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Bringing Back the US


With America reeling, great minds search for solutions.


I've been in Wyoming since last Thursday at a conference that's a combination of major players in the financial world, science, technology, arts and politics.

On Thursday I spent the entire afternoon with T. Boone Pickens discussing his plan to replace gasoline with natural gas -- which would mean wind turbines would be used in power generation. He was the most down to earth person anyone would want to meet and his plan is more than a get-rich-quick program. This year America will send $700 billion abroad and that number is only going to move higher and higher. T. Boone is open to all ideas including solar, nuclear, and hydro and drilling in the outer continental shelf. His main point is we have the means to lessen our dependence on oil and at the same time stop this trend that could eventually bankrupt America while making other nations wealthy (including nations that hate the US). This situation is nuts, absolutely crazy and all Americans should be demanding immediate action.

Here are some of the key numbers to consider:

  • 85 million barrels of oil a day produced globally.
  • 86.4 million barrels of oil a day consumed globally.
  • 25% of global daily consumption by the US.
  • 4% of the global population total in the US.
  • 3% of global crude oil reserves held in America.

I also spent time with Jim Wolfensohn, the former head of the World Bank. He gave me a tour of his wonderful home which is one of only two designed by Caesar Pelli. The night before, Mr. Wolfensohn gave a speech on where the global economy will be by 2050 and I must say I was frightened by the time he was finished. At the rate things are going India and China will be 48% of the global economy and America will drop all the way down to 13%. Some of the reasons for the change will be population explosions but also just hard charging changes in those nations and others like Brazil and Russia. Per capita GDP in India and China will be $45,000 while America will be $90,000. Currently the per capita incomes are $2,700, $5,300 and $45,000 respectively. Needless to say these are sobering projections.

I also met with a lot of venture capitalists and self made people, including Bob Metcalf who is considered the father of the Ethernet and also part of the VC group that funded Akamai and others. The great thing about these investors and the lesson everyone should take is that there are always opportunities. During this downdraft in the stock market many investors are going to sell stock in great companies because others are selling. It will not matter if fundamentals haven't changed, price will be the determinate for dumping, mostly at a financial loss; not potential market share, profitability, product pipeline or other real factors that ultimately dictate value and stock price. I've seen this movie on more than one occasion, albeit with different plot twists. Once the dust settles it's going to be forward-looking folks that have stayed the course and taken advantage that will reap incredible rewards.

This isn't to say every stock in your portfolio is a hold; on the contrary holding dogs is just as bad as dumping eventual winners. As for the economy there are serious problems that will take time to work out but that doesn't mean the stock market will not rebound before the coast is clear. The stock market is a harbinger of things to come and right now it's pricing in the worst case scenerio and of course excessive fear. I would say there are going to be new worries like student loans which could be a disaster in two monhts because the spigots are turned off and there's no securitization of loans. One junk bond guy I spoke to said it's going to be a nightmare, most colleges will not have any funds. Like other niches of the economy this will improve but there is real concern that time isn't an ally.

There are problems that will not be cured with time but only through serious consideration and action. America has to make a stand and rally around T. Boone Pickens' call the way a bunch of shopkeepers and farmers rallied around the siren of Paul Revere. Moreover, while I admire Mr. Wolfensohn, his vision doesn't have to become reality. Though, it will unless we reemphasize greatness in the US. Rather than this path of ripping apart the system that made it great and attacking the so-called rich, we should be encouraging wealth generation, not redistribution. People that create jobs should be applauded and people that don't have skills should be helped in getting them rather than having the government try to protect jobs and skills that aren't competitive on the global stage. I also spent a considerable time with Ward Connerly who says we must have a nation that is color blind and focuses on merit rather than being anchored by the sins of the past.

The fact is the US has fallen down hard on education and achievement. We aren't letting the world's smartest people into this country because of laws that seem to want to protect jobs for people with lesser skills. That's not how America got to the top of the world. Competition must be stoked by all citizens. I don't think it's too late to alter the course many have already modeled and accepted as fact. I've never been as optimistic and afraid at the same time as right now. I'm prepared to do the work but I just fear the US has slipped into a phase of self-pity that will have us whining and finger pointing while the rest of the world zips right by.

As for the stock market I really hope investors will stay the course and keep their heads up in search for opportunities. We will find them for sure but it takes a little patience and understanding. In the meantime you have to have exposure to the downside especially if you're prone to panic; making some money will assuage those fears and maybe help you pull the trigger when the turn comes. I'm not talking about picking the exact bottom, in fact I think some of the biggest money making ideas are ones my firm is already long in the model portfolio that have been getting hit. Every time the market goes through these phases I'm saddened months later when taking profits but people have already sold (most at a loss) because the stock was down and they were afraid. If you want to be afraid of something, be afraid of politicians dragging their feet on oil and education and twisting the question of fairness so that it means a divided nation that feeds on animosity and jealously.
Hang tough.

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