Generational Dynamics Forum - New Site

Trevor wrote: What would motivate China to dump our bonds is either their pride, or their rage after a trade war. It wouldn't be a rational decision.

Imagine Higgie knew for sure the date when China was going to dump their Treasuries. He would then know how to make a fortune. China will also know how to make a fortune. It would not be hard to make out very well even while their Treasuries were plunging in value.

They do not need to let their currency appreciate compared to any other currency but the dollar. They can print more Yuan to keep it from shooting up higher than they want and buy gold or any other paper currency but the dollar.

It would probably start a major Treasury bond panic and lead to hyperinflation in the US dollar. The US would be pissed at China but would become much much weaker all the sudden. If you look at GNPs for the new values on the currencies we would probably see China as a bigger economy than the US all the sudden.

It might be a rational decision.

I wouldn't hold my breath Vince. It won't be long before the US Treasuries are the only thing the Chinese hold of value. I have studied this game for a good decade and the idea that something other than US credit holds the world of trade together is mere nonsense. We had one US brokerage firm fall apart in 2008 and the whole world shut down. China has destroyed what was left of its financial system to limp through this. Yeah, they claim 10% growth, but when their growth is building absolute total losses, it isn't the kind of growth that is going to leave them in good shape. You have no idea how little money a couple of trillion is to China?

Then, what are they going to get for those treasuries? The US might just have the Fed buy them? Then the Chinese would be stuck with worthless US currency, right? They would also have absolutely zero market for the crap they sell in our Walmarts.

They have no exchangeable currency in China. There is no system of collateralization, very little in the form of property rights. Literally every week, we find the companies that trade on the US exchanges are based on fraud accounting and broke. $2 trillion is about $2000 per person over there. It is about 4% of the debt money in the US.

Great holiday season? Maybe for some.

http://www.msnbc.msn.com/id/45795148/ns ... ss-retail/

Sears Holdings Corp. plans to close between 100 and 120 Sears and Kmart stores after poor sales during the holidays, the most crucial time of year for retailers.

I'm noticing that even the so-called "good" news really isn't that good. For example, they expect 400,000 weekly jobless claims, but there are only 395,000. If that's good news, I'd hate to see the bad.

TODAY'S SCHADENFREUDE

Berkowitz Loses Again on Sears Slump
By Charles Stein - Tue Dec 27 19:38:03 GMT 2011

Bruce Berkowitz, whose $8 billion Fairholme Fund is suffering its
second-worst year on record because of wrong-way bets on financial
firms, may have lost about $190 million today on Sears Holdings Corp.,
the third- largest investment of his flagship fund.

Sears, the retailer controlled by hedge-fund manager Edward Lampert,
fell as much as 26 percent after saying it will close as many as 120
stores because sales of consumer electronics declined in the holiday
shopping period. Berkowitz’s funds owned 16.3 million shares, or 15
percent of the company, as of Sept. 30, data compiled by Bloomberg
show.

Berkowitz, named Morningstar’s domestic stock manager of the decade in
2010 for returning an average of 13 percent over that period, is
trailing 99 percent of peers this year after betting that financial
stocks would rebound with the economy. Sears, based in Hoffman
Estates, Illinois, has declined about 54 percent since the start of
the year.

“I just don’t see how we get hurt with Sears,” Berkowitz said in a May
conference call with investors in his fund. “Maybe we make an awful
lot of money, time will tell. So far I’ve been wrong.”

Tom Pinto, a spokesman for Berkowitz, didn’t respond to a message
seeking comment.

http://www.bloomberg.com/news/2011-12-2 ... -bets.html

It sounds like they may be asking for a bailout soon, costing us tens of billions. Why are these "analysts" saying that recovery is just around the corner when it's anything but?

I hear you, Trevor; hey, if the banks get all those bailouts, then naturally, why not the hedge funds as well for wrong-way bets they made...there would certainly be symmetry in that, right!?

And to all: Again, as one who is doing academic research into investing, I've always had my doubts about those who are anointed as "gurus" for actively-managed funds: yeah, they can have an exceptional batting average for a while, but even the best of them are bound to lose money every now and then. My research is telling me so far that self-managed investing coupled with excellent discipline (and prudent underlying protection for the investing bets made) is better to do (that is, if one shuns just a buy-and-hold approach). However, I still have a lot more research to do. —Best regards, Marc

even under normal circumstances, everybody is going to screw up once in a while. However, I haven't heard anyone explain why there was a bubble or what it means for the stock market.

Okay, here are the 2-year and 10-year bond yields for Belgium, France, Ireland, Portugal, Greece, Italy, and Spain as of Dec 27:

Belgium 2 year bonds-2.36%
Belgium 10 year bonds- 4.03%

France 10 year bonds-3%

Greece 2 year bonds- 132.56%
Greece 10 year bonds- 35.43%

Ireland 2 year bonds-8.1%
Ireland 10 year bonds-6.31%

Italy 2 year bonds- 5.23%
Italy 10 year bonds- 7.02%

Portugal 2 year bonds- 15.84%
Portugal 10 year bonds- 13.46%

Spain 2 year bonds- 3.38%
Spain 10 year bonds- 5.35%

Marc wrote: My research is telling me so far that self-managed investing coupled with excellent discipline (and prudent underlying protection for the investing bets made) is better to do (that is, if one shuns just a buy-and-hold approach). However, I still have a lot more research to do. —Best regards, Marc

Greetings Marc,

The market is about speculation. Gone are the days of buy and hold.

Trevor wrote:However, I haven't heard anyone explain why there was a bubble or what it means for the stock market.

Greetings Trevor,

What bubble are you referring to?