Bullish on America

Warren Buffett once said "Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can't buy what is popular and do well." We read this quote again and again, and now even more convinced that the US and global markets are on the road of true recovery (albeit a slow one in the developed countries). The US market bottoms have been reached twice in October 2008 and March 2009 (appears to be double bottoms already.) Unless traders and investors are waiting for tripe or quadruple bottoms (unlikely in our view), we are already in early recovery phase (at least from stock markets level since markets are discounting mechanism). The economy is also getting a bit better.

Folks, despite all the bad economic indicators and market news, we are not in a very dire shape as most market pundits want to you to believe. The fact you can still read this article, comment and read many other websites, means you have fairly good access to internet and computers and some money to spend. For Americans in general, you are better off living in the United States than in many other countries. At the very least, the legal structure, democratic system, and entrepreneurship are still strong ingredients of the US. For Americans (or even immigrants staying in the US legally or illegally), do you really think US is a bad place to work, live, prosper, and enjoy? Think twice.

We believe US-denominated assets are still cheap and attractive enough to support increasing demand for US Dollars and inflow of money from foreign investors. Global investors need US Dollars in order to buy US assets. Hence, although we are not happy with US government printing US Dollars, a fiat currency, like there is no tomorrow, we believe the demand for US Dollars will continue to be strong. Investors from cash-rich emerging countries will likely increase their investments in US assets including properties. The living standard and infrastructure in the US are still much higher than in many cash-rich emerging countries. Many foreigners still want to get educated in US top universities. There is no second Harvard, Stanford, MIT, Cornell, Yale, USC, UCLA, etc...anywhere else.

Don't believe it? Try to travel to BRIC countries for 3-6 months. Visit various parts of China, India, Brazil, and Russia. Don't just go to the big modern cities only. Try to go to the smaller cities, then go to even more rural areas. Then compare your own living standards (as well as infrastructure) with the people living there. Try to find drinking (and drinkable) water in a good public places such as parks (if you can find one.) BRIC is growing, as everybody knows. It is a very easy trend to spot and capitalize. However, many people in the BRIC countries also want to live in the US if they have the means and opportunity to do so. There are countless success stories of immigrants in the US. US is an amazingly unique country built by immigrants for the immigrants and for the people. Government officials from state level to federal level are also democratically elected. Recent examples:

• President Obama was born in the US soil all right, but his father was from Kenya, and attended Harvard, and now became the first African-Caucasian-American multicultural president in the US. Does he want to live in Kenya?
• Billionaire Co-Founders of Google, Inc. (GOOG) were sons of immigrants. Do they want to move back to Russia now?
• Kirk Kerkorian (MGM's largest shareholder) was the son of Armenian immigrants. Does he want to live in Armenia now?
• George Soros, the famous speculator, was born in Hungary, and has found great prosperity as a US citizen trading all over the world. Does he want to move back to Hungary now?
• Jerry Yang, Co-Founder of Yahoo (YHOO) and a billionaire, was son of Taiwanese immigrants. Does he want to go back and live in Taiwan now?
• Sushi master Nobu Matsuhisa, the famous celebrity sushi chef in Beverly Hills, CA. Does he want to go back and live in Japan?
• Steven Chu, Ph.D, an American physicist and currently the 12th United States Secretary of Energy. Does he need to hide his Chinese descent name ('Chu') to become US Secretary of Energy, a highly important position? Nope. He was son of Chinese immigrants. Does he regret being born in the US and want to go back to his parents' original country?
• There are plenty multimillionaires in Silicon Valley, Los Angeles, New York, etc who are first-time immigrants (not even sons or daughters of immigrants). They are Indians, Chinese, Eastern Europeans, Israelis, Australian, Pakistanis, etc. They create companies, jobs, and opportunities to Americans. Do they want to move back to their countries?
• and so on....there are too many to mention here.

The answers are clear. People all around the world like to live, work, and prosper in the US. They feel the US is the true land of opportunity, the land of unlimited potential. It is true that home prices are now down, stock markets have not yet recovered to the level back in mid 2007, and American banks are under siege due to poor risk management. However, fundamentally, the diversity, multicultural mix, entreprenerial spirit, innovation and dynamism of the United States are still very strong and will continue to attract investment dollars from cash-rich foreign investors.

There is simply no other harmonius multicultural country like the United States. Everyday, we challenge you to observe when you visit places, restaurants, and stores in many parts of the cities or states you live in and surely, we bet that you will meet many people from different countries, cultures, and backgrounds living in harmony doing their own things, working, living, enjoying their lives in the US soil. In our view, this is a clear sign of a strong country that is currently having temporary and solvable difficulties.

Ask yourself, if you are American residents and citizens or recent immigrants in the US, do you really want to move to BRIC countries now to study, live, work, and prosper? Do you want your children to be born, live and get educated in BRIC countries or in the United States? Do you want your children to go to Harvard or a famous university in China or India?

This leads us to a quote from George Soros: "Markets are constantly in a state of uncertainty and flux and money is make by discounting the obvious and betting on the unexpected." Nowadays, many investors and traders now obviously are not too convinced that US economy and US stock markets will recover in a sustainable manner. Many so called market pundits believe that the US Dollar will be doomed. We beg to differ. We are bullish on America, American people, American entrepreneurs and innovators, American assets (especially the undervalued high quality assets), US Dollar (not in the near term), and American economy in the long-term.

Comments

[Dave Wrixon:]

If this is all true why is the capital investment that would drive America's future so obvious by its absense? It went missing about 20 years ago and has never rung home.

Jun 16 05:00 AM

[Tomcat101:]

I bet people were saying things just like this when Rome ruled the world...

Jun 16 08:17 AM

[Ferdinand E...:]

Good for you author. There are plenty of things that need to be done in the US, but I believe that they can be done and the country will get moving again. Of course, a lot of the things will have to be changed. For instance, those two crazy wars will have to be abandoned, and - pardon my French - some pretty useless people are teaching economics in some of of the American universities. Don't tell them I told you so however.

I haven't spent as much time in the US as I should have lately, but even so I believe that Americans - on the average - work harder or are capable of working harder than many persons in Europe. That will pay off in the long run.

Jun 16 09:17 AM

[Marli:]

Your observations are based more on sentimental anecdotes than hard data and carefully thought-out analysis.

The 56 trillion plus in unfunded Medicare and and Social Security liabilities that have to be paid out over the next 15 years compound the 1.7 trillion per annum budget deficits the Congressional Budget Office forecasts for the next decade, deficits which generously assume 3% growth after inflation. The 76 million retiring baby boomers combined with the unprecedented private sector debt load means that the tax base will not be able to cover anywhere near the total obligations, which means the Fed will have to monetize the debt to avoid default as foreign central banks diversify holdings into IMF bonds, SDRs, commodities and gold while negotiating bilateral trade swap agreements that bypass the US dollar as the intermediary currency.

America's prosperity is based predominantly on private sector credit and government debt as the US government takes advantage of its de facto monopoly on the supply of the world's reserve currency to finance its near-perpetual deficits and bloated military apparatus.

Your 'irrational exuberance' flies in the face of the current restructuring of the global geopolitical economy.

Jun 16 09:39 AM

[Alan Young:]

The author mistakes wealth for prosperity. Our current wealth is the accumulation of past productivity, and it is indeed highly concentrated. But it is not growing— indeed, it is at risk, as we have too many chits out against it.

Prosperity means current productivity, and that's what drives markets.

Jun 16 11:31 AM

[Alphameister:]

I'm not pleased with this country's slow drift into socialism. But for now, at least, it's a great place to live and offers the freedom to invest in countries presenting better growth prospects.

Jun 16 11:52 AM

[noworriez:]

I do love to live in the US. I just don't want to invest here. The author apparently sees a linkage between where you live and where you invest that, as far as I can see, does not exist. When the US Government changes back to pro-growth policies, then I think the US will be investable again. Here is to change!!

Jun 16 12:08 PM

[Graham and ...:]

You can't confuse levels with rates of changes. America's standard of living is at a higher level. But other countries have faster (percentage) rates of change (off low bases). That's why their stock markets are going up faster than ours.

Jun 16 02:54 PM

[lo maximo:]

The author was right in what he said, but all of that was about the past. Things have changed. Financial institutions have cut credit lines down to the amount already owed. There is no credit available. Banks got billions in bail out funds. Did those banks cut balances of card holders? No. Did they lower fees and rates?
No. They cranked up interest rates to insure than no one will ever get out of debt. Take a look at your credit card statement. You thought you were paying 5% or 7%? No, it's been raised to 27%! They say 70% of economic growth comes out of consumption.
With six million un-employed, companies in chapter ll, millions of homes in foreclosure or short sale, are you sure there are enough
people with cash or credit to buy? How? Banks are hoarding the billions they got.

Jun 16 04:03 PM

[Old Trader:]

Just about everything this article mentions WAS true, in the past. Please note that all of the examples given of "immigrants made good" are people who are in their mid 30s, or older. The author is correct in saying there are no second Harvards, MITs, Cornells, etc., but its also increasingly true that the young immigrants who come here to study at the top tier schools are returning to their homelands to apply their new-found knowledge, youthful energy and enthusiasm.

Jun 16 05:35 PM

[Tomcat101:]

I'm packing all my stuff and moving to Zimbabwe.

Jun 17 09:38 PM

[maryanne:]

Very inspirational, the US is a great place to live. But as all the commenters pointed out, financially it has serious problems. Also the encroaching socialism and politics take precedence over laws (greedy Unions, Illegal immigration)

Jun 22 08:37 PM

[TradingHelp...:]

Hope doesn't fix multi-trillion dollar budgets.

The more I read about economics the more certain I am that the very structure of the banking sector and Fed credit policies are flawed.

Jun 27 08:05 PM

[Pax Americana:]

We Hold These Truths To Be Self Evident That All......................

Jul 01 11:41 AM