Rob Cheng’s Blog

14 months ago the American economic bubble burst bringing about the worst recession since the Great Depression. Since that time, in the age of internet enlightenment, we have all watched as the Fed has done everything in is power to re-inflate the bubble. It is a very weird time in the history of our country and I hope I can bust a few myths related to our economic bubble.

Our economy is not improving

They are quick to rush out any sign that the economy is improving because GDP is on the rise. The best measure of the strength of our economy is not GDP; it’s employment. No matter how you cut it, the unemployment numbers continue to grow. Plus if you add in the people that were searching for a job and have given up, the picture looks even worse.

Although the Fed and the government would like us to believe that things are improving, it is a hard pill to swallow as long as unemployment continues to rise. If one takes into account, all of the illegal aliens and transient workers that have left since the economy imploded, the employment picture looks abysmal.

The Stock Market is not a proxy for the economy

The Dow has hit over 10,000 and is up to over 30% from its lows a little over a year ago. Wow! That is great growth. The problem is that in times such as these, there is little or no relation to stock market performance and that of our economy. More »

November 29th, 2009 | Category: Financial Crisis | Leave a comment

About two weeks ago, one of my brokers called and told me that it was time to get back in the market. I laughed at him. I reminded him that I got out of the market entirely in May 2008, and now that events have unfolded, I had little faith in our financial system. But he kept on pushing and pushing, and of course, we were going nowhere, because in my view the downsides far outweigh the upsides. Here are the top reasons why I will never listen to another stockbroker ever again.

Stockbrokers advise you when and what to buy not when to sell. That was what my broker was doing two weeks ago. He wanted me to buy again. That’s my issue, in all of my years of investing, I have never had a broker call me and tell me to sell. Never. More »

June 14th, 2009 | Category: Financial Crisis | Leave a comment

This entire economic crisis has left me more than a little peeved. The reason is that Obama and Bush have been dancing around assigning blame for this huge mess. The reality is that this entire crisis and heartbreak was entirely avoidable. In order to create such a mess with the world’s largest and most powerful economy takes a perfect storm of retards acting overtly and covertly.

What is an economic bubble? If one looks at any chart related to the housing prices or the stock market during the last 15-20 years, the bubbles are more than apparent. A bubble is by definition something that pops. That means that there is ascent in pricing, followed by a precipitous decline, also known as a crash. Therefore, the people that buy and sell in the beginning of the bubble, win. The people that invest at the tail of the bubble, lose almost everything. When one looks at it through this lens, it is hard to distinguish between a bubble and a Ponzi scheme. The only difference is that the architects of a Ponzi scheme go to jail. The architects of a bubble retire to a private island. More »

April 13th, 2009 | Category: Financial Crisis | Comments (1)

It has been over 6 months, since George Bush went in front of the entire nation and told us all that we are all screwed. He succeeded in putting the nation into a panic setting the stage for an unprecedented flurry of government spending. After 1/2 a year of spending, none of the stimulus has had any impact whatsoever. Employment continues to rise, housing prices plummet, and GDP is still shrinking.

The underlying theory behind the “shop til you drop” stimulus plan is Keynesian economics which became popular during the last depression. Unfortunately, Keynesian economics will nor work this time. The primary reason is that the United States is broke. In the last 50 years, our great country has been transformed from the largest creditor nation to the largest debtor nation. We are broke, and we are addicted to spending more money than we have. Addicted is the only appropriate word, and like an addict, there is only one solution. We must wean ourselves from the addiction, rather than borrow more money. Obama and Bush have been feeding the addiction. More »

March 18th, 2009 | Category: Financial Crisis, Politics | Leave a comment

The Fed announced two months ago that they would drop America’s key interest rate to .25% giving America the unique distinction of having the lowest interest rates in the world. In addition, although Congress is still wrangling, they will soon pass one of the largest spending bills in the history of the nation, wrapped up in a bow and called economic stimulus. Although, it sure smells like pork. These two events have one key thing in common - printing more money. In fact, the United States will begin printing money at an unprecedented rate, not just in the history of our nation, in the history of the world.

Ultimately, I believe these policies will fail. Furthermore, their policies are designed to promote consumption and penalize savings. I refuse to fall into this trap. I believe that saving money is always prudent, and in these economic times, even more so. There in lies the dilemma. If I want to save money, where should I do that? More »

February 8th, 2009 | Category: Brazil, Financial Crisis | Comments (22)

As I have already documented, I sold all of my stocks in May 2008. I feel fortunate, but I know of no one else that has escaped this economic crisis unscathed. The sordid details of the Madoff scandal and the avarice of AIG are just surfacing now. It is riveting how misplaced were our confidences with our financial security. Confucius said “May you live in interesting times.” And this is so very true. I put together these thoughts to help people navigate through these uncertain and interesting times. More »

January 4th, 2009 | Category: Financial Crisis | Comments (2)

This post is called the Double Bubble, because it is clear that there have been two very significant bubbles to ripple through the world in the last 15 years. Just looking at the Dow Jones Industrial average, there is a bubble which begins circa 1995 and bottoms out circa 2003. Immediately after the tech bubble bottoms, a new bubble begins to form, which is the crisis we face today. As has already been discussed in previous blogs, Greenspan intentionally created a second bubble by lowering interest rates after the Tech Bubble popped. More »

December 28th, 2008 | Category: Brazil, Financial Crisis | Leave a comment

We keep on hearing that the current economic crisis is global in nature. That is to say, that each and every country in the world will suffer along with the United States. To be honest, this entire premise seems false to me. Surely there would be winners and losers as this economic crisis unfolds. Plus on top of this, the US is the largest debtor nation in the world. Surely the lenders will survive the crisis better than the debtors.

The chart below takes a peek at the interest rates around the world. The first thing that I notice is that there is a huge spread in interest rates from various countries. Their appears to be high interest rates in countries that are expanding such as China, Russia, India and Brazil. And then the balance of the countries have extremely low interest rates such as Japan, US, Europe and Great Britain. This chart is critical for understanding the economic crisis since artificially low interest rates are the root cause of the bubbles. More »

November 23rd, 2008 | Category: Brazil, Financial Crisis | Leave a comment

One of the greatest travesties to this bubble is the incredible American deficit under the Bush administration. The deficit has ballooned by over $5T in a scant 8 years. We can all agree that this is highly fiscally irresponsible, but the question remains, “Where did all this money go?”

After all, Bush is a Republican, and the funds certainly were not spent on liberal causes such as welfare and education. Given the record price at the gas pump, the funds were not spent on alternative energies, or more energy efficient cars. In fact, I think that we can look back at the success of the Humvee as a unique product of the Bush administration. More »

November 3rd, 2008 | Category: Financial Crisis, Politics | Leave a comment