Posted on 06/25/2002 8:10:33 PM PDT by BlackJack
With Worldcom news out, futures down and US Dollar going down hard tonight. Click INO Charts
The U.S. dollar is plunging for two reasons: 1) interest rates in the U.S. are at or near historic lows, and 2) corporate America's earnings estimates are an absolute joke.
As you hunker down and savor these thoughts, I intend to continue over-weighting my stock portfolio with small caps -- as corporate America collapses, savvy investors are going to realize that small companies with simple balance sheets and well-defined product and service lines are the only places that produce anything close to reliable financial reports.
I'd add 3: There's some uncertanty over whether or not there will be another terrorist attack in the US.
Good post, Alberta's Child! It just so happens that I'm big on 4 things myself: Cash, Small caps, mid caps, and a little physical precious metal. I've always been a bit conservative with investments anyways, though I was lucky enough to rebalance my 401k more heavily towards cash in Feb of 2000.
Well, in that case, I think your opportunity will arise shortly if you have the dough. I think my 'hood got built just in time as I think that the building industry needs to hunker down for a couple of years.
Oh, and I actually do have some rather fancy crispy paper form the 1980's. It says "LTV" on it. Its from before the first bankruptcy.
If you lived in Hong Kong, you would have seen that real property decline in value by up to 60% over the past few years.
Buying opportunity?
That's an interesting point, but I think this point tends to be overemphasized. When you think about it, what good will it do anyone to have yen or euros in their pockets if the world's largest, most affluent consumer base is under duress? I think any savvy investor will realize that the rest of the world would be impacted by a terrorist attack on the U.S. far more than the U.S. would be impacted itself.
As I look at all of the indicators I see a declining stock market and a declining dollar, but a robust real estate market and unemployment rates that are the envy of the world. Maybe I'm wrong, but it seems to me that the rest of the world is telling us that our government is sh!t and our major corporations are sh!t, but our nation is still very strong.
Buying opportunity?
Only if you expect the value to rise within a reasonable amount of time, which it won't.
Reminds me of a friend who bought Nortel Networks at $20/share after it dropped from $80 because he thought it was a buying opportunity. Nortel shares are currently somewhere between 2 and 3 dollars.
This is part of the business cycle. We need this to help our economy. We've been sending our money out bigtime during the 90's...now it's time to get some of it back.
I'd laugh, but my income is tied to the markets.
Its really weird, but I'm afraid that too many people have a very short memory. We are pretty close to where we were, what, a couple of years ago as far as foreign exchange is concerned. That is certainly not the end of the world.
Foreign investors are pulling out a bit, but not due to faith or lack of faith in the US. They are pretty big into the stock market as well as T-bonds. Basically, the US money and stock markets have attracted tons of foreign investment and that has been what has sustained the dollar v. other currencies.
I really think that the rest of the world is basically putting their money where they think it will do the best, just like any other investor.
BTW, a devalued dollar isn't the end of the world; it makes US manufacturing cheaper as compared to foreign manufacturing. IOW, it might improve the trade balance a bit.
The idea that one should be able to make a lot of money off of investments in a short period of time is an unwise and probably a fairly modern concept, even the bible says something about slowly plodding.
I don't know about Hong Kong, but my property is my property no matter if a Nuke landed tomorrow. Real property is real, with the exception of California which is not a real place.
Every time a tenant pays rent, and you use that rent to pay principle they're putting money in the bank for you in the form of equity. Every time the value of the property goes up your net worth increases. Every time we have inflation your net worth and your rent goes up. When we have defaltion your rents don't go down, (although you may have more trouble keeping qualified tenants). Every dollar above the loan payoffs and expenses is postive cash flow.
All for mundane task of walking to your mailbox every month and plucking out a check. I don't see how you can beat that.
Disclaimer: I'm just some schmuck with 2 stupid pieces of property (working on a third I hope) who doesn't know much about economics but knows a little bit about property.
I don't think you're wrong about the deficit spending. Why would free marketeers be confortable with our government growing nearly out of control? Why should they feel that we're any different than Europe anymore? Freemarketeers like freedom, not huge deficits and big government.
Mattafact, at least the Euro-supjects have their socailism built into their pathetic system.
We were always looked upon as "different". Maybe us being not so "different" any more has some second guessing. I don't know how much this has to do with what's happening but I know it has something to do with what's happening.
LOL!
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