• Guest, The rules for the P & N subforum have been updated to prohibit "ad hominem" or personal attacks against other posters. See the full details in the post "Politics and News Rules & Guidelines."

U.S. Receives a Margin Call

Ferocious

Diamond Member
Feb 16, 2000
4,584
1
71
For years, the U.S. economy has been borrowing from cash-rich lenders from Asia to the Middle East. American firms and households have enjoyed readily available credit at easy terms, even for risky bets. No longer
This really appears to be a growing crisis regarding the confidence level in America by those who lend money to her.

I got this uneasy feeling that we may have pushed our luck a little too far this time in assuming we could just borrow and spend our way out of trouble.

This time might really be different.


http://online.wsj.com/article/...?mod=hpp_us_whats_news
 

venkman

Diamond Member
Apr 19, 2007
4,955
11
81
Everyone should make sure that a decent amount of their investments are diversified in foreign assets/money at this point.
 

blackangst1

Lifer
Feb 23, 2005
20,594
745
126
Originally posted by: venkman
Everyone should make sure that a decent amount of their investments are diversified in foreign assets/money at this point.
I have a chunk in Latin America as well as the middle east (Dubai mostly) but last 6 weeks or so I have snatched up quite a few shares of dow jones stock...15-20% discount on fortune 500 companies is to good to pass up. Once again this bullshit of sell sell sell comes from the economic minds of children. You buy when the market is DOWN not up.
 

da loser

Platinum Member
Oct 9, 1999
2,037
0
0
Originally posted by: venkman
Everyone should make sure that a decent amount of their investments are diversified in foreign assets/money at this point.
lol, if you think america wouldn't bring down the world you're clueless.
 

BrownTown

Diamond Member
Dec 1, 2005
5,314
0
0
Originally posted by: da loser
Originally posted by: venkman
Everyone should make sure that a decent amount of their investments are diversified in foreign assets/money at this point.
lol, if you think america wouldn't bring down the world you're clueless.
Yeah, these days a large depression is a global occurance, if the USA suddenly can't buy as much stuff then who are all those other countries going to sell their products to? Its in the best interest of other coutries (like say China) to keep USA customers spending as much money as possible. The US economy going down the crapper is NOT in the best interest of the vast majority of countires and leaders in this world (maybe Iran and the like would rejoice, but China wouild have to find someone else to push all their worthless crap on).
 

Legend

Platinum Member
Apr 21, 2005
2,254
1
0
Originally posted by: BrownTown
Originally posted by: da loser
Originally posted by: venkman
Everyone should make sure that a decent amount of their investments are diversified in foreign assets/money at this point.
lol, if you think america wouldn't bring down the world you're clueless.
Yeah, these days a large depression is a global occurance, if the USA suddenly can't buy as much stuff then who are all those other countries going to sell their products to? Its in the best interest of other coutries (like say China) to keep USA customers spending as much money as possible. The US economy going down the crapper is NOT in the best interest of the vast majority of countires and leaders in this world (maybe Iran and the like would rejoice, but China wouild have to find someone else to push all their worthless crap on).
The rest of the world was in rubble 60 years ago, and we had virtually limitless resources. Now their economies are about to overtake us. They'll do just fine without us.
 

Dari

Lifer
Oct 25, 2002
17,136
37
91
Originally posted by: blackangst1
Originally posted by: venkman
Everyone should make sure that a decent amount of their investments are diversified in foreign assets/money at this point.
I have a chunk in Latin America as well as the middle east (Dubai mostly) but last 6 weeks or so I have snatched up quite a few shares of dow jones stock...15-20% discount on fortune 500 companies is to good to pass up. Once again this bullshit of sell sell sell comes from the economic minds of children. You buy when the market is DOWN not up.
I think it is going to fall further.
 

Jhhnn

No Lifer
Nov 11, 1999
61,808
13,955
136
lol, if you think america wouldn't bring down the world you're clueless.
Yeh, well, the question is if they'll land on top of us or underneath us... The current value of the Euro suggests that we might not end up on the top of the wreckage...
 

sandorski

No Lifer
Oct 10, 1999
68,196
3,242
126
Originally posted by: BrownTown
Originally posted by: da loser
Originally posted by: venkman
Everyone should make sure that a decent amount of their investments are diversified in foreign assets/money at this point.
lol, if you think america wouldn't bring down the world you're clueless.
Yeah, these days a large depression is a global occurance, if the USA suddenly can't buy as much stuff then who are all those other countries going to sell their products to? Its in the best interest of other coutries (like say China) to keep USA customers spending as much money as possible. The US economy going down the crapper is NOT in the best interest of the vast majority of countires and leaders in this world (maybe Iran and the like would rejoice, but China wouild have to find someone else to push all their worthless crap on).
It is just this kind of Myopic thinking that created this problem in the first place. International Investors will only go to a certain extent to protect the US Economy and it appears that at this time that extent has been exceeded.
 

venkman

Diamond Member
Apr 19, 2007
4,955
11
81
In my 10th Grade Economics class (~10 years ago), my textbook and teacher tried to convince the class that deficit spending was not a big deal and actually a great idea because the US will forever be able to borrow more and more money because international investors will see it as a safe investment due to the consistently growing GDP of this country. I said thats crazy, that puts the entire country at the mercy of foreign investors and the exact opposite of self-sufficient. I didn't even go into the whole interest paid argument at the time. My teacher told me that I was too young to understand.
 

sandorski

No Lifer
Oct 10, 1999
68,196
3,242
126
Originally posted by: venkman
In my 10th Grade Economics class (~10 years ago), my textbook and teacher tried to convince the class that deficit spending was not a big deal and actually a great idea because the US will forever be able to borrow more and more money because international investors will see it as a safe investment due to the consistently growing GDP of this country. I said thats crazy, that puts the entire country at the mercy of foreign investors and the exact opposite of self-sufficient. I didn't even go into the whole interest paid argument at the time. My teacher told me that I was too young to understand.
yup, that sentiment has been posted here as well.
 

blackangst1

Lifer
Feb 23, 2005
20,594
745
126
Originally posted by: Dari
Originally posted by: blackangst1
Originally posted by: venkman
Everyone should make sure that a decent amount of their investments are diversified in foreign assets/money at this point.
I have a chunk in Latin America as well as the middle east (Dubai mostly) but last 6 weeks or so I have snatched up quite a few shares of dow jones stock...15-20% discount on fortune 500 companies is to good to pass up. Once again this bullshit of sell sell sell comes from the economic minds of children. You buy when the market is DOWN not up.
I think it is going to fall further.
Not the companies I bought. I buy and hold anyway. The ones I bought are where I have been wanting to buy at for 5 years. If they DO fall further, which they may, it wont be much. And if they do, so what? I buy and hold. Ive never held a stock less than 4 years, and I've ALWAYS sold at a tidy profit. :)
 

blackangst1

Lifer
Feb 23, 2005
20,594
745
126
Originally posted by: venkman
In my 10th Grade Economics class (~10 years ago), my textbook and teacher tried to convince the class that deficit spending was not a big deal and actually a great idea because the US will forever be able to borrow more and more money because international investors will see it as a safe investment due to the consistently growing GDP of this country. I said thats crazy, that puts the entire country at the mercy of foreign investors and the exact opposite of self-sufficient. I didn't even go into the whole interest paid argument at the time. My teacher told me that I was too young to understand.
There is some truth in that argument. Also, as long as you understand when we increase our TRADE deficit, we decrease our DEBT, and vice versa. As a general rule you cant have it both ways.
 

venkman

Diamond Member
Apr 19, 2007
4,955
11
81
Originally posted by: blackangst1
Originally posted by: venkman
In my 10th Grade Economics class (~10 years ago), my textbook and teacher tried to convince the class that deficit spending was not a big deal and actually a great idea because the US will forever be able to borrow more and more money because international investors will see it as a safe investment due to the consistently growing GDP of this country. I said thats crazy, that puts the entire country at the mercy of foreign investors and the exact opposite of self-sufficient. I didn't even go into the whole interest paid argument at the time. My teacher told me that I was too young to understand.
There is some truth in that argument. Also, as long as you understand when we increase our TRADE deficit, we decrease our DEBT, and vice versa. As a general rule you cant have it both ways.
No doubt about it. The trade deficit can partly be blamed on the Yuan exchange rate being fixed by China. Generally when you import from another country, the exporting countries currency should appreciate against yours making future Chinese imports more and more expensive. China fixes the exchange rate by buying up dollars on the open market which keeps the value of the yuan steady against the dollar and keeps Chinese products/production cheap for American companies.
 

Dissipate

Diamond Member
Jan 17, 2004
6,829
0
0
Originally posted by: blackangst1
Originally posted by: venkman
Everyone should make sure that a decent amount of their investments are diversified in foreign assets/money at this point.
I have a chunk in Latin America as well as the middle east (Dubai mostly) but last 6 weeks or so I have snatched up quite a few shares of dow jones stock...15-20% discount on fortune 500 companies is to good to pass up. Once again this bullshit of sell sell sell comes from the economic minds of children. You buy when the market is DOWN not up.
Speaking of children, do you even know what dollar cost averaging is? Buying up a whole bunch of any stock at one time is not a good strategy.
 

Farang

Lifer
Jul 7, 2003
10,921
3
0
Originally posted by: Dissipate
Originally posted by: blackangst1
Originally posted by: venkman
Everyone should make sure that a decent amount of their investments are diversified in foreign assets/money at this point.
I have a chunk in Latin America as well as the middle east (Dubai mostly) but last 6 weeks or so I have snatched up quite a few shares of dow jones stock...15-20% discount on fortune 500 companies is to good to pass up. Once again this bullshit of sell sell sell comes from the economic minds of children. You buy when the market is DOWN not up.
Speaking of children, do you even know what dollar cost averaging is? Buying up a whole bunch of any stock at one time is not a good strategy.
You know the article you linked to basically says dollar cost averaging isn't a strategy worth using.
 

blackangst1

Lifer
Feb 23, 2005
20,594
745
126
Originally posted by: Dissipate
Originally posted by: blackangst1
Originally posted by: venkman
Everyone should make sure that a decent amount of their investments are diversified in foreign assets/money at this point.
I have a chunk in Latin America as well as the middle east (Dubai mostly) but last 6 weeks or so I have snatched up quite a few shares of dow jones stock...15-20% discount on fortune 500 companies is to good to pass up. Once again this bullshit of sell sell sell comes from the economic minds of children. You buy when the market is DOWN not up.
Speaking of children, do you even know what dollar cost averaging is? Buying up a whole bunch of any stock at one time is not a good strategy.
I do dollar cost average on 90% of my accounts. I leave 10% of my accounts to "play" with. Individual stocks I dont dollar cost average, mutual funds I do :)
 

blackangst1

Lifer
Feb 23, 2005
20,594
745
126
Originally posted by: Farang
Originally posted by: Dissipate
Originally posted by: blackangst1
Originally posted by: venkman
Everyone should make sure that a decent amount of their investments are diversified in foreign assets/money at this point.
I have a chunk in Latin America as well as the middle east (Dubai mostly) but last 6 weeks or so I have snatched up quite a few shares of dow jones stock...15-20% discount on fortune 500 companies is to good to pass up. Once again this bullshit of sell sell sell comes from the economic minds of children. You buy when the market is DOWN not up.
Speaking of children, do you even know what dollar cost averaging is? Buying up a whole bunch of any stock at one time is not a good strategy.
You know the article you linked to basically says dollar cost averaging isn't a strategy worth using.
I didnt read it, but if it does say that it's a worthless article. Dollar cost averaging is the smartest way to invest long term.
 

Farang

Lifer
Jul 7, 2003
10,921
3
0
Dollar cost averaging has been widely criticized by economists and academic finance researchers as more of a marketing gimmick than a sound investment strategy (a way to gradually ease worried investors into a market, investing more over time than they might otherwise be willing to do all at once). Numerous studies of real market performance, models, and theoretical analysis of the strategy have shown that in addition to having the admitted lower overall returns, DCA does not even meaningfully reduce risk when compared to other strategies, even including a completely random investment strategy.
So you're basically protecting against an immediate crash of a stock after you buy it (which is rare) versus lost long-term gains.
 

Dissipate

Diamond Member
Jan 17, 2004
6,829
0
0
Originally posted by: Farang
Dollar cost averaging has been widely criticized by economists and academic finance researchers as more of a marketing gimmick than a sound investment strategy (a way to gradually ease worried investors into a market, investing more over time than they might otherwise be willing to do all at once). Numerous studies of real market performance, models, and theoretical analysis of the strategy have shown that in addition to having the admitted lower overall returns, DCA does not even meaningfully reduce risk when compared to other strategies, even including a completely random investment strategy.
So you're basically protecting against an immediate crash of a stock after you buy it (which is rare) versus lost long-term gains.
It's a lot less rare than you think. For instance, Sprint, a multi-billion dollar company and one of the largest wireless carriers in the U.S. has lost over 50% of its value since the beginning of the year.

Text
 

Jhhnn

No Lifer
Nov 11, 1999
61,808
13,955
136
Your description of how the Chinese peg to the dollar is erroneous, Venkman. They don't exchange other currencies for dollars- they get more dollars than they can use from the imbalance of trade with the US. They also spend dollars like crazy for raw materials- steel, copper, petroleum, etc as well as for advanced technology of production, thus forcing up the price of such. If anything, they, like others, are quietly trading dollars for Euros or whatever when the opportunity is right...

If the yuan declines with the dollar, which seems unlikely, it just makes their export goods more irresistible in markets other than the US... even as they maintain their US relationship.
 

Dissipate

Diamond Member
Jan 17, 2004
6,829
0
0
Originally posted by: Farang
Bringing up one example does not prove an event isn't rare.
Ok, how about Bear & Stearns, a very large bank which lost 46% of its value in 1 day. If you bought in with your entire investment sum at the beginning of the day you would have lost 46%. Buying in at different price points just makes sense. It's basically some kind of insurance against huge losses.
 

Dissipate

Diamond Member
Jan 17, 2004
6,829
0
0
Originally posted by: Farang
Originally posted by: Farang
Bringing up two examples does not prove an event isn't rare.
fixed.
Let me give you a more concrete example. Suppose a company that you want to invest in is about to release it's quarterly earnings report. Do you invest all your money before the announcement or all of it afterwards? If the earnings report is good the stock will probably go up, if it is bad the stock will probably go down. In the case of Sprint, for instance, after it announced a huge write down for Q4 07 the stock totally tanked.

If you don't put money in before the report you could miss out on some good gains, but if you put all your money in before the report you could suffer big losses. So the answer is that you put some of your investment funds in before the announcement and some after, but certainly not all at once. DCA spreads your investments out over a series of events/announcements that affect stocks. Each event carries risk so by spreading out your investment over those series of events you are effectively spreading your risk.
 

ASK THE COMMUNITY