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Friday, December 26, 2008

The Big Picture

I wanted to share another thought I had, and general gist of my mindset for where the USA was, is, and will be.

The USA circa 1950-1985 ish, basically was a place where the middle class "blue collar worker" was king. Between Unions and the USA's manufacturing capacity, the less than wealthy got a "better" wage for their work than most of the world. Many "conservatives and centrists" said it was too much, and it would make America uncompetitive. Since the "conservatives" couldn't seem to break the Union and blue collar stranglehold on corporate America using conventional means, they turned to the unconventional.

Break down trade barriers and make the US worker compete for their job from abroad. Japan may have lead the way in the 70's into the 90's, but the broader market was cracked open with Reagan and China. The Free Trade movement took off, bringing us to 2008, where US manufacturing is dead, culminating with the demise of non-government unions as symbolized with the UAW being routed as GM is brought to it's knees.

So what does this have to do with stock market and trading?

What we have been witnessing is the ever increasing acceleration of the US workforce being "brought into line" with the world workforce. Those in China making 10 cents an hour for their labor vs US at 20 bucks an hour. (example, not accurate figures)
As the US Labor force must compete, their daily expenses will become "more like" the Chinese peasant. The Chinese peasant doesn't buy 52" flat screen tv's. They spend most of their money on resources, and try to save whats left for a better tomorrow.

That means their MAIN expenses is food, energy, shelter, health care, and work related necessities. (such as a car in the USA).

Now I'm not saying the people in the USA will become on par with a Chinese peasant for life style. But what I am saying if your looking to what will "rise" in value in the next 5+ years inside the USA, it will be those items that have historically taken less cash out of the US labor's pockets. The US has been very fortunate where food and energy is NOT their main expenses, although shelter, health care and work related has played a significant role in cost.

On the macro level, as the world re-aligns itself to a global competitive marketplace, and the Chinese & Indians grow "in wealth" and as the USA "loses wealth as compared to China/India", a parity among the workers will be achieved.

China/Indian workers will have less of their income devoted to food/energy, and Americans will have more of their income devoted to these sectors.

Between US stock market problems, currency fluctuations, countries becoming insolvent, China and India providing the greatest growth, and US debt, this is why I favor resources over the long haul. In the next 1 to 18 months however, resources could go much lower before rocketing higher ahead of all other sectors.

Food for thought. (I couldn't resist!)

Seeking Alpha has a similar slant ranting on what happened to the American Dream.

1-29-11 - Added link on china view refinement from back in 2009. For all things china, click here.

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