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John Thomas graduated with a bachelor’s degree in biochemistry with honors and a minor in mathematics from the University of California at Los Angeles (U.C.L.A.) in 1974. He moved to Tokyo, Japan where he was employed by a medium-sized Japanese securities house. Thomas became fluent in... More
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  • Population Pyramids Make a Great Investment Tool
    Desperate homeowners counting on a “V” shaped recovery in residential real estate prices to bail them out better first take a close look at global demographic data, which tells us there will be no recovery at all. I have been using the US Census Bureau’s population pyramids as long leading indicators of housing, economic, and financial market trends for the last four decades. They are easy to read, free, and available online at http://www.census.gov/. It turns out that population pyramids are something you can trade, buying the good ones and shorting the bad ones. These graphical tools told me in 1980 that I had to sell any real estate I owned by 2005, or face disaster. No doubt hedge fund master John Paulson was looking at the same data when he took out a massive short in subprime securities, earning himself a handy $4 billion bonus in 2007. To see what I am talking about, look at the population pyramid for Vietnam. This shows a high birth rate producing ever rising numbers of consumers to buy more products, generating a rising tide of corporate earnings, leading to outsized economic growth without the social service burden of an aged population. And what happened 40 years ago? The Vietnam War, where two million young people were killed who otherwise would have been enjoying their gold years now. This is where you want to own the stocks and currencies.
    Tags: VNM
    Nov 08 05:09 pm | Link | Comment!
  • Japan Has the World's Worst Population Pyramid
    Now look at the world’s worst population pyramid, that for Japan. These graphs show that a nearly perfect pyramid drove a miracle stock market during the fifties and sixties which I remember well, when Japan had your model high growth emerging market economy. That changed dramatically when the population started to age rapidly during the nineties. The 2007 graph is shouting at you not to go near the Land of the Rising Sun, and the 2050 projection tells you why. By then, a small young population of consumers with a very low birth rate will be supporting the backbreaking burden of a huge population of old age pensioners. Every two wage earners will be supporting one retiree. Think low GDP growth, huge government borrowing, deflation, and a terrible stock and housing markets. Dodge the bullet.
    Tags: AAXJ, DND, JEQ
    Nov 08 05:08 pm | Link | Comment!
  • If Demographics is Destiny, Then America's Future Sucks
    If demographics truly is destiny, then America’s future sucks. Brace yourself. We are turning into Japan. As a silver tsunami of 80 million baby boomers retires, they will be followed by only 65 million from generation “X”. The intractable problems that unhappy Japan is facing will soon arrive at our shores. Boomers, therefore, better not count on the next generation to buy them out of their homes at premium prices, especially if they are still living in the basement. They are looking at best at an “L” shaped recovery, which means no recovery at all. The only thing that can possibly save us is a rising tide of immigration, bringing in more young workers. Oop’s! The last administration did everything it could to shut out immigrants by building huge, multibillion dollar walls on our borders. What are the investment implications of all of this? Get your money out of America and Japan, and pour it into Vietnam, China, India, Brazil and Mongolia and other emerging markets with healthy population pyramids. You want the wind behind your investment sails, not in your face with hurricane category five violence. Use this dip to load the boat with the emerging market ETF (EEM).
    Nov 08 05:07 pm | Link | Comment!
  • Buy Vietnam on the Big Dips
    Now that we have figured out that Vietnam is a great place to invest, we welcome the news that the Van Eck group has launched its own Vietnam Index Fund (VNM). The venture will invest in companies that get 50% or more of their earnings from that country, with an anticipated 37% exposure in finance, and 19% in energy. This will get you easily tradable exposure in the country where China does its off shoring. Vietnam has been one of the top performing stock markets this year, at its peak rising by an amazing 110%.  It was a real basket case last year, when zero growth and a 25% inflation rate took it down 78% from 1,160 to 250. This is definitely your E-ticket ride. Vietnam is a classic emerging market play with a turbocharger. It offers lower labor costs than China, a growing middle class, and has been the target of large scale foreign direct investment. General Electric (GE) recently built a wind turbine factory there. You always want to follow the big, smart money. Its new membership in the World Trade Organization is definitely going to be a help. Until now, the only way to get involved with this country was to go through the tedious process of opening a local currency brokerage account, or buy a region sub emerging market ETF. I still set off metal detectors and my scars itch at night when the weather is turning, thanks to my last encounter with the Vietnamese, so it is with some trepidation that I revisit this enigmatic country. Throw this one into the hopper of ten year long plays you only buy on big dips, and go there on vacation in the meantime. Their green shoots are real. But watch out for the old land mines.
    Tags: VNM
    Nov 08 05:06 pm | Link | Comment!
  • My Ultra Long Term Forecast
    If the Dow Jones Industrial Average rises by 4.5% a year for the next 90 years, the index will reach 525,000 by 2100, a 53 fold return.
    Nov 08 05:05 pm | Link | Comment!
  • Should I Be Buying on this Dip?
    I almost stepped on a rattlesnake last night. I finish up most days slinging on a 60 pound pack and clocking 1,000 feet of climb on nearby Mount Diablo. But since my days drag on as I search for more illustrative charts or that elusive statistic, I usually leave late, which means coming down the mountain in the dark. Last night was particularly rewarding, as I caught the rise of the full harvest moon in its pale glory. When I hike, I am in a semi transcendental state, as I subconsciously process the day’s data intake, until “Eureka!” a trade crystallizes out, and I can’t wait to rush home and write it down. It was the reptile’s conspicuous rattle that broke my trance, as the three footer slithered away into the underbrush, making continuous “S” shapes in the soil.  A few inches to the left, and I would be writing this letter from an emergency room, minus one leg. I have been struck by Western rattlers before, but they never got past my Justin cowboy boots or the hem of my Levi 501’s. Which all leaves me wondering, are there snakes of a different variety lurking in the markets today? Many of the great long term plays I baled from on October 13 are suddenly a lot cheaper. The Canadian dollar (FXC) has plunged from $97.50 to $92, crude (USO) has backed off from $42 to $39, Baidu (BIDU) cratered from $440 to $355, and First Solar (FSLR) got whacked from $164 to $120. At these prices, are they golden nuggets waiting to be scooped up from the ground-or are they venomous vipers, coiled and waiting to strike an outreached hand? I vowed I would stay in cash for the rest of the year, until I lock in bonus payout. But if the best of breed investments drop much from here, I will be sorely tempted to nibble.

    Nov 08 05:04 pm | Link | Comment!
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