What is Sky Blue Monthly,
that we should be mindful of it?
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What is Sky Blue Monthly? Why is it useful? Why is it able to warn you about the potential financial dangers? We hope that you read it before the inevitable burst of current American equity bubble. But we are sure, by the fate of life (or by the life of fate), most will read our Sky Blue Monthly only after being caught and burnt badly in the bust!
When we decided to launch Sky Blue Monthly, we told our friends about it. Generally, the reactions from them were positive. Nevertheless, a few expressed concerns. Examples were: "No, I don't think it is going to work. Most investors only want the recommendations of individual stocks. They don't care what the economy is going to be. Yes, of course economy affects stocks. But, they don't have a clue. "; "Man! You are wasting your time. No body likes economics. People won't pay you to suffer! "; "I think your customer base will be about 1,000 people on this planet. As long as your Monthly talks about economics, you are targeting a very small population. The best scenario will be one or two hundred subscribers. And that is it! "; "You know what people need? First, open your market letter; then, read your recommendations; after that, actions! Most people are not analytical. They want the final answer; they don't want the steps. They won't go through the whole analysis. That is way too hard for them! " or "Your analysis is excellent! Your ideas are good. But, investors won't read your letters. Yours is too difficult for them. Only graduate students will read your stuff and then use your ideas. Why are you giving away your ideas for free? What are you doing?! " We think they had a point.
Economics (Macro Economics) is so important to the stock market and bond market. Yet, few study it before investing or speculating. There are 3 major reasons for it. First, many economic analyses are incredibly difficult to understand and are filled with all sorts of mathematical and/or statistical equations and formula. Second, most traditional economic studies apply Static Economics and they are not right anyway; so, why bother? Third, most economic commentaries focus on specific economic reports, such as GDP, Consumer Price Index, US Housing Starts, Monthly Retail Trade, …etc. Most people cannot see the whole picture by reading these pieces; and they do not have time and training to integrate these individual reports and commentaries. Let's ask you a few questions: "Do you like Math? ", "Do you love Statistics? ", "Do you enjoy reading a lengthy forecast that is no better than a random guess? " or "We like our favorite paintings as they are, but do you like each of them to be a 8,000 piece jigsaw puzzle so that each time you want to behold them, you need hours to put them together? " If all your answers are "Yes!", then you don't need Sky Blue Monthly.
Sky Blue Monthly was launched for the rest of us who are shouting "No!". Sky Blue Monthly has none of the above problems. Sky Blue Monthly avoids difficult mathematical and/or statistical equations and formula. We achieve this by carefully translating the ideas into plain English without significant loss of the original concepts. Sky Blue Monthly applies our unique Far-from-equilibrium Macro Economic Theory (FFEE), which is a Dynamic Economic Theory and is far more accurate in forecasts than those Static Economic Theories could possibly managed. Although this is very time-consuming, we integrate all the pieces and present the whole picture of current economic situation, with emphasis on inter-relationship among USA, EU and Japan. (the most important factor in the current global economy) Thus, Sky Blue Monthly stands alone. It is different from all others. In addition, each issue of Sky Blue Monthly goes through several revisions (before publication) in order to simplify the whole article and make it more readable. As a result, Sky Blue Monthly is concise -- it is not annoyingly long, but it contains the most important analysis (especially the big picture) that you have to know before you jump into the markets. We want anyone who can read English can also understand the analyses in Sky Blue Monthly easily. It is a very challenging task but we will continue to invest our time and efforts to simplify, condense and perfect our Sky Blue Monthly.
We hope the above efforts will take care of those doubts. The economics in Sky Blue Monthly is not your regular ivory tower economics. You have nothing to be afraid of -- not only that, you will also find Sky Blue Monthly very useful and very easy to understand. Looking back, those who ignored macro economics often paid for it, with heavy losses. On Oct. 19, 1987, US stock market crashed. Many investors only studied the individual companies' earnings, book values, balance sheets, etc. (i.e. They only studied the "Micro".) They didn't have a clue on what were happening in the macro economic factors such as capital flow and currency movements. And they paid dearly for that. Do you really believe that from Oct. 12, 1987 to Oct. 19, 1987, each company in America suffered a sharp drop in earnings, sudden deterioration in balance sheets; and hence, each stock sank as a result? We don't! If you only focus on the "Micro" (and ignore the "Macro"), it is an accident waiting to happen. If you didn't read macro economic analysis in the past because of those 3 obstacles described above, now you don't have an excuse because Sky Blue Monthly has removed them. Sky Blue Monthly is written for common investors, not for Ph.D.
Some may say they are the buy-and-hold long-term investors, and therefore, they don't have to worry about macro economics. Wrong! Not every market crash was as nice as that of 1987. From the peak in 1929 to the trough in 1932, Dow Jones Industrial Average dropped from 386 to 40. Remember that not every mutual fund manager can beat the indices. Besides, some companies simply went into bankruptcy. You can lose all the money that you have invested if you buy and hold all the way through the bear market. In addition, bear market is not always similar to 1987 collapse, which was very sharp but brief. For example, from 1929 to 1932, there were 6 leg downward moves: -40%, -27%, -35%, -33%, -41% and -52%. (from peak to trough) And it lasted 3 years. Buy-the-break attitude is particularly dangerous in this type of situation.
What if you don't invest in the financial markets? Then, should you be mindful of Sky Blue Monthly? Let's talk about the value of your house. (close to home!) According to FFEE, after a financial bubble bursts, there will be either (I) deflation or (II) hyperinflation. There will not be a dis-inflation, moderate inflation, or price stability. If (II) hyperinflation happens, you won't need to pay mortgage any longer because after hyperinflation, it will cost much more to buy a stamp than the amount of your payment. Talking about free (almost free) house! But, if (I) deflation occurs, the value of money will skyrocket and the real cost of your home loan will rise rapidly. There will be a real risk that you will lose your house! Want to learn more on why the inflation rate behaves so weird after the burst of a bubble? See Feb. 2000 Sky Blue Monthly for more details.
We use FFEE to write Sky Blue Monthly. Sky Blue Monthly is all about macro economics. It provides the other half of the picture which people usually miss. Most market letters focus on individual companies and stocks. They only provide half of the picture, the "Micro". We provide the other half, the "Macro". If you want to invest, you need to get the full picture, not a half picture. Sky Blue Monthly is not a substitute; it is a complement.
Special Note from the Editor: The first 3 issues of Sky Blue Monthly (Dec. 99, Jan. 00, & Feb. 00) are the most important issues because they contain introduction, brief economic history, basic ideas, essential concepts and important economic theories that may not be repeated in the later issues. So, if you have not read the first 3 issues, you are missing a lot of goodies! Besides, you may encounter difficulties while reading the later issues if you skip the first 3 issues.
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