Mad Hedge Fund ...'s  Instablog

These are indeed grim times. If you can't make money selling Twinkies to Americans, then you better shut down, and fast.

That was my conclusion on leaning that the venerable bakery company, Hostess, was liquidating in in the wake of failed union negotiations. I probably could not have made it through my Quantum Mechanics class at UCLA without the sugar high generated by the company's Ding Dongs, Zingers, Ho Ho's, and chocolate cupcakes.

The bad news is that things are only going to get worse for the unions. The recent eight year forecast published by the Bureau of Labor Statistics shows that 4.19 million jobs will be gained in the US in non-union professional and business services, followed by 4 million healthcare and social assistance jobs, while 1.2 million will be lost in manufacturing.

This is great news for website designers, Internet entrepreneurs, registered nurses, and masseuses in California, but grim tidings for traditional metal bashers in the rust belt manufacturing states like Michigan, Indiana, and Ohio.

I'm so old now that I am no longer asked for a driver's license to get into a night club. Instead, they ask for a carbon dating. The real challenge for we aged career advisors is that probably half of these new service jobs haven't even been invented yet, and if they can be described, it is only in a cheesy science fiction paperback with a half-dressed blond on the front cover. After all, who heard of a webmaster, a cell phone contract sales person, or a blogger 40 years ago?

Where are all these jobs going to? You guessed it, China, which by my calculation, has imported 10 million jobs from the US over the past decade. You can also blame other lower-waged, upstream manufacturing countries like Vietnam, where the Middle Kingdom is increasingly subcontracting its own offshoring.

These forecasts may be optimistic, because they assume that Americans can continue to claw their way up the value chain in the global economy, and not get stuck along the way, as the Japanese did in the nineties. The US desperately needs no less than 27 million new jobs to soak up natural population and immigration growth and get us back to a traditional 5% unemployment rate.

The only way that is going to happen is for America to invent something new and big, and fast. Personal computers achieved this during the eighties, and the Internet did the trick in the nineties. The fact that we've not done much since 2000 but create a giant paper chase of subprime loans and derivatives explains why job growth since then has been zero, real wage growth has been negative, and American standards of living are falling.

Alternative energy and biotechnology are two possible drivers for a new economy. Unfortunately, the last administration did everything it could to stymie progress in both these fields, coddling big oil so China could steal a lead in several alternative technologies, and starving stem cell researchers of Federal cash, ceding the lead there to others.

While the current crop of politicians extol the virtues of education, the reality is that we are dumbing down our public education system. How do we invent the next "new" thing, while shrinking the University of California's budget by 20% two years in a row? If my local high school can't afford new computers, how is it going to feed Silicon Valley with computer literate work force? The US has a "Michael Jackson" economy. It's still living like a rock star, but hasn't had a hit in 20 years.

China can have all the $20 a day jobs it wants. But if it accelerates its move up the value chain, as it clearly aspires to do, then America is in for even harder times. I'll be hoping for the best, but preparing for the worst. How do you say "unemployment check" in Mandarin?

I managed to catch up with my former white House Press Corp colleague, Helen Thomas, when her national book tour swung through San Francisco. At 91, Helen is the oldest and longest serving member of this esteemed group of journalists, and has the traditional right to ask the first question at each press conference.

The native Kentuckian has covered every president since Kennedy, but has been observing the political scene since the Roosevelt era (Franklin, not Teddy). I knew her when I was a wet-nosed apprentice writer during the Carter administration and she was a senior writer for the old United Press International.

Helen hasn't changed an iota, and is as feisty as ever. John F. Kennedy was her favorite president, a man of peace who knew war, who inspired people, and launched the space program and the Peace Corp. Lyndon Johnson brought to life the most sweeping social programs since FDR's New Deal, but saw his legacy shattered by the Vietnam War. She pitied Richard Nixon, who at the end felt the wrath of the nation fall upon his shoulders.

Gerald Ford was a decent human being, too nice, really, for the job that was thrust upon him. Ronald Reagan was a master at managing the press. George W. Bush lied to the people about WMD's in Iraq and hung the albatross of torture around America's neck. He then sanitized the war for public consumption, and cowed the press into fearing being called unpatriotic and anti-American. Bush heard that Helen was murmuring that he was the worst president in US history, and broke with a century of precedent by conspicuously ignoring her seniority during his administration.

Obama, who shares a birthday with Helen, lacks the courage to do the right thing and should stick to his guns. But all new presidents come in completely unaware of what they have signed up for and there is a tortuous learning process. Investigative reporting is gone forever because newspapers can't afford it.

Helen has seen public morals become more liberal for ourselves, but more strict for our public officials. I know there isn't any real investment insight here, and I will probably get some angry e-mails from Tea Partyers. But hey, when a piece of living history crosses your path, you grab on to her with both hands and shake her until the gems of insight she possesses fall loose. If Helen could only bottle and sell the energy she has at her age, she could make a fortune.

Come join me for lunch for the Mad Hedge Fund Trader's Global Strategy Update, which I will be conducting in Chicago on Friday, January 4, 2013. A three-course lunch will be followed by a PowerPoint presentation and an extended question-and-answer period.

I'll be giving you my up to date view on stocks, bonds, foreign currencies, commodities, precious metals, and real estate. And to keep you in suspense, I'll be throwing a few surprises out there too. Enough charts, tables, graphs, and statistics will be thrown at you to keep your ears ringing for a week. Tickets are available for $248.

I'll be arriving an hour early (11:00 AM) and leaving late in case anyone wants to have a one-on-one discussion, or just sit around and chew the fat about the financial markets.

The lunch will be held at a downtown Chicago venue on Monroe Street that will be emailed with your purchase confirmation.

I look forward to meeting you, and thank you for supporting my research.