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The reason why I won't buy CNY is because I lived in China as an expat and still have lots of contacts there, so I know that place inside out. The financial sector of that country is completely rotten. It is a place to make quick bucks, that's about it, but remember to take your money and run. The long-term prospect of China is very much in doubt. Plus, how do I take profit on a non-convertible currency? I have quite a few very rich Chinese friends who share the same opinion, they all have businesses in China, but left their families and most of their fotunes outside of that country. That in itself says a lot.
The answer is, gold. Gold is the only thing that cannot increase in supply easily and everybody hoards when currency system is in turmoil. Just look at what happened to gold price in 1980s, today's gold spot still has a long way to go.
Also, China is no Japan, it won't be Japan for a long time. Japan is technologically much more advanced than China when it was in the comparable period of 1970s. The contemporary Chinese who were born in the late 1970s and early 80s save as little as the Americans, how do you think one can afford a car in China? Car loans. Do you know what the latest default rate on car loans in China is? 10x the American default rate. That is a country that looks good today but will disappear the moment their main backer, America, runs into problems. The way to hedge against the fall of USD is to find a country / countries with the least economic ties with us, namely, the Europeans, Scandinavians or even the Russians. The entire Asian economy is dependent on us, so I won't hedge against a free fall of USD with any Asian currencies as a general principal.
Investment IS about psychology. Why does one need to spend a MILLION to live in a squatter hut in BA? That is about psychology. Why does one need to pay hundreds of P/E for GOOG? Again, psychology.
The root of the problem is, there is way too much USD floating around. When there is too much paper in circulation, there will be inflation. But China's cheap labor and export-oriented policy has ensured that we don't get inflation in goods that can be imported or services that can be outsourced. However, whatever paper USD is left unconsumed will have to start chasing items/assets that cannot be outsourced, and commodities that cannot be increased in quantity as fast, namely, homes, medical service, education expense, food, commodities and precious metals. It is a simple economic phenomenan of lots of SOMETHING chasing limited quantity of SOMETHING. The price of whichever in scarce quantity will go up, and that of whichever in abundant quantity shall go down.
What is the value of USD? It is just paper that is backed by "in God we trust", or shall I say, in AG we trust? Economics is a study of relative scarcity and group psychology.
Peter P
2005 Sep 17, 5:30pm
That is about psychology. Why does one need to pay hundreds of P/E for GOOG? Again, psychology.
Yes, greed is GOOG.
No, I am not suggesting that we will ever go back to gold standard, that is quite impractical. However, in this era of irresponsible money printing, people will start to increase the % of gold in their portfolio. Before we jumped on this bandwagon of free money, I had 0% in gold in my porfolio. Now I have 14%, and still plan to increase to about 25%. Same thing is happening to other friends of mine who are thinking of hedging against the free fall of USD because it is long overdue.
I am sure lots of new gold bugs were lately manufactured because of this Katrina rebuilding effort + no tax raise nonsense. You just can't turn on the printer 24x7 expecting everything to stay constant. Sooner or later, USD will be worth less than the paper that the denomination is printed on.
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"S.D. blazes new trail in housing slowdown"
signonsandiego.com: http://tinyurl.com/afg6n
The market is giving Teresa Generas the jitters, causing her to pray for somebody to buy her 1931 Mission Revival bungalow, which has been on the market more than six months.
"It's getting a little bit scary right now," she said. "I'm not a person of means. I'm a retired nurse and a widow and I don't have millions to call upon."
Generas, 64, moved to a condo in Tierrasanta last spring and put a $1.1 million asking price on her 1,879-square-foot, three-bedroom home in Kensington. Since then, it's been in and out of escrow three times and is listed at $950,000 to $975,000. Her son Tony is house-sitting and helping cover her two mortgage payments, which total $6,000 a month. But she's not ready to accept lowball offers.
"I just refuse to believe that there's been that much of a dip," she said.
Lowering the price more doesn't interest her. "I think people who can afford this house wouldn't care that much anyway," she said.
...Karen Peterson, last year's president of the realty association, said sellers shouldn't panic and buyers should not hesitate if they find what they want. "I think we're still adjusting," Peterson said. "Last year was such a hot market."
She said that in a few cases buyers are outbidding each other. Areas where prices are down saw rapid increases earlier. But the big bugaboo remains the anticipation that the proverbial real estate "bubble" will burst.
"People think prices are going to go down and the statistics keep telling us they're not," Peterson said. "They need to buy. We have an excellent inventory, excellent interest rates. What are they waiting for?"
#housing