As an American, it is alluring to fathom that all local happening determine the fashioning of the world. To some extent, that is a true statement.
Our country has arguably had the most front and center position in global policy, military dominance and peace keeping, technological advancements in all fields, and has been most efficacious in grooming a culture of leadership and advancement.
For these achievements, we deserve respect and approbation. The latest antics of the “worst of class” aside, I have great pride in the people of this nation.
However, part of being mature is knowing when it isn’t about you.
This sell off has nothing to do with America. Our economy is steadily advancing and we are healing from our wounds; both those found physically and those located in the holes of our pride. This progress is encouraging, sure.
But our neighbors are not doing so well; and you need to recognize that we count on them far more than you give them credit for. You must understand that trade with foreign entities makes up around 30% of all sales and purchases in the U.S. GDP.
How much of that is Europe, which is forcing itself into austerity, destroying their demand base? How much of that is China, which is experiencing a mini-blow up on its hands?
It is fanciful and calming to imagine ourselves inside a bubble, impervious to the craziness of the outside world. But we are not. America is at the top, but the hill is shallow; its zenith does not scrape the clouds, only the tops of the trees.
In the well chosen words of Lloyd Blankfein, I do think we’re a little better. But I only think it’s a little better.
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wise words, CT
Mr Thaler, I’ve been toying with an idea for the last few days, ever since northern European yields started blowing out. I’m trying to get a few different opinions on a thesis.
My basic premise is that:
1. There is now an aversion to all European debt, regardless of risk.
2. Out of all the European countries, Germany is most likely to come out of this mess having been harmed the least.
Therefor, wouldn’t the bonds of countries highly leveraged to the German economy be a decent long term purchase if they can be had at a large discount to their recent values, regardless of what happens to the European Union?
Of course, being bonds this quickly gets out of my comfort zone. My only idea of how to play this in a relatively direct manner would be to buy banks that hold a lot of debt from northern European countries. Of course there is the slight problem that all banks suck right now and may for the foreseeable future…
Your thoughts, as a buyer of distressed assets?
And of course, well said as usual.
German yields would disagree with you; last I checked they’re lower than ours.
I agree with a good chunk of that. I live near DC and sometimes I think highly of it, sometimes I think it’s just full of very high-functioning autistic professionals.