Why Tom Friedman Is Irrelevant.

Tom Friedman should stick to politics. Leave bad financial advise to Ben Stein and Jim Cramer.

His latest missive:

Is China The Next Enron?

http://www.nytimes.com/2010/01/13/opinion/13friedman.html

Mr. Friedman makes an argument that even though Super Short Seller Jim Chanos bet against Enron and won big, he really doesn't know what he is talking about with regards to China.

Mr. Friedman has solid investment rules he never breaks. One of them this gem.

1- "First, a simple rule of investing that has always served me well: Never short a country with $2 trillion in foreign currency reserves."

I don't know where to begin here. Credit bubbles are credit bubbles, and bubbles eventually pop. It did pop in China in 2008. The reason China was able to reignite their economy was their huge stimulus injection they engineered. Of course a big part of that stimulus was foreign currency reserves. The end result? Out of control asset prices that will only lead to another crash. Obviously Mr. Friedman didn't get the memo about the implosion of the U.S. Housing sector. When you have money flushing around it will only engulf into a tsunami of credit. This is the China real estate situation currently. If you thought US and European Banks were out of control, they would be considered girl scouts compared to the Chinese.

http://tradersutra.blogspot.com/2009/11/china-walking-around-like-elephant.html

http://tradersutra.blogspot.com/2009/08/more-on-china-bubble.html

http://tradersutra.blogspot.com/2009/08/more-on-usd-and-china-decoupling.html

I am thinking this type of investment advise has a short shelf life. Did Mr. Friedman live in the 80's? How about Japan? How did that end up?

Countries that undervalue their currencies only do so to grow their trade surpluses, which they use in conjunction with capital flows to inflate asset prices in their own country. They do this with massive credit expansion leading to classic overbuilding of infrastructure. You see. Boom to Bust. Mr. Friedman understands the Boom, but has no clue that it always leads to Bust.

Just because Jude Law is now playing Hamlet doesn't change the ending of the story. Hamlet still dies. If the plot and story lines are the same - the end result is the same regardless of who the actors are.

Mr. Friedman should stick to solving the Arab/Israeli conflict. Something that he has been writing about for 15 years, and leave the bad investment advise to either Ben Stein and/or Jim Cramer.

I have studied Jim Chanos for years. I made money shorting Enron although it was touch and go for a while. Similar patience will be awarded with China.