No doubt you’ve noticed that the world is said to be awash in cash but that very little of it seems to trickle down to median man.  Public and corporate pension funds can’t meet their obligations with underfunding by gross amounts being the usual.  The endowments of educational and medical institutions are always short of need.  Even public institutions of higher learning are so underfunded that they can’t open the door or effect progress without public subscription.  Most of the countries of the world can’t meet the need for the infrastructure of daily life including water and toss their waste in the nearest stream for disposal.  The medical needs of their citizens are gross with birth defects on the rise and shorter life spans typical.  Global warming is melting the poles.  The standard of living of the United States is in danger of collapse and the 3rd world is making little progress.  Yet we spend our public budget both on and off the balance sheet in a war that clearly now repeats Vietnam.  

And yet the financial markets are trading huge amounts of public and private securities daily and real estate is so hot that equity yields have declined by half over the past five years.  We don’t invest a dime without anticipation of a better return.  The result is that we have drained the resources we put in place 50 years ago to meet current superior yields as we went along.  We trade on reported earnings but we never consider adequate current reserves for replacing what we use.  Now we don’t have a city without a crumbling CBD, water systems, sewers and power systems.  We haven’t built a refinery forever.  Our water defenses are dangerous, New Orleans, Sacramento, the Colorado, the Mississippi, the Great Lakes are all in trouble.  The Rust Belt is re-rusting and the Great Plains are dry, dry, dry.

We invest in the upper strata of real estate and the fringes of corporate life where the yields are superior.  We neglect everything else except to keep the lights on to prevent collapse whether it be the business world or daily residential life.  The VC world has billions allocated as does the Hedge Fund community and the Private Equity sector, but who knows where the lines blur between these sectors.  They are operating their businesses now rather than acting as financial investors.  Invarably they insist on increasing revenues and decreasing expenses short term to get a short term superior result.  The culture they establish is never that of a builder, it’s always the New York financial centers overcoming.  This has been going on so long that we have trouble naming a great builder while we see all the financial operators in the society pages.  


We’re going to have to change the balance of power here.  However, you don’t have to worry as the issue is self-correcting.  We’re down to just a few department stores now and we don’t really have any more domestic car companies.  We invested in a lot of domestic real estate which is just junk now.  I don’t care who owns it, most old buildings are just ordinary while only a few are distinctive.  The Japanese found that out and now our domestic investors have come along twenty years later to repeat the same mistakes.  Name the industry that isn’t a concern now. 

While we’ve wasted our domestic money mixed with the offshore dinero in poor concepts, there are offshore operators coming in now to take over and rekindle our basic industries.  They’re from South America and Asia and the old USSR countries and they’ve got the hunger to repot these industries.  You can see the results all across the interior of this country.

So the point of this is that despair is not appropriate, but to be careful where you’re investing today as a lot of advisors are past their peak.  They’ve run the program they invented until it doesn’t apply anymore.  Future dollars there may not be rewarding.  It’s back to the basics and the Old Fashioned way if you want to make money in the future.  Watch carefully for the new breed.          


Be Sociable, Share!