51–60 of 118 posts
Much like the tech bubble and housing bubble, by the time you read these articles in the mainstream press, it is FAR too late to invest. You've already missed 10-15 years of explosive growth in the Chinese economy.
I know this won't be popular, but the whole idea of "diversification" has always struck me as a lame attempt by rich people (Stock brokers) to get more money from poor people. So I roll my eyes whenever a guy with a Rolex and a Porsche is telling me I need to "diversify"
A better investment (for most people) would be in a mutual fund or index that is tied to the Chinese economy.
My bucket:
FXI is a China fund
EEM is an emerging mkts fund
EWS is singapore
or you could just assume that the Chinese will want meat so you buy MOO
or you can spec on the Yuan directly with CYB.
>Politically, the country is under international pressure to rein in its huge trade surplus. The government doesn't feel any of this pressure, as it's not an internal issue they don't care. I would argue that yes the yuan is likely to rise against the dollar, but because of high inflation (very very high in China) most assets would also rise in comparison to the dollar(Oil, Gold, Silver etc.) Actually the only good r…
I know this won't be popular, but the whole idea of "diversification" has always struck me as a lame attempt by rich people (Stock brokers) to get more money from poor people. So I roll my eyes whenever a guy with a Rolex and a Porsche is telling me I need to "diversify"
Let me try to persuade you otherwise: Imagine average Joe investing in a very non-diversified portfolio of one stock which he has decided he likes, perhaps due to personal knowledge of the firm. Over time, odds are this stock will do poorly compared to if he'd had a more diversified portfolio. It's the same general law of markets that is why it's generally better to invest in index funds... they benefit from overall…
Diversification means I need to give the stock broker more money. That's all it means to me. I understand the risk aversion concept. You don't need to "educate" me.
Telling lay people (as you call them) that they need to do this or bad things will happen is the perfect scam. Create disonance and then offer a solution.
"Repent and ye shall be saved." "Diversify and ye shall be saved." I don't buy either argument. I got out of the market in 2000, never been back. Never will.
Edit... and yes, I owned index funds, but they wanted me to buy more index funds to further diversify my holdings. I learn quickly. That's always been my problem.
Speaking of currencies, I'm wondering if anyone more intelligent than me knows what to make of this: http://research.stlouisfed.org/fred2/graph/?s[1][id]=BASE To my untrained eyes, it makes the idea of diversifying into anything other than the US dollar seem like a good idea. But to be honest my understanding of the US monetary system gets fuzzier the more I learn about it.
Just as price is a function of supply and demand, so are exchange rates. The money supply is independent of the price of goods and of the price of currencies (exchange rates).
Seemingly, a larger overall quantity of dollars in existence would seem to predict a decline in the value of the dollar relative to other currencies, but the monetary policy decisions that resulted in increased money supply are intended to achieve relative price stability.
For example, the dollars introduced to the economy and lent to banks had the effect of encouraging banks to make loans, which helped increase demand for products and services, which helped prevent prices from falling.
Also, many of the dollars are being used as reserve capital after the market price of various securities which had been used as reserve capital declined, leaving the entities under-capitalized. All this was done in an attempt to keep interest rates low (in effect a price target) and prevent banks from being forced to stop lending money...
So I think the bottom line is that the behavior of consumers and firms can account for so much variability in supply and demand that the money supply can expand greatly and prices can still say roughly constant... the other side of the coin being that monetary policy was used to keep prices relatively stable, in this case by keeping the credit infrastructure status quo alive.
edit: Of course, if the Fed gets it wrong or lacks the will to raise interest rates when necessary, hyperinflation can result, which would impact exchange rates.
The Yuan is pegged to the US Dollar at around 1 yuan = 0.15 USD cents. A graph of exchange rate for Yuan/USD over time produces a horizontal line. The current president 'Hu Jintau' controls the exchange rate through China's currency policy which dictates how many USD an owner of Yuan can get in exchange. So buying yuan is a bet that the peg will be removed and the USD will be printed so much that nobody will exchange…
As always, great advice from WSJ: I will have one million dollar in my account in 5 years - if I start with two millions.