Embrace the risks you see, fear the ones you can’t see. Embracing risks we see would have us buying municipal bonds because the back-breaking pensions are obvious risks. Anticipating the worst, many bonds have lost 20% of their value. Will the worst come to pass? Probably not, and at least not likely before most of my munis have already come due. This pension thing is a 10-year-from-now problem, that needs mending today. Do we have the guts to stand up to the unions? If you want to see what kind of blight occurs from heavy unionization, just look at Detroit with 21% unemployment, or the steel industries in and around Allentown, Pennsylvania, where unionization finally killed both Bethlehem Steel and LTV a decade ago. That area remains blighted today. Fearing the risks we can’t see would have us selling our Chinese mutual funds, because the future looks mighty rosy, huh? Remember how rosy Japan was in 1988? They were buying all of Hawaii, and Palm Springs too. Their stock market peaked right about then, and then went into a 20-year tailspin that wiped out 80% of everything. They were a financial wunderkind; much like China today. Yet, all that came to a screeching halt, with a 20 year depression that has completely enveloped Japan. I would rather own Japan today than China. At least Japan’s risks are known and accounted for. When have you heard anything about risks to China? Did you know that average Chinese urban condo abodes cost over twenty times annual income? $50,000 incomes buying million dollar properties? How about $5000 incomes buying $100,000 properties? Sound better? What was the peak housing/income multiple in the U.S. four years ago? Six times across the board; fifteen times in California. I’m not predicting an imminent crash. I’m simply reflecting on my wise friend’s quote that, “Judgement comes from experience, and good judgement comes from bad experience”. We miss you Ross.