over the country, but the fact is it's just not all that sexy - at least not yet.  Then we can talk about the levees and how they need better management.

And what we develop here in the US we can export knowledge, expertise, materials to international markets.

If one wants to play the "infrastructure/water" investment, then I have one recommendation for you: GE.  I believe GE will be a great investment in this environment; I've thought about going long on GE but I'm afraid regarding the banking/loan division, want to make sure they are clean, but overall GE is a great play on infrastructure.  Tasty, I believe the Aussie company is Macquerie, ticker MIC, they basically trade like a utility company with stable share price and high dividend (around 6.5-7% now), I also think they are a good long-term infrastructure play.  They own a lot of parking lots. :P

3. Tech/nanotech/biotech - In case anyone hasn't noticed, the US is still the best place in the world to be an entrepreneur, the best place to take an idea, get funding, start a company, build that company or sell it to another company, etc.  I biotech in particular ESPECIALLY becomes more viable if we get a Democratic Congress and a Democratic President, because the Bush Administration has put huge shackles on biotech, and the Dems have shown huge support to biotech and life sciences.  We will get immediate resumption of stem cell research, more support from the FDA, very likely better overall governmental organization regarding drugs and drug approval.  The Dems have a much more favorable relationship with silicon valley and have been in recent history much mroe forward thinking in regards to the tech businesses.  Nanotech in particular is a great wild card - it can literally be used in anything.  I read recently about a researcher at stanford that increases battery life by a factor of ten with the use of nanowires.

Many if not all of these businesses have been stifled under the religious fascism of the Bush Administration.

Now, we have affordable housing, a positive savings rate, and hell, let's be really optimistic and say we'll pull mostly out of Iraq and Afghanistan and those operations only cost about 100B a year after 2010, and now we have a government that is supportive of innovation especially of alt-energies (as opposed to just the lip service) and hell, we even ratify the kyoto protocol and raise gas mileage standards.  Suddenly we now have a HUGE increase in demand for energy technologies (which, by the way, our homies in floridabuilder and cabuilderboy can help us out on by building homes that are energy efficient), and not just the trickle of increased demand for energy tech, and we could see in very short order a very large shift in the way we power our lives.  Now add increased infrastructure investment along with greater opportunities for all the other tech industries out there - hell, we might even get another tech boom.  This is an honest appraisal here too, not being pollyanna: I think if the democrats control congress and the white house, it is quite possible that the Nasdaq might get back up over 5k by 2012, and if there is a bubble, watch out, it could easily go to 10k by 2015.

Ah yes, and with all this new demand, we will see growth in advertising... and where do most ad firms work from?  That would be the US. :)... and on and on, and what's it called when business is increasing causing more demand and more business creation?  Virtuous cycle baby.

Basically what I'm saying is that we could easily restart a virtuous cycle of business, but we need to A. Get Bush and his cronies the hell out of our lives and B. Go through the pain of a SHARP recession, end this viscious cycle quickly, or else the recovery will be delayed and might not be as strong as it could be.

Hopefully this gives you an idea of where we will be going, and gives you some theories of some positive outcomes.

Short answer: energy, infrastructure, and tech (nano, bio, all others) may lead the way to a new virtuous cycle.

p.s. Electric cars are coming this year too - keep your eyes open for investing opportunities in "zero emission vehicles" 

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#22) On February 01, 2008 at 1:35 PM, jesterboomer (80.50) wrote:

Europe has been where we are today in the US.    Rapid outsourcing of manufacturing and, now, services.  I believe that a democrat government actually has a better shot at revitalizing the US than a republican one, why:

1)  We should look upon health care as a virtuous industry but the current system of insurance is incredibly inefficient.  Health care spending will grow substantially and will add to GDP and employment if it is properly restructured.

2) Many people in the US don't have much money to spend.  In an increasingly service based economy, money has to be recycled within the US.  The very greedy CEO's and wealthy are not giving back their fair share to the US economy if they are buying overseas mega-homes, yatchs, etc.  We actually need higher taxes on the very wealthy and some reasonable inheritance taxes.  Wealth that is generated in the US needs to substantially remain in the US.  This does not mean we cannot benefit from investing overseas - we can.

3)  We need to stop the continual drain of money into Iraq asap and reduce defense spending - put it into health care and infrastructure in the US.

4)  We need to get serious about alternative energy - solar and nuclear.  Biofuel subsidies are of very limited benefit.

5) Ultimately, we have all the resources we need in the US to enjoy prosperous, healthy lifes.  It just needs the correct social  environment to foster growth in appropriate and useful directions.   That will not be provided by  greedy and selfish attitutes that have marked the current administration.

 

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#23) On February 01, 2008 at 1:39 PM, WCWlooky (23.68) wrote:

Congrats on top fool. It is supposed to be

15 minutes of fame, but I think you will

do much better than that. As for your blog,

I am not sure this is true or not, but I heard

the Media and the talking heads have only

correctly called two of the last 11 recessions. 

 

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#24) On February 01, 2008 at 1:57 PM, zygnoda (26.87) wrote:

I agree with DemonDoug.  I think those different areas have the potential to get the economy going. 

DemonDoug.. I want the Telsa Roadster

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#25) On February 01, 2008 at 4:05 PM, Persuter (81.60) wrote:

DemonDoug: I'm surprised you mentioned GE as an infrastructure play but not a clean-energy play. Not only does GE make quite a few clean-energy components, such as wind turbines and nuclear reactors, but demand for cleaner power will increase demand for their newest, most expensive coal, gas, and oil power technologies. 

Your point about biotech really being helped by a Democratic victory in November is interesting. I don't know how much "shackles" the Republicans really put on it, though. Stem cell research, sure, but biotech's a big field. 

Also, just a side note, natural sinkholes aren't uncommon in coastal areas. There was one about three hundred yards from my apartment in Florida that shut down a major road. Florida gets a lot more of them than California because it gets more rain. The sinkhole in San Diego, assuming I'm thinking of the same one, happened because of the major rains there.

Anyway, I'm not sure how much I agree with your points about infrastructure and tech. I do think you're absolutely right about the tax/spend imbalance we have now, though. We simply cannot borrow two hundred billion a year and expect it to have no effect. Indeed, I suspect the one and a half trillion that Bush borrowed between 2001 and 2006 had something to do with the subprime crisis. When you're making a lot of 100% guaranteed loans to the Treasury, you can accept more risk on your other loans.

WC: That stat can't really be right, since there's no sure way to count "calling a recession". It's not like the media and talking heads all have a vote on it. 

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#26) On February 01, 2008 at 5:49 PM, cubanstockpicker (< 20) wrote:

When you have a President that was Hard up on waging war, he didnt take into account collective wisdom of generals before him.

Sun Tzu in 99 BC: "You must raise one levy to wage a war, you must act quickly and decisively and not wait for reinforcements. Do not raise a second levy."

"The greatest of Generals win a war without spilling a drop of blood." 

"When in a position of strength, act in weakness, when in a position of weakness, act with strength"

Conclusion George Bush, David Petarus and the Washington elite dont have a clue about what to do.

Borrowing more money to wage a war is removing the will of the people. 

REPUBS that preach against taxes and democrats, borrowing 1 trillion at 25% isnt really smart, especially since the 1 trillion, or part of it could have been spent WISELY creating alt energy infrastructure spending reducing our need of oil.

Wow a double whammy Mr. President, job creation and energy independence. Another Point about talking head Repubs, its not even about global warming, its about ENERGY INDEPENDENCE and the stranglehold of oil which is costing us through our nose.

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#27) On February 01, 2008 at 5:58 PM, borcobob (72.45) wrote:

How is it that so MANY for us fools missed HOV so bad?

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#28) On February 01, 2008 at 5:58 PM, DemonDoug (99.67) wrote:

Persuter:

You are right about GE.  Clean energy, infrastructure, and oh yes they are a leader in water and also healthcare.  GE is a great company to own if you get it on a gap down.

The Republicans have a long history of stifling medical advances.  I find it fitting (not ironic, but fitting), that Ronald Reagan vetoed a bill that would have given a large increase to Alzheimer's research - and that's what killed him.  How fitting would it be if GW Bush got some disease that we were 10-20 years from curing but there would be a cure with stem cells, and it killed him?  Stem cells are just part of the picture.  The FDA under the Bush administration has been a disaster, this is directly attributable to the fact that Bush appointed people to give them cushy, easy govenrment jobs - basically government nepotistic welfare.  He is the worst president in the history of the US, and it's only a testament to the people of the US that our country hasn't completely fallen apart.  Also, I'm not sure you realize how damaging the lack of stem cell funding has hurt our country in the short and long term.  Many researchers that would have worked here have gone to other countries.  No, stem cells are not going to be a magic bullet, but it's a symptom of an administration that has set our country back by decades in terms of medical research. 

Regarding sinkholes, there is one major difference between florida and and san diego.  Florida is one big swamp.  You've got water everywhere.  Water erodes limestone underground and creates sinkholes.  Southern california is a desert.  Deserts don't have huge amounts of natural underground water and limestone :P.  So yes, I know in florida and other swampy places sinkholes are common.  And Philly, where I'm from, is actually kind of swampy too.  But the major cause of sinkholes outside of that is bursting pipes (and in Philly there quite a lot of limestone to cave in if a pipe breaks).  The sinkhole in san diego was before any rains came, this was back in October, and it doesn't ever rain in southern california in october.

"The Guatemala City sinkhole that killed three people and swallowed dozens of homes was formed by the same thing that creates sinkholes in Los Angeles. Not weather. Not an act of God. Not strange rock. Bad sewer pipes created this sinkhole. And the problem is getting worse, around the world and in the United States."

Also, in terms "infrastructure and tech," it's just a hypothesis on what will lead us out of recession.

 

OT- TD, what's the deal with TSO?  Are all refiners going to get killed with poor crack spreads?  I generally still love oil and gas as an investment, but I'm getting a little squirrelly about putting new money into it.  I saw recently MRO dropped below where I would consider buying, and there are some others I genuinely am interested in putting real money in.  The only problem with investing in oil is that it's far away from my areas of expertise (other than the fact that I drive a car), but I'm looking to educate myself on oil investing, any ideas where to go and what to read? thanks man. 

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#29) On February 01, 2008 at 7:29 PM, DemonDoug (99.67) wrote:

bob- hov is short covering nonsense.  that's about it.

zyg - I would give my right cerebral cortex for a tesla roadster.  Assuming they actually hit the freakin market! 

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#30) On February 01, 2008 at 7:57 PM, OttoBismarck (76.91) wrote:

Wow.. Really interesting comments here..

First of all, TDRH congrats on your number one.. Must feel good..

As being said, there always these ´hidden gems´ or unexpected multi-daggers etc.. And, although the US are up and have been up for correction, I think some positive news might be highlighted as well:

We're or you're getting rid of Bush. That's good news: a Hillary/Obama combination will do the image of the US much good. And believe me, here in Europe there have been a lot of anti-american feelings over the last few years. I think, that with the focus on energy-saving policies and a democratic white house, trust in the US will recover.

What will we get with the democrats? War retreat --> better image of the US, less expenses --> stronger dollar. Plus, oil dependency of foreign countries (a huge factor in the ever-increasing US debt)  could get close to zero with the focus on clearer energy. Ethanol, electricity, fuel efficiency, solar energy, uranium etc.. all can be important in this process and can provide interesting plays..

My most interesting one is CHK, because natural gas is for me the best alternative for gasoline. XTO is another one. GE perhaps the best one. I guess the time is here that the historically more boring stocks are becoming the more interesting ones. It's the challenge to find the affordable ones. Way better than buying bits and bytes from the internet biz. at stellar prices!

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#31) On February 01, 2008 at 9:02 PM, floridabuilder2 (99.63) wrote:

holy crap TDRH... now that your the prettiest girl at the prom everyone wants to dance with you.......... again congrats... I find it interesting that you have recently switched to green thumbs vs. red... is this because you feel that the recent correction has provided some good value plays in the commodities, etc???  or is this temporary thinking?

That LEN green thumb is working for you, but I would cash that out... the low point for builders should occur in April May if spring selling season is a bust.........  I'll know more soon because Spring selling starts right after the superbowl

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#32) On February 01, 2008 at 11:18 PM, Tastylunch (30.02) wrote:

DemonDoug

just wanted to rebutt a little of what you said about tourism.

yes the natural parks are way over stretched, I don't think it's a good thing at all ecologically for them. Particularly ones with sensistive ecologies, like Glacier, Yosemite, Denali and Bryce. However I don't think the goverenment is going to restirct access to them more so than they already have (with the shuttle program). That would be hugely unpopular.  The real benefits of the parks is not the revenue they themselves generate but the fact they bring foreigners into the country at all. Many foreign tourists decide to come here to see a park but then afterwards go to other locales while still here (like ski resorts). That's where the real benefit of our parks could come from.

Actually I would think the devalued dollar should not hurt American domestic tourism very much. If anything it should be a wash or  encourage it some. A weaker dollar will strongly deter Americans going abroad and thus leading many Americans who would ahve gone abroad to spend their vacation time here domestically instead. What will hurt American domestic Tourism is domestic recession (like we have now), but that doesn't mean tourism can't be an industry that leads out of one.

Finally hotels and such have other ways to make more money besides raising fees . They can add room capacity, upscale facilities and add services. Foreign travellers with more discretionary income may want to retail shop more, order room service, golf, buy ski packages, buy show tickets,  get spa treatments, etc.Furthermore increased interest often lead to increased competition which will (new hotels etc), help to keep prices in check. So Hotel's/resorts increased profitability doesn't necessarily have to = inflation.

Again this is just one scenario I see as likely, not what should ideally happen. Personally I'd prefer to see greentech,biotech, manufacturing and infrastructure modernization lead the charge like you mentioned. I don't think any of those are foregone conclusions though in an election year since they are dependant on help from congress... Let's hope congress is smart enough to help them along.

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#33) On February 02, 2008 at 2:11 AM, jegr5347 (< 20) wrote:

Even thought the US has exported industries, they can easily be imported back on a cheap dollar. It is only a matter of time before the yuan gets revalued and that will bring more equilibrium into the picture. I was watching MSNBC report about Indian businessmen complaining about the rupee appreciation crisis. All of these currencies need to come to equilibrium and when that happens, the US will be fine. They cannot be artificially managed forever without creating upheaval in their own back yards. In the meantime, our house needs to get cleaned up. Homebuilders and banks need to go under, major investment and consumer banks need to stop behaving like hedge funds and people need to realize that Google and Apple are fads and not long-term sustainable investments or bellweathers of the economy. Did anyone hear Brin's comments after earnings release.....uuurghhh!!!!

There will be a 1-3 year dump accross several industries, mostly retail and real estate. I see infrasctructure, technology and industrial manufacturing as the stars for the next few years, mostly on international demand.

FYI keep an eye out on Boeing, between the (1) Dreamliner, (2) the favorable currency against the euro and (3) Airbus industries expensive cost of labor, I see a major turn of events. Airbus has a can of whip A$$ coming to it. This is just one example, Texas Instruments, Cisco, Caterpillar, Ingersoll Rand, United Technologies among others.

Disclaim.......I green thumb and own Boeing. 

 

 

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#34) On February 03, 2008 at 1:12 AM, StockSpreadsheet (77.42) wrote:

I'm late to the party, but will add my two cents.

Tourism will be part of the economy that will help lead us out of recession.  The cheap dollar will bring in more foreign tourists, so that should help our balance-of-payments deficit.  A play on this would be hotels.   Not sure if there are any cheap hotel stocks right now, but if you want to play the tourism angle, then it would have to be the larger hotel chains, (Hilton, Sheraton, etc.). 

Manufacturing should also do well.  The cheap dollar will help our exports compete with those from around the world.  Our major manufacturing exports are heavy equipment, machine tools and aerospace, (civil and military aviation).  I see Boeing being a big beneficiary.  The cheap dollar will aid them in their competition with Airbus.  I think Caterpiller could also get a good benefit, aiding them in their competition with their Japanese and Korean competitors.  Deere may also benefit. The military exports are less price sensitive and are limited due to political restrictions.  (China would love to buy a bunch of F/A-18s, but I don't think we will sell them to them.)  Due to the political restrictions, the military exports will have less benefit from the cheaper dollar, though Lockheed-Martin and Boeing could still benefit some.

Another of our major export industries is agriculture, (especially wheat and corn).  The cheap dollar will help these industries, but high oil prices could hurt due to raising the cost of fertilizers and the cost of operating farm machinery.  China could become a big market for us here.  I have read that China is taking some of their more marginal land out of cultivation due to erosion and polution problems.  This should help us as they turn to us, the Canadians, the Australians or the Argentinians to supply their grain needs, (since those are the major wheat and corn exporters that I know of).  Deere again could be a beneficiary due to farmers with more income buying newer farm machinery.

Infastructure investment will also help pull us out of a recession.  One beneficiary of this might be Cemex, as one of the largest cement companies in the world with a large U.S. presence.  Some local steel mills might also benefit.   

Eventually, housing prices will stop falling, or at least slow their descent, and the banks will get to the point where they have written off most of their bad debts.  At this point, lending and construction will start to pick back up.  This will help the economy and will also help pull us out of recession, since it will be both a confidence booster as well as giving an employment boost.  

It's probably too early to buy any of the above companies, (they will probably be better bargin three to six months from now), but they are my guess of who will benefit the most from the falling dollar and the above industries I think will help pull us out of the recession.  Time will tell if my guesses are right.

As for the other comments above.

1) I think if we pull out of Iraq too fast it will be a disaster.  Rightly or wrongly, we bombed the crap out of them and now we got to help fix them.  If we do it correctly, it could be a great benefit.  We bombed the crap out of Germany and Japan using a lot of the same rational that we used on Iraq, (a dictator that was attacking his neighbors and threatening the world).  We also stayed for years to help fix Germany and Japan and they became great benefits to the world after a few years of very desperate times.  If we help Iraq get back on its feet, maybe it can become another Germany or Japan, (stable society, good economy, strong currency, etc.).  If we pull out too soon, I think they will become another Somalia, (anarchy, local warlords competing for power, etc.).  We don't want such a society sitting next to 30% of the world's oil supply, not to mention the anarchy would be the perfect training ground for terrorist groups.   I do think we need to work harder to train Iraqis to take over the military duties and the policing duties and move more towards training their people to do what our military is now doing so that we can turn most of it over to them and maybe have a token force to help in major insurgency actions and to make sure that somebody, (such as Iran), doesn't invade them while they are in their weakened state.

2)  I also agree that the government should change a few policies to help the American economy.  I think that taxing savings at the same low rate as capital gains would be a start.  That could help encourage saving, giving benefit to American banks and industries since then maybe we could fund our own needs with more of our own savings instead of borrowing abroad.

3)  I also think that we should move more towards fair trade instead of free trade.  Allowing unrestricted access to the American market for Chinese manufacturers, as an example, while we face severe restrictions in trying to access their market is not helpful to our domestic economy.  They should face just as many restrictions in accessing our market as we face accessing theirs.  If they lower their restrictions, we could then also lower ours.  This isn't a problem we face with just the Chinese.  It is true of a lot of nations, but since our biggest trade deficit currently is with China, that is a place to start.

4)  I think we should focus a lot of energy on clean energy and on coal conversion technology.  We have lots of sun in the southern U.S. and could derive a lot of power from solar energy in those states if we work to make solar energy more affordable.  If we work to make it more affordable,  that could then become an export industry for us, potentially.  Also, the U.S. has the world's largest coal reserves.  We should get more of our energy needs from coal, but need to try to diversify it and clean it up.  Clean coal technology is a start.  Coal liquifaction and coal gassification technologies could spread the benefits.  We could greatly reduce our oil imports if we power more of our power plants from coal-derived sources and derived more of our gasoline from coal-bases sources.  Less oil imports would help our trade balance and could also lead to an export industry.  It would also have fewer of our dollars flowing to radical foreign governments, which I think makes it a win-win proposition.

5)  I think that the dollar needs to stay weak for a while.  A strong dollar helped kill our manufacturing sector, which is what helped lead us into this import-centric country that we are today, (along with some short-sighted and one-sided federal policies).  A weak dollar for a few years might encourage us to buy more American products, (since the foreign products would be more expensive), and could help bring some of those manufacturing jobs back to the U.S..  We could then reinvigorate our manufacturing base to aid our information-economy base that we have.  This would make us a stronger nation.

6)  I think if we have a Hillary/Obama ticket, then it should be an Obama/Hillary ticket.  I think that Hillary would be a disaster as president, but that Obama could be interesting.  I don't like McCain, but am still undecided between Romney and Huckabee.

Well, those are my thoughts.  Nice discussion folks.  Best of luck to you all.

Craig 

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#35) On February 04, 2008 at 12:44 PM, Gtrinvestor (99.92) wrote:

What will get us out of this in the long-term?  In other words, what competitive advantage does the US hold over all other countries?  As trite as it may sound, it is our diversity and knowledge base, both of which are being put under strain lately.  Let me expand on these thoughts:

I was at a walk-in-clinic the other day for a cold, and I ended up getting a woman doctor who was raised in India, came to the US in her late 20's.  I was down on the US as an economic powerhouse, thinking that we were headed towards European status (another has-been world power), but she quickly stepped up to defend the US.  Her reasoning, nowhere in the world do market ideas so freely get exchanged, and nowhere in the world can anyone turn their ideas into dollars. 

The doctor's example was her and her husband (both doctors).  Whe said that first her husband came to the United States with $5, and now he is a radiologist.  She came to the US with $2, and now she is a general practitioner.  "Where else in the world could this happen?" she asked me?  I told her India, to which she said nonsense.  Too many caste issues still among other things.

Education is the other big issue which helps us (for now, but is fleeting).  Ideas will always make more money per capita than physical labor, so we need to continue to work our way up the food-chain.  Education is the only was this is going to happen (or we need to allow the thousands of engineers being generated by India each year into the US).  Education is expensive, but it is worth it.  Even though my kids go to private school, I have no problem writing my check for property taxes supporting the local public schools.  To play off the old adage, we need to teach the people in the US now just how to fish, but how to be the best fishermen.

So TDRH, you ask what will lead us out of our slow decline?  Is it monetary policy, adopting the gold standard, restrictions on imports, etc?  I say that those are tactical moves, but not strategic long-term solutions.  What we need is to invest more money education and creating smarter people, and the rest will take care of itself. 

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#36) On February 04, 2008 at 1:24 PM, zygnoda (26.87) wrote:

Does anyone else have anything to say about the education system?  It's in the news a lot.  They always talk about loosing our competitive edge in education.

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#37) On February 04, 2008 at 2:15 PM, TDRH (99.92) wrote:

GTR, this is what I meant by "in the land of the blind, the one eyed man is king." The US still has a lot going for it. Are the BRIC economies going to unseat the US? I personally don't think so, though with the current state of our financial institutions, domestically and internationally, it is a possibility, but I believe all countries will be hurt by financial collapse.

Think you are spot on with education, and encouragement, tax incentives for continued education both for corporations and individuals. People are going to have to retrain/retool two or three times in their working careers.

But ours is for the longer term strategy, not what is going to bring us out of the recession near term. Bush is all about putting money in consumer's hands ASAP-give a man a fish, you feed him for a day, teach a man to fish and you feed him for life.

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#38) On February 04, 2008 at 3:19 PM, mickeyc21 (96.55) wrote:

I can answer the tourism questions. One of the cities we operate in is a great bellweather for the issues everyone has raised here: Las Vegas. Yes foreign tourism has noticably increased particularly from England. The English basically have to get on a plane to go anywhere and if packages to Vegas are cheap their attitude is "why not". I believe domestic tourism is down but this is anecdotal.

The moment for me when I decided the recession was gauranteed was when this MASSIVE project next to the Bellagio went bust: http://www.kvbc.com/Global/story.asp?S=7689467&nav=menu107_2

If a vast dedication to greed and peoples addiction to easy money can't get funding there is something interesting going  on.

The 60% year on year drop for September 2007 for my business gave me some kind of clue too! We aren't hugely geographically diverse but we cover California (worlds sixth largest economy) and Nevada - and no we are not mortgage brokers or a homebuilder!

Those relying on tourism forget that the infrastructure for tourisn here is fairly poor compared to a lot of other destinations - with the obvious exceptions of Vegas and New York City - and the truly appaling reputation this country has overseas. A large number of foreigners genuinely believe that walking down the street of a major US city is like a stroll through Baghdad.

It will be interesting to see how long the English keep coming as their own version of the housing meltdown makes frequent front page news over there. 

 

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#39) On February 04, 2008 at 9:42 PM, masokotanga (99.71) wrote:

I feel the need to comment on this: 

"I think if we pull out of Iraq too fast it will be a disaster.  Rightly or wrongly, we bombed the crap out of them and now we got to help fix them.  If we do it correctly, it could be a great benefit.  We bombed the crap out of Germany and Japan using a lot of the same rational that we used on Iraq, (a dictator that was attacking his neighbors and threatening the world).  We also stayed for years to help fix Germany and Japan and they became great benefits to the world after a few years of very desperate times.  If we help Iraq get back on its feet, maybe it can become another Germany or Japan, (stable society, good economy, strong currency, etc.).  If we pull out too soon, I think they will become another Somalia, (anarchy, local warlords competing for power, etc.).  We don't want such a society sitting next to 30% of the world's oil supply, not to mention the anarchy would be the perfect training ground for terrorist groups.   I do think we need to work harder to train Iraqis to take over the military duties and the policing duties and move more towards training their people to do what our military is now doing so that we can turn most of it over to them and maybe have a token force to help in major insurgency actions and to make sure that somebody, (such as Iran), doesn't invade them while they are in their weakened state."

First of all, last time I checked, Japan directly attacked us! Also, Hitler was destroying the world economy and western style democracy, and had plans to eventually conquer the US! Iraq never posed a direct threat to the US militarily.

Second, we were able to rebuild Germany and Japan without insurgencies because those were ethnically homogeneous societies with strong central governments. When you defeated the central government, you defeated the society. Iraq is an artificial country carved up by the Brits after the fall of the Ottoman Empire. It doesn't matter if we stay for 1 year, 10 years, or 100 years, as soon as we pull out, Iraq will go the way of Yugoslavia.

As to the original question, right now, I only have two US companies that I have real money in and would strongly recommend. They are RICK and KTII. I thought PRAA was a great pick, but I mistakenly believed it was a counter-cyclical, and have been burned badly. I wish there was a way to capitalize on the overleveraged US consumer, without having to short stocks, but I have not found it.

 In terms of broader trends, I agree that alternative energy and infrastructure will be the big winners, if the democrats get elected. Maybe healthcare too. You need to listen to how the politicians want to spend your money to identify the next bubble (and eventually it will be a bubble). I don't usually like Harper's (too anti-capitalism), but I found this pretty interesting:

http://harpers.org/archive/2008/02/0081908

 

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#40) On February 05, 2008 at 1:56 AM, FleaBagger (98.34) wrote:

It wasn't until I read the Ron Paul supporter rants that I realized just how opposed to free market economic policy libertarians are. I always thought they were for letting the economy be, but now it's all about how evil corporations are, and how we're going to lose to other economies because of the trade deficit, blah, blah, blah.

For us (US) to have an explosively vital, fast growing, indomitable economy, all we have to do is amend the constitution to prohibit government spending on anything other than the military or law enforcement, and prohibit tariffs and other trade barriers, and let the private sector take care of itself. Every dollar the government spends into the economy (on corporations or the poor, or anything else) makes us several dollars poorer as a country, between the bureaucratic waste and the distortion of the economy from the perversion of incentives.

As for the fretting about trade deficits, free trade between countries has always, and will always, benefit every country involved to the exclusion of countries that punish themselves by imposing tariffs or other trade barriers. Any deficit is illusory, due to the very real benefit of access to capital enjoyed by the "losing" side of a trade deficit.

Corporations and the wealthy people controlling them have time and again proved themselves to be the greatest (indeed, only) beneficiaries of redistributive economic policy, whatever that policy may be; this is completely contrary to the popular perception of such schemes. Tell me, who gets rich from welfare safety nets? Don't answer "no one" so quickly. Of course it's not recipients, not even those committing fraud, but what about corporations and "entrepreneurs" who provide the products and services to the government necessary to service the welfare rolls? Don't think these millionaires will vote to end the welfare state.

All in all, it's the middle class who suffer the most from the policies of those who talk the most about the disappearing middle class and the need to rescue them. That is, what should be an upper middle class is needlessly kept a lower middle class/welfare recipient class to the benefit of certain wealthy individuals and corporations. Only economic freedom is fair, and only economic freedom helps the poor and middle class.

For further reading, check out Drs. Thomas Sowell and Walter E. Williams.

Oh, and don't use the term "military-industrial complex."

If you have any comments or questions, I will notice them and respond to them if you leave them at my blog, where I will parallel-post this. Just click on my name above, then click on "blog." 

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#41) On February 05, 2008 at 2:16 PM, haiku888 (45.81) wrote:

Part of the issue is that the benefits of Reaganomics only has finite benefits. The reason being is that the interest on debt could overburden the income resources meant to pay it off.  Housing prices  have stagnated creating a case where the consumer can no longer spend more than their income by refinancing.  Add the additional burden of higher food and energy costs explains why a short term fix may not be enough.  In the end this contraction is perfectly natural.  Personally, if the United States where to lose its dominance, who is to say that a oligopoly of China, Europe and the US would not be more healthy for the World for the long term.  As investors diversification is the name of the game. So as investors we need to look at diversification in terms of a global perspective rather than merely Americentric. Currently much of the worlds economy is too tied into the consumption of the United States.  What is the harm of spreading out the possible boom and bust cycles more globally. 

Personally I see the key as being through immigration. No I dont mean shutting down the borders I mean expanding the skilled labor work visas and international student visa.  We still have one quantifiable advantage over other nations.  It is the relative ease of social mobility and opportunity for advancement. Because of the wealth and mindset of Americans there is no place better.  Moving into the middle class and affluent is easier here in the US. There is no caste system  and the estate tax system here provides a relative hedge against nepotism.  Sure it isnt perfect but it beats the caste system of India anyday.  That social mobility still will draw the  scientists, programmers, and doctors of other nations here.  Bringing the best and the brightest is a net positive for the United States.  It will improve on innovation which TDRH is looking for and provide the skilled technical labor pool which our own education system is not providing.  Educational spending on the sciences and math here would help in the long term but we are looking for macro changes over the next five to ten years.  

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#42) On February 05, 2008 at 5:09 PM, FleaBagger (98.34) wrote:

"Reaganomics," as you say, is not about cutting taxes and increasing spending. Increasing spending was an unfortunate political reality. Cutting taxes and cutting nondefense spending was the ideal way to revitalize economic growth and pay for defense spending to win the Cold War. The reason it only sort of worked was because most of the nondefense spending cuts were not enacted due to the leftism of congress, and frankly, the American people. We still had a revitalized economy and a Cold War victory, but inflation caught up to us because of the borrowing and spending.

If we can cut taxes, cut entitlement programs, and eliminate unnecessary regulation of private enterprise, our economic woes will shrink like hemorrhoids on Preparation H.

The world's never going to be perfect, but with economic freedom, we can make it a whole lot better.

And by the way, the estate tax doesn't spread wealth from the rich to working class stiffs, it spreads wealth from the rich (and small business owners and farmers) to an inefficient bureaucracy and wasteful gov't spending that helps no one.

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#43) On February 05, 2008 at 11:27 PM, lordelrond (99.40) wrote:

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#44) On February 06, 2008 at 12:32 AM, FleaBagger (98.34) wrote:

And what exactly are we talking about when we say "flag-waving"? Are you saying that patriotism and loving your country are wrong? Or are you saying that being blind to your country's faults is wrong? I think we just want to be able to talk past one another so we can feel smug and superior to those who disagree with us. Because, after all, if we define our terms differently, we can see them as obviously wrong, and they can see us as obviously wrong, and we can all be so full of ourselves. Everybody wins. Yay!

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#45) On February 07, 2008 at 12:55 PM, pointbite (57.75) wrote:

Here is an attempt at optimism...

http://www.pointbite.com/2008/01/31/cause-for-optimism/ 

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#46) On February 08, 2008 at 8:59 PM, claritee (< 20) wrote:

If I read your request right, your looking for domestic companies/solutions that will lead us out of this mire & recession, and you are not asking for pie-in-the-sky scenarios, which many of the responses seemed oriented toward.  The only thing I see in answer to your question is alternative energy, because it cuts across so many of the issues you raise and especially; natl security, economic, environmental.  It seems these 3 have gotton to the point to force the issue long overdue.  Now, that's obviously not an overnight fix, nor comprehensive, but it can be the catalyst who's time has come, and where American ingenuity/passion can make an impact.  Researching/Selecting is critical and this is at least a 3-5 year horizon.  Meantime, Energy plays that benefit from globalization, is one now arena (after oil pulls back a bit).  Defense will have some short term gyrations but should also be a play in this timeframe of global shifts and uncertaintities.  Right now, I like MTR (natural gas domestic) and PVX (Canadian oil sands) as high dividend players.  FTK should expand in oil services on a global basis.  Again these are interim suggestions as I haven't yet consolidated on any of the alt energy plays (my investment horizon is much shorter then they).

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