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Reasons to Open a Chinese Bank Account

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Re: Reasons to Open a Chinese Bank Account

#61

Post by grandalf »

16s wrote: post #56
grandalf wrote: post #46

Earlier quoted context omitted.

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…

Sorry, it didn't work. 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 bu…

How does buying an index fund mean giving a stock broker more money? It's your money, invested. You're certainly free to keep it under your mattress if you prefer. Historically, money invested has drastically outperformed money kept under mattresses :)

Re: Reasons to Open a Chinese Bank Account

#62

Post by natnat »

maukdaddy wrote: post #12

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.

Perhaps in stocks, but the value of the currency is kept fixed by the Chinese government and wasn't available for purchase until very recently. Even if all of America's hedge funds spent all of their money on Yuan, it wouldn't get any more expensive unless the Chinese government intervened.

Re: Reasons to Open a Chinese Bank Account

#63

Post by nkurz »

grandalf wrote: post #46
16s wrote: post #39

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…

Over time, odds are this stock will do poorly compared to if he'd had a more diversified portfolio.

How are you calculating these odds? I'd naively assume that the average performance would be the same but the volatility would be much higher. Dollar cost average into it and you reduce this somewhat. I've never really understood the magic of diversity either, unless it's just to insulate against risk of ruin.

Re: Reasons to Open a Chinese Bank Account

#64

Post by iwwr »

fleitz wrote: post #42
meric wrote: post #10

Earlier quoted context omitted.

Trust them to do everything they can to keep it growing. People are in China are only generally content with their government because every year everyone gets richer and richer, except the family five blocks down the road that had their house confiscated and compensated only 25% market price because the local council is planning to build a `public facility` on the land.

Similar to the United States, except here your house gets seized to build a factory for Pfizer. http://en.wikipedia.org/wiki/Kelo_v._City_of_New_London

Or when the local town planner adds extra restrictions to your property, so the value goes down and they can snap it up for a bargain.

Re: Reasons to Open a Chinese Bank Account

#66

Post by grandalf »

jamesbritt wrote: post #47
fleitz wrote: post #42

Earlier quoted context omitted.

Similar to the United States, except here your house gets seized to build a factory for Pfizer. http://en.wikipedia.org/wiki/Kelo_v._City_of_New_London

Horrendous action, no doubt. But there was an interesting follow-up: "Prior to Kelo only eight states specifically prohibited the use of eminent domain for economic development except to eliminate blight: Arkansas, Florida, Illinois, Kentucky, Maine, Montana, South Carolina and Washington.[30] By July 2007, 42 states had enacted some type of reform legislation in response to the Kelo decision. Of those 42 states, 21…

One person's blight is another person's economic development opportunity.

Re: Reasons to Open a Chinese Bank Account

#67

Post by 16s »

grandalf wrote: post #61
16s wrote: post #56

Earlier quoted context omitted.

Sorry, it didn't work. 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 bu…

How does buying an index fund mean giving a stock broker more money? It's your money, invested. You're certainly free to keep it under your mattress if you prefer. Historically, money invested has drastically outperformed money kept under mattresses :)

Because it never ends:

1. You don't invest? Let me help you start. (give guy money)

2. Good, you invest. Let me help you diversify. (give guy more money)

3. Good, you are diversified, but you need to diversify more (give guy even more money)

4. You have too many stocks. Let's get you into more bonds. (give guy money)

5. Hmm... you don't have any exposure to Far East currency, but we can't take away from your Euro position. Give me some more money so we can buy this new Chinese currency. (give guy money)

6. ...

That is my point. Investing is a scam.

Re: Reasons to Open a Chinese Bank Account

#68

Post by grandalf »

nkurz wrote: post #63
grandalf wrote: post #46

Earlier quoted context omitted.

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…

Over time, odds are this stock will do poorly compared to if he'd had a more diversified portfolio. How are you calculating these odds? I'd naively assume that the average performance would be the same but the volatility would be much higher. Dollar cost average into it and you reduce this somewhat. I've never really understood the magic of diversity either, unless it's just to insulate against risk of ruin.

Just look at the top stocks 30 years ago and see which ones are still in business today, and of those which have beaten the market average. No stock will outperform the market over the long term. Nor will any mutual fund!

For medium time horizons it's not impossible but exceedingly unlikely.

For short time horizons it's still not remotely easy for firms to accomplish, and many do not.

Re: Reasons to Open a Chinese Bank Account

#69

Post by jrockway »

16s wrote: post #67
grandalf wrote: post #61

Earlier quoted context omitted.

How does buying an index fund mean giving a stock broker more money? It's your money, invested. You're certainly free to keep it under your mattress if you prefer. Historically, money invested has drastically outperformed money kept under mattresses :)

Because it never ends: 1. You don't invest? Let me help you start. (give guy money) 2. Good, you invest. Let me help you diversify. (give guy more money) 3. Good, you are diversified, but you need to diversify more (give guy even more money) 4. You have too many stocks. Let's get you into more bonds. (give guy money) 5. Hmm... you don't have any exposure to Far East currency, but we can't take away from your Euro pos…

Um, why you buy an index fund and you put $1000 in, you can immediately get $1000 out. And many brokerage accounts are free.

So this is no more of a scam than a bank account, except you take on more risk in return for more reward. Not a huge risk, but bigger than the money market.

Re: Reasons to Open a Chinese Bank Account

#70

Post by patrickgzill »

sethg wrote: post #28

OK, that’s the upside from the depositor’s point of view. What is the upside from the Bank of China’s point of view? Given the massive dollar reserves that the Chinese government has accumulated from its trade surplus, why should they sell off renminbi in exchange for even more dollars? If the RMB/USD exchange rate is almost certain to increase, why would the bank want to give up an appreciating asset in exchange for…

All you are buying is a paper promise of yuan.

US dollars, devalued as they are, are still the reserve currency of the world and most importantly, oil is still denominated in USD.

So basically they can print up as many yuan as they can sell, and exchange paper with pretty pictures on it, for oil and other commodities they can actually use.

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