Weekly Articles 2010

The only thing more expensive than education is ignorance.

Anyone who trades liberty for security deserves neither liberty nor security.

He that is good for making excuses is seldom good for anything else.
– Quotes by Benjamin Franklin

China:  Strengthen the Yuan or Face Collapse
There has been a lot of noise out there on the yuan recently and I want to try to set the record straight.  Not only do I think that a revaluation higher in the yuan is inevitable, but as I have said for many months now, the longer they take to implement this the greater the probability of a total economic implosion that will be very, very difficult to reverse.  Let me explain.  First and foremost, the argument being made against a yuan appreciation relates to the concept that the margins for exporters in coastal China are so thin (somewhere around 3% is what I have been reading) that the government cannot possibly allow an appreciation as it will wipe out the exporters and then led to social unrest.  This is pure nonsense and all you have to do is look at the following article in today’s China Daily http://www.chinadaily.com.cn/cndy/2010-03/11/content_9570417.htm.  Below I have provided some excerpts from the piece.

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QE must go to infinity or the Fed will be history.
– Jim Sinclair

The Reversal of Globalization:  Why we Desperately Need a New Model for Economic Advancement
The biggest theme I see in the world economy at this moment is a massive reversal of the trend to globalization and a move toward “local” thinking and acting on every level of human society.  Many people on this list will read this and be revolted by the concept and indeed there are reasons for concern.  That said, it is important to put all things in context.  The world has seen a massive secular trend toward free trade for decades and to think that this can or will just continue at the prior pace forever is nonsensical.  I am in the camp that believes free trade and globalization have generally been a major positive for the living standards of most of humanity (just look at the millions that exited poverty in India and China alone), but that there are limits to the trend in a world with limited resources in the short-term.  So just as knowledge, standards of living and technological progress have generally advanced since the Dark Ages, there have been periods of disruption where things turned the other way, regressed and led to some monumental disasters and human suffering.  I believe we are at one of those periods and there is no way around it.  The best we can hope for is to understand the limits to the old fiat money printing, unlimited credit, environmentally destructive, “growth at all costs model” and readjust or we are doomed for a very dangerous period on the horizon.

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The welfare of humanity is always the alibi of tyrants.
– Albert Camus

Before I get into this note, I want to take a couple of lines to explain the primary purpose of this piece going forward.  These emails will be entirely dedicated to my macro musings and there will be little if any mention of individual stocks and securities.  This is simply due to the fact that I am going to be trading and investing more of less full-time and to recommend or disparage individual names on a frequent basis may just cause more problems than it is worth.  That said, I will be commenting on sectors and subsectors of stocks on a regular basis.  Now that I am on my own I will also pull less punches than I did before and as such the commentary may be more politically charged.  Some of what I say may prove objectionable to some on the list and I am entirely cognizant of this fact.  This list is very extensive at this stage and I fully expect it to be whittled down as time progresses.  Please do not hesitate to request your removal from the list.  I will not be offended.  I am not trying to please anyone, rather my intention is to provide as intellectually honest a macro perspective as I can from my worldview.  I hope that you find my commentary useful and entertaining but more than anything else I am writing all of this because I am deeply concerned about the future.  I see extraordinarily dangerous times ahead if we do not reverse the course our current set of global leaders is on before it is too late.  So without further ado…

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