Global Capital Markets - Investments

Let’s see if there’s any appetite for this thread. Possibly a good place for Fox and I to continue our discussion on risk management (if F cares?) and avoid pissing off too many people who want to talk about Republicans vs Democrats.

We can widen the discussion to global capital markets - good or bad thing. IMF. Third world debt. Bring it on…

Actually, compared to the global trade debate, there is probably more room for nuanced approaches in global finance policy.

Foreign investment in 3rd world countries especially there sovereign debt is a fool’s gamble. This is a classic pump and dump if history is any guide. The current spreads between US treasuries and 3rd world debt are at a historic low. … id=2402819

This story explains it quite well. I plan on picking up “Security Analysis” in the future and getting back into investing after I pack away the cash for the 2005 Roth IRA and my emergency acct.


(Moved from other thread)

Listen, this is getting Rascallian in its silliness. We are talking past each other. I think I know why.*

The question was is Soros a great investor?

I suggested that his public persona does not match the reality. Investment requires knowing what to buy and how much to buy.** He relied on others to tell him what to buy.

Then there is the how much to buy (Risk management - vary the relative quantities to diversify your risks***.)

Then i suggested that even here there is a question - was his decision to buy lots a smart one or a lucky one? looking back, because it worked, we might all say it was smart… but that is the affect of hindsight. He took huge risks and backed JR’s or SD’s judegment. So was it a canny risk management process or a huge punt? Without doubt, it was the latter.

Think about the risk return profiles that these guys face. If the punt goes wrong, what happens? They go bankrupt. But they live to fight another day. If it goes right? They become billionaires and spend their money propagating their own world view.

Who made the smart investment decision and who made the gamblers’ punt?

I think the difference between us may largely come down to the use of the phrase “huge punt.” To investors, this means a large AND risky position. For example, putting a lot of money into a single stock, when you are measured by your performance against the whole market. That’s a punt. Interestingly enough, if you are being measured by your performance against the S&P500, putting a large amount of money in a deposit account would be considered a huge punt, too. (because you would look like an arse if the market goes up). Given this fact - that it is all about the relative nature of the investment as to whether it is a punt or not, it makes no sense to claim

For that is precisely the meaning of the word 'punt."

Let me add that if someone had a large amount of money in one place but it was peanuts compared to what they were doing with the rest of their portfolio, it would not be considered a huge punt.

**Not, as Fox misrepresents it “What and When?” trying to sidestep the whole issue.

***Even Fox agrees with this after seeming to quibble at the start.

I think debt looks troublesome… but some emerging market equities may be quite good over the next few years. (Though I sense a hiccough coming soon - places like India have splutterd a bit recently.)

I feel honored. :smiley:

Sovereign debt is really troublesome. They were talking of actually seizing Argentina’s assets overseas, but nothing cam of it. If a country defaults on its sovereign debt, how are you going to collect? Troublesome is an understatement. The underlying problems that make all these countries financial basketcases are still there. In Peru, Chrysler has actually had to use unregistered property as collateral in order to do business with bus comapnies there. Also many of the countries going through the boom are doing so on the back of rising raw material prices. So if China(rising raw material user) screws up, guess what happens to all the countries riding on the back of declining raw material prices?

I think of international diversification as investing in the S&P 500. I do not see it as investing in corporations in countries with shoddy accounting and opaque regulations. I call that gambling. China ia unloading crap right now and getting top dollar for it, very similiar to dressing up a 50 year old hooker and telling her john that she is beautiful and 17 years old as long as it is dark. India is overpriced at the moment, though I’m sure that someone who knows what they are doing could do well. I am not that person and I trust that mutual funds do not have those people either if past performance of most international funds is any indicator.


Ouch! Well, one might point out that the US has had its fair share of shoddy accounting… but in general, I take your point. However, don’t forget that the difference in risks is discounted to some extent by the difference in valuations between the US and emerging markets.


Its been the same story for nearly 15 years! Quite true. Nevertheless, there are some companies emerging from China that have a chance. Hey, you don’t have to take it from me - Mr Buffet has been active, too.

They’ll be more tears in the near future though. Remember what happened after Barton Biggs went “maximum bullish” for example…? Shanghai is seeing a bubble in property, i am convinced… and investment rates are looking a bit frothy, too. I am sure China wants to at least try and slow things down now so it doesn’t get a worse crash in the run-up tothe olympics.

hey! Some of my best friends are fund managers, etc…

This part of the world, though, does have one thing going for it, on a longer-term, macro view. Its come through 4 or 5 pretty hard years after the 1998 crash… and a new credit cycle seems to be starting. A weak dollar will keep money supplies, here, growing - provided there is no return to capital controls. Future earnings will probably be much better than in the recent 2 years and therefore are probably being underestimated by analysts. Some stuff looks cheap. Property in HK ( a direct beneficiary of a weak dollar) for example.

No doubt there’ll be some scares - probably due to weakness a little later on in the US, etc. But in general, I think the cycle is in our favour.

Don’t forget - things always look bad at the bottom of the down-cycle and the beginning of the up-cycle. All the bad news is out. A correction in the US current account deficit is going to need a relative rise in spending here vis a vis the US.

“Buy on the dips,” I say. But be careful, 'cos ‘dips’ in this part of the world can be a wee bit hairy.

The percentae of dodgy ompanies in the US is small, versus say a plae like China, where corporations sue reporters to bankruptcy for reporting anything more than the fluff they give them. Also if memory serves me correctly, compaies in Taiwan and China will pay reporters to issue favorble articles and opinions on them, in what should otherwise be objective reporting.

I Believe Mr Buffet(?) said it best when he said, “Cheap crap is still crap.”

For a man of Mr. Buffet’s success and skill, I can see no reason on earth why he would invest in China. It practically goes against everything he talks about and preaches from my understanding.

The US dollar is set for a fall, not that it hasn’t already. Eventually SE Asia will realize that funding our current acct deficit is really not helping their economies as much as they think and will slow down the rate of dollar shopping. They can’t quit, because the withdrawal would be the economic equivalent of a heroin withdrawal. China’s the real issue as they have 2 choices and both have their benefits.

  1. Raise the peg and reap the benefits of lower natural resource prices(which are priced in US$) and get rid of some of that excess cash that is literally burning up their economy, before it explodes under the weight of dodgy lending.
  2. Keep the peg the same and get points for doing nothing.

I’m sorry, :wink:

I don’t think we’re at the bottom of a down cycle. I don’t think all the bad news is out. Japan still has a host of problems to sort out. Korea is trying to get over a consumer debt binge. Taiwan is trying not to get shot at, invaded, etc. China is just trying to figure out what is going on. I’m taking a wait and see. I’m also putting my money where my mouth is and investing in the S&P 500 still. I need my international diversification. :laughing:

As always a pleasure talking business with you

Indeed. But there are some pretty good franchises out here. Some badly managed… others a little better managed. They are worth something. Witness Warren taking 15% or so of China Petrochemical.

Plus, I think there are some good companies in HK, one or two “not-horrible” ones in Taiwan and Korea, and a smattering across Sing, Thailand, India that are worth buying.

Perhaps he is USD shy and looking for commodity producers…?

My biggest disagreement is with you here. Excess money sloshing around and a pick-up in the loan growth series for many Asian economies suggests the start of another 3 or 4-year credit cycle.

I would agree - often, you will get more bad news, say a bankruptcy, at the start of an upcycle. Think of a company that has managed to stay alive not through sales growth but only through the unusually low interest rates of the recession. If its in a tough industry, sales will not rise as the whole economy picks up and the rising interest rates will squeeze it out of business.

But if (and when) such bad news shakes the markets, that would be a time to buy.