Foreign investors undaunted by weak dollar

[Bono71]

The sinking U.S. dollar was supposed to scare foreign investors away from U.S. assets. Instead, it may have whetted their appetite for more slices of the American pie.


http://story.news.yahoo.com/news?tmpl=story&cid=2026&ncid=2026&e=6&u=/latimests/20050119/ts_latimes/foreigninvestorsundauntedbyprolongeddollarweakness

[daleo]

1. Everyone likes a fire sale.

Although they may be getting played.

[tom_paine]

2. IF we can trust a Bushistanian Treasury Report

(personally, I have greater trust in the 1978 Soviet Department of Agriculture Production Report than I would in the Bushevik version or ANY report generated by a corrupt and moribund Totalitarian Government, whether it is the 1978 Soviets or the 2005 Busheviks)

and that's a pretty big IF, the economic calamity coming from skyrocketing debt, baby boomer retirement, and the simple act of Amerika going from Free Nation to Totalitarian Nation, is eventually going to come home to roost.

But really, I don't believe a Bushistanian Treasury Report, same as the Soviet report generated by the same archetype of corrupt individuals only seperated by their disparate economic philosophies.

[Joanne98]

21. LOL!!!!!!!!!

[madrchsod]

3. why not? if i had a boatload of euro`s

i`d be buying everything i could. there`s a bankruptcy liquidation going on in america-

[sweetheart]

8. Its really tempting... 2 for 1 sale

If the EU did not tack on import duties and VAT, everyone would buy
from the US on ebay, but with, shipping, duties and whatnot, the
results make it a mediocre deal.

The trick on ebay, is to get the seller to declare the sale value
low so that the duty is low as well... then its not bad. Pretty much
fair value, the pound would be nearer to 1:1 with the dollar, but with
2 for 1, the whole US is on sale for holidays and knicknacks. They
should put in a huge (satellite visible)blue light special beacon
and roll it around between american cities and the whole nation can
be like KMart. ;-)

[truthseeker1]

16. Interesting.....I just sold to someone in the UK and he requested

that I declare a lower value to save him a few on customs. I used to not ship internationally (because it's a pain in the ass - more paperwork, "lost" packages, etc.) but I've had more and more requests from Europeans and Australians lately, so decided to open up my higher priced auctions to international bidders. Didn't realize I was conducting a fire sale! But with the exchange rate, that's pretty much what it is.....

[sweetheart]

19. that was YOU!!! ...

who sold me the cast iron frying pan... ;-) HA! Actually i've found
i've just gotta lay low, as often the sellers are in red states, and
i can feel that they know their talking to those european red commies.

But it seems even repukes don't care about politics on ebay... although
perhaps there's a market for "blue state auctions"... and i can
patronize the good half!

I had a seller screw up and mark a value way highter than the $7.50
the actuall item cost... so its sitting in customs waiting to return
to the uSA... it'll cost me more to pick it up from customs than
the auction and the shipping 2 times over. If you ever want to screw
a buyer, just make the price high on the shipping form.

[justinsb]

4. Obviously...

If the US dollar goes down and foreign currencies go up vs. the dollar it effectively allows them to buy more with less, even if they don't have confidence in the long term future of the US economy that doesn't mean that they don't see any US assets of value.

[Kagemusha]

6. Let us recall the Japanese investment boom.

Fire sale that it is, this is part of the natural process of what happens when you run a trade deficit. It's happened before and the Japanese didn't just end up owning everything. Bad fire sale purchases hurt when what you bought goes down even further in value. But, that's a natural part of the business cycle.

We have much worse things to be worried about.

[idlisambar]

15. Economic sovereignty is a legitimate concern

If our economic policies are subject to Japanese, Chinese, and Korean central bank control that affects our ability to deal effectively with a range of problems.

This has gone far beyond a "business cycle" effect, trade deficits of this magnitude are a result of structural changes, namely the 30-year tranfer of industrial capacity from the United States to East Asia and to a lesser extent Europe.

[VirginiaDem]

33. I'm with you n/t

[Spazito]

5. LOL! So the US is going to owe even more to Japan, China and

Saudi Arabia and this is to be considered GOOD news?

[Kagemusha]

9. When did they come into this?

Japan's trying to beat down the yen, China's linked to the US $. And Saudi Arabia sells oil in dollars.

The countries that can take advantage are like, say, the UK, Germany, Freed... er... France, for example.

[Spazito]

10. Exactly, that is the precise point!

Japan, China and Saudi Arabia are the biggest holders of US 'paper'. They buy the 'paper' which is the sale of US assets to foreign holders so those countries can buttress their own economies. Once their economies can withstand the plummeting of the US dollar, watch out.

[Kagemusha]

11. And that is uh.. when..?

I don't expect to see it anytime within the next decade. So I'm not sure what your point is.

The fire sale is not to Japan or China. It's to the Europeans. Simple as that.

[Spazito]

13. Nowhere in the article does it say 'Europeans'....

and Europe owns little of US paper in comparision to the three countries I listed above therefore it stands to reason those who gain the most, ie, Japan, China and Saudi Arabia are the one's propping up the US temporarily.

When it is in their self-interest, they will dump US dollars and go to euros and I strongly suspect it will be within this decade unless bush goes down in flames. It is called 'economic war'.

[VirginiaDem]

34. It will never be in their interests to do this

We are all too connected. Japan, Saudi Arabia and China lose way too much with any US economic collapse. Their economies would be destroyed. They're not buying our debt because they want it but rather because they think they have to. I admit they could panic or try to jump the gun to get out before the other guys do but it would be the suboptimal strategy so I wouldn't expect it quite so soon.

[Art_from_Ark]

43. Agreed

The typical East Asian outlook is long term. As you noted, these big foreign players (especially Japan) are buying US debt because they feel they have to. I should note, however, there is the added attraction of 4+% interest on 30-year Treasuries which, considering there is ZERO savings interest in Japan, makes it attractive for the LONG-term holder. Under those circumstances, the US dollar would have to lose more than half of its value vis-a-vis the yen in the next 30 years before Japan would incur a loss on its Treasuries (provided said Treasuries are held to maturity). The Japanese government won't panic (publicly, at least), although private investors who do not buy their Treasuries (indirectly) through the Japanese government certainly reserve that option.

[idlisambar]

44. The U.S. economy would be destroyed more

...Consider these remarks a few years ago from right-wing firebrand and current mayor of Tokyo --- Shintaro Ishihara...


("Gendai", December 1999 edition. A special story: A series of 10 exciting opinions "I can't leave without saying this")
Ishihara: Japan is so exploited by the US. It is also a financial slave of the US. Why is it so afraid of America? Japan doesn't need to care the security treaty with the US at all. If America complains to Japan about the treaty, we just ask the US Army to get out of Japan. At present, this country has enough military technology and budget, so we make it become a strong defense nation by using its money and ability. Then, we should do what the US is most afraid of. Japan sell US Treasury bonds (it has bought about 3 trillion dollars). It will be criticized as pulling a trigger of the Depression, but this is Japan's turn to drop atomic bombs. The world economy will sink after Japan sells all its Treasury bonds. Then, which country or region will recover first? It will be Japan and East Asian Nations that can make high quality products. The best manufacturing country, Japan, as admitted by the US, will survive. And the East Asian nations also have manufacturing technology and a high standard of education. Therefore, the "Greater Asia Yen Sphere" will be established.


Does this represent the thinking of the Japanese establishment? Probably not. Yet it provides some insight into why East Asian nations are willing to continue buying our overpriced treasuries -- in the long-run, wealth goes to those who have the technology and manufacturing capacity.

[Tempest]

20. You're wrong, it's as simple as that.

>>It's to the Europeans.<<

Three top purchasers of U.S. Treasury instruments from 2001-2004:

1) Japan
2) China
3) Saudi Arabia

Business trade magazines has been reporting this for the last 4 years.

A simple Google search will provide the exact amounts each country has been purchasing.

[bobbyboucher]

7. We are one dirty bomb away from fiscal meltdown.

Bush's handling of the economy since 9/11 has been purely political. He staved off disaster after he slept through 9/11 by giving away the farm. Now we are out of economic bullets, just like Osama wants. He lies in wait.

[DBoon]

12. More news: Vultures undaunted by dying prey

Slowly dying animals were supposed to scare vultures away. Instead, it may have whetted their appetite for more tasty carrion.

[CAcyclist]

14. Hmmm, makes me wonder

If our economists are all loudly proclaiming the horror of the sinking dollar and basically trying to scare average people into buying foreign currencies and gold (which they will be selling), then this news isn't good for *them*. They want us to panic and put our money in risky investments, since we aren't investing in the regular stock market and they don't benefit from us investing in real estate except the narrow group of REITs.

The Bush administration hasn't done anything to try to stop the dollar slide and some in the administration have "accidentally" made statements that may have helped weaken the dollar.

I think what this news means is that the sky isn't falling and those outside know that.

[idlisambar]

17. The sky is being held up by the Asian central banks

Some in the investor community may understand this and are making short-term investments to take advantage of what may be a local minimum dollar value versus the Euro. Others may legitimately think the U.S. is on track and that dollar assets are a safe investment for the long-term. Whatever the explanation, investor behavior is ultimately a poor guide to the real state of affairs. If investors knew everything bubbles and crashes wouldn't exist.

[truthseeker1]

18. what is REITs?

So are you suggesting it might be safe to keep real estate investments? We are about to put our house up for sale so we can take the money and run so to speak. We're planning on renting for the next few years and putting our equity into, you guessed it, foreign funds and gold. The scare tactics are working, if that's what they are. Now I'm confused :(

[VirginiaDem]

23. You could lose a bundle trying to play it safe...

You're going to be selling low and buying high--if there is no catastrophic drop than you might be better staying in. Our interests rates will go up so investments here will earn more. That should attract foreign investment, which, everything else equal will help the dollar stabilize. See my post below for the worst case scenario of reserve currency status...

[truthseeker1]

25. Well, actually, we'll be selling high

We're getting out while the prices are still up. Prices are bound to drop once the foreclosures begin and buying starts to level off. We'll jump back in in a few years when it's lower.

[VirginiaDem]

31. Fair enough

If that happens, then you are selling high and under that scenario you'd be buying gold and foreign assets low. It's all a crapshoot, almost literally. My opinion is less drastic than most on DU. I think Bush's fiscal/monetary policies are horrible for the economy because future generations are going to have to pay off this deficit but I don't expect we will get the kind of crash that is hourly predicted here. That's just me--I hope I'm right and I wish you luck whichever you choose.

[Joanne98]

26. Real Estate Investment Trusts.

[VirginiaDem]

22. US strategy "works" until

dollar loses reserve currency status. That is when foreign investors turn tail and run. Up until then, the weak dollar encourages buying of US products and services, which in turn causes dollar to rise. None of which changes the fact that we have a huge trade deficit but we live in an interdependent world so a crashing US economy has enormous negative impacts on everybody. This means they'll continue to buy our debt as necessary. Again, that is all assuming that things don't get so bad that the dollar is no longer the world's reserve currency. There is of course the Chinese wildcard--they're pegged to the dollar at an artificial rate. This means, maybe, that they are less hurt by the falling dollar because when the dollar falls, so does the Yuan, which means that Chinese products don't become prohibitively expensive.

[VirginiaDem]

24. Didn't you get the doom and gloom memo?

There is an economic apocalypse coming, dagnabit! Sell! Sell!

[AP]

27. Uhm, every seller needs a buyer. You don't get a market price

until a seller finds a buyer willing to take the asset.

When the price drops, that means it's harder for the seller to find buyers.

[VirginiaDem]

29. That's right...

but there are different factors that affect currency values. One is speculation, whether short or long-term. The dollar's drop means exactly what you say but that doesn't mean that speculators aren't getting ready to jump back in. We could be one day away from a correction for all we know. Another way currency values change is investment. The lower the dollar, the more tempting it is for foreigners to buy in. I think this is where the reserve currency status comes in to play, correct me if I'm wrong. As long as the US dollar retains reserve currency status, investment in the US is not so overwhelmingly risky as to stop foreign investors from jumping in. The third way is through the buying of goods and services. There was an article in the Economist recently about a spike in tourism from Brits. They can come and have a blast here at much cheaper prices. That's a miniscule change but if when you aggregate all of the different examples of this then it must have some kind of stabilizing effect.

[w4rma]

28. Why are we supposed to be happy that wealthy foreigners are buying up

American property and American corporations?

If you made all your money in Euros instead of Dollars you'd have 33% more money to buy up American assets, with.

[VirginiaDem]

30. We don't have to be happy but neither do we

need to panic. People panicked in the 80s over the Japanese buying up America. Movies, books and political campaigns were run on the theme that the Japanese had cunningly flushed the American economy down the toilet. In the end, the Japanese threat died out and we were all better off for having avoided a protectionist trade war. I must say it's depressing to find that just 5 years removed from the Clinton presidency, liberals are embracing protectionist thought in full. I just hope we don't nominate Buchanan in 2008...

[w4rma]

41. There was no "free" trade back then and a trade war was STILL prevented

America bounced back BECAUSE of pro-American economic policies, not despite them.

[idlisambar]

45. Clinton, unfortunately, was part of the problem

His embrace of ill-advised trade agreements and his "strong dollar" policies considerably weakenend American manufacturing during his presidency.

Admittedly, there was a time in the mid-90's when it looked like the U.S. could get away with importing goods and exporting services, but since then the services surplus has shrunk and the goods deficit has risen at breakneak pace. The postindustrial strategy is a loser and Clinton, unfortunately, played a big part in advancing it. The structural problems that have led to our current troubles didn't begin with Clinton and they certainly didn't end with Clinton, but liberals would do well to understand and acknowledge his mistakes.

[Redstone]

32. What a stupid statement.

Of course they're not going to be "daunted" by weak dollars.

It means their money can buy more than it did before. Ergo, they'll buy more. Duh.

I'm not an economist or even a stock-market type, and even I understand this. My eight-year-old son understands this.

So why is it news?


Redstone

[VirginiaDem]

35. They would be daunted if they

were as expectant of calamity as folks around here. But they aren't, so they're buying. It is news of the good kind.

[Canuckistanian]

36. I had a boss who liked to lend money to people

To indebt someone is to control them.....
Look at the power Japan has. If Japan suddenly cashed in all their US assets, America would soon be bankrupt...

[VirginiaDem]

37. Japan buys dollars because it can't afford a relatively strong

yen not because they want to have our debt. They don't want to do this; they believe they have to. The fear is that Japan will panic and dump their dollars not that they're taking every opportunity to buy up all of our debt.

[Canuckistanian]

38. I see. But they're strting to realize their position.

I read it somewhere.

[VirginiaDem]

40. That's possible but where's the evidence

that the US is bending to Japanese threats to bring down the US economy? Any threat by the Japanese, Chinese or Saudis to "do this or we'll ruin your economy" would be seen for what it is--a bluff. Otherwise, how else would power be wielded?

[Sparkly]

39. It's almost like a big going-out-of-business sale

:(

[Lostnote03]

42. Our local Water Company is about to be purchased by RWE of Germany...

.....The city council is stacked in favor of the sale however our Mayor it appears will be forced to open it up to a public referendum to avoid the council making the decision by itself......She has attempted to slow the process by litigation however our bloated ego of a vice-mayor went behind her back and attempted negotiations w/o her knowledge....They(council) will vote tomorrow to halt the city purchase of the water company, then hopefully the Mayor will push for a voter referendum.....With the dollar falling and interest rates set to rise I'm totally confused as to the financial impact upon the foreign investment potential however I am told that since the value is traded in dollars it doesn't really matter.....