Without trying to create any attack or criticism of you personally or your profession, the word "professional" in the world of money management or anything else simply and only means that the one so termed does it for money. That money may come from generating legitimate returns for clients, as is, I'm completely certain, true for the great majority. It may also come from 2% fees on billion-dollar hedge funds where the pricipals cannot now withdraw funds and whose fund values cannot be priced.
Nothing is permanent in finance, but the erosion of the dollar as a currency will probably continue as long the Fed takes it upon itself to serve as the main benefactor to the money center banks whose professional staffs saw fit to purchase gargantuan amounts of very questionable debt. If the Fed sees fit to continue to lower rates at the short end, I'd suspect the dollar has a modest amount further to fall. The IMF thinks the dollar will fall for 3-5 years.
[The excerpt below is from a WSJ article concerning the IMF’s view of the US dollar.]
Over the "medium term," which is three to five years in IMF parlance, "we still see room for further depreciation," Mr. de Rato said.
The euro, he said, is "very near" its equilibrium value. At a breakfast with reporters yesterday, Mr. de Rato repeated his remarks that the dollar's drop had been "quite substantial." However, he then added his projection that the dollar still had room to fall. IMF officials say his remarks were meant to more accurately convey the fund's view of the dollar and didn't reflect any pressure from the U.S. Treasury or European finance ministries. "There's still some depreciation to come in the medium term," said the fund's chief economist, Simon Johnson.
Another thing professionals do is to package some of these debt instruments.
"In the spring of 2006, Goldman assembled 8,274 second-mortgage loans originated by Fremont Investment & Loan, Long Beach Mortgage Co., and assorted other players. More than a third of the loans were in California, then a hot market. It was a run-of-the-mill deal, one of the 916 residential mortgage-backed issues totaling $592 billion that were sold last year.
The average equity that the second-mortgage borrowers had in their homes was 0.71%. (No, that's not a misprint - the average loan-to-value of the issue's borrowers was 99.29%.)
It gets even hinkier. Some 58% of the loans were no-documentation or low-documentation. This means that although 98% of the borrowers said they were occupying the homes they were borrowing on - "owner-occupied" loans are considered less risky than loans to speculators - no one knows if that was true. And no one knows whether borrowers' incomes or assets bore any serious relationship to what they told the mortgage lenders."
Professionals both packaged and bought the above type of instruments. So I'll rhetorically ask: What's the definition of professional?
The final piece of total insanity in the equation is that the US Treasury says it is interested in a strong dollar, but little or nothing is done to maintain its value. In fact, it appears the exact opposite mandate is in effect.
Personally, I have no real problems buying productive dollar-denominated assets......with dollars I already have or dollar-denomiated debt....which is what foreigners are doing. But buying dollars or dollar debt with foreign currencies to me is ridiculous when the US Treasury and the Fed seem to be devaluing them as fast as possible.
Yes, if you think that the dollar goes weaker from here, it would be foolish to take foreign dollars and buy USD assets. I’m saying, that we are at the point in the cycle where the weak dollar cannot any longer be expected to continue its fall, and that when the shift is made, the deal is then extremely profitable.
The Canadian dollar is at par, the pound at 2, both on the extreme end of a range. That is not just a “range”, it is where common sense kicks in. Truly now, does it not ever get to the point in your mind, where spending 80 bucks on a french bottle of wine, is just plain stupid to buying a great California wine for 20 bucks? Or maybe you just are that much richer than i and can somehow taste the 60 dollar difference??
Or how about the airline company deciding what airplane to buy? Is it not the same with airbus and boeing? Does the 30% discount by buying the boeing not have any value in the making of that decision???
I kind of don’t appreciate the repeated reference using “professional”, really comes across as personal. Let me ask you a question. If I said I’d played professional foootball for 15 years, would my experience there, be no more important or valuable than that of some guy that watches games during the w/e? Or what if I served in the US Armed Forces, would that 15 yrs of experience be as easy to piss on? And it’s not like I’m asking you to take my “credentials at face value” since I’m willing to back anything I bring up, with examples and illustrations? Also, I’m the first to admit when I don’t know, don’t care, or don’t understand.
The long story about the mortgage situation, not sure what the relevance there is by the way. IMHO, you had a r/e boom fueled by excessive liquidity, that had no responsible originators since they intended on dumping the loans off on some other sucker anyway... An end to that boom is welcome, and the spectacular demise of some of these companies was probably expected the day they put the name on the building.
Seed articles/opinion so that the not-as-smart money takes positions OPPOSITE theirs. Think about this... At market turning points, i.e. if you are long, you need to go short to take your profits. So you don't "tout", 'Gee, I think we've reached the top so you other guys should start selling along with me so I get WORSE prices." No, it's "BUY, BUY, BUY, the market going to the moon...".
Capishe?
Bingo!
And you can watch this happening in real time if you watch the multinational gold price charts in the wee hours of the morning. The American gold sellers push the price down during the day, but the oil producers push it back up during the night, day after day. Its obvious in gold, but a little harder to see in other hard goods, because their prices are not tracked so meticulously; but at the end of the year it is visible in your bank balance.
Well said, sir.
Borrowing next year's appreciation to finance today's consumer spending - what a solid plan.