Has anyone here heard of www.stockflips.com ?

Elle -

Re your last post, it dawned on me this morning, reading it, that the
foreign subsidiaries probably hold whatever excess cash they have in:
US T-Bills! (LOL)

I haven't looked at the repatriation of foreign profits (Congress left
open a window as you may have heard, to repatriate at temporarily low
tax rates), but I have noticed a lot of accounting charges against
profits as multinationals take advantage of it.

"News" and so forth are not a primary source of information. That's why
your thread topic was so good - you went directly to the quote by
Bernanke. His purpose is to explain, and he is not a dumb man.

[This is extraneous, but I like to "vent" sometimes, too: e.g. the
number of people who are killed in Iraq, how terrible the war is, loss
of life, and so on ... we have an unpublicized "war" going on that from
1997- 2002 annually takes 40,000 predominantly civilian lives ... check
the highway statistics. Also, I would like to know how much so-called
"lawyers" and their class-action lawsuits cost us. It's getting hard to
find a good doctor, for example. How many new businesses do not go into
business because they fear irrational lawsuits?]

Good update, though I'm not sure how MSNBC figures the news
means the trade position is "much better." Subsidiaries
abroad don't exactly send their profits home, do they?

OTOH, if a U.S. based company's foreign subsdiaries are
doing well, its U.S. based stock will do well, generally
speaking. So that's some good news.

Or maybe one should take a more gloval view: Company xyz,
with operations worldwide, is healthy as shown by blah blah
blah. Good for all of us on earth?

"dapperdobbs" <GeorgeCFL[at]hotmail.com> wrote
- quote -

To All -

Just a summary vindication of what I posted above about the trade gap,
and Bernanke's statement: today MSNBC ran a piece stating that the US
trade position looks much better when the sales of US subsidiaries
abroad are taken into account. Those sales do not get counted as US
exports, because the manufacturing occurs abroad. Foreign sales by US
subsidiaries were up 6%+ last year. MSNBC came up with the usual
"doubled over the past ____ years", and I believe they said over the
past 7 years.

The impact of all this is that if the US imposes protectionist trade
measures to "(quote) stem the US trade gap (quote)" - that will hurt
foregin subsidiaries, if other countries 'retaliate', because the US
manufactures and sells abroad more than foreigners manufacture and sell
here. MSNBC did not offer comparative statistics for US subsidiaries'
sales and US imports. What they did say, though, adds light to
Bernanke's statement.

Will Trice wrote:
- quote -

Just generally I'd assume that inflation discourages foreign money - for
the same reason that if I were to buy, say, bonds from Brazil I'd want
their inflation to be low (3%, stable) not high (12%, unpredictable
economy).

But there are so many interdependent things here, I don't know what
would happen or what the real mechanism would be. You're right that "all
else equal" a foreign investor wants 8% instead of 4% on their dollars,
so if inflation brought high bond rates that might increase investment
in US bonds. But all else isn't equal. Our economy is so big that
inflation here is going to have effects elsewhere - on trade imbalances,
currency exchanges, etc. Like, high inflation means goods are more
costly, and if wages hadn't risen, consumption should be lower. That
might reduce the trade deficit, leaving these countries with fewer
dollars to invest, reducing Treasury purchases for that reason. (I'm
sure it would be easy to come up with a scenario for increased Treasury
purchases as well - which is why I don't ponder these sort of
global-macro trends all that much!)

I do think that if there was the hint of coming inflation, that should
reduce demand for existing 10-year Treasuries, for the reasons I
mentioned before.


- quote -

It depends how you run it but short-term rates (eg T-bills) seem
decently correlated to inflation rates, numbers in the 0.4 to 0.6+
range. It makes sense, a bond buyer wants to at least be breaking even,
based on expectations about inflation. I wonder if correlations will
rise now that there are actual, competing bonds that compensate the
investor for the inflation rate (TIPS).

-Tad

Michael Sullivan wrote:

- quote -

This seems intuitive, but see:
http://www.federalreserve.gov/pubs/i...04/ifdp704.pdf

The authors here conclude that the correlation between exchange rates
and inflation (in the U.S.) is low, but that there is a high correlation
between exchange rate changes and inflation volatility.

-Will

Will Trice <wwtrice[at]paragondynamics.com> wrote:
- quote -

Think about what inflation means. It means the value of a unit of
currency is worth less relative to goods and services. If a US dollar's
value is falling relative to goods and services, it will also be falling
relative to any other currencies which do not share it's problems.
Which drives down foreign investors net returns.

So yes, US inflation matters to foreign investors. To the extent that
the inflation is driven purely by US internal factors, it may not make a
lot of difference, except that it can drive down bond prices if interest
rates also rise. But in a global economy, much more of our inflation is
related to worldwide dollar purchasing power than purely internal
factors.


Michael

"Elizabeth Richardson" <erichktn[at]worldnet.att.net> wrote
- quote -

The following suggests to me something like maybe both know
best:

"[Megacap U.S. companies] might also benefit if the dollar
declined, [Stuart A. Schweitzer, global markets strategist
at JPMorgan Asset and Wealth Management] said, because they
earn much more of their profits overseas than most other
United States companies. For instance, the 50 largest
companies in the S.& P. 500 earn about 40 percent of their
revenue outside the United States. The rest of the companies
in that index earn on average less than a quarter of their
profit abroad."

-- NY Times, today, "The Bigger the Better as Large Stocks
Regain Favor," Business section

Tad Borek wrote:

- quote -

Tad, my comment was in the context of Scott's statement, "Foreign
investment in the treasury market will continue as long as inflation is
kept in check". I've seen no indication that increasing U.S. inflation
causes foreign inflows into treasuries to decrease, and in fact it seems
that higher treasury interest rates would lead to increased foreign inflows.

- quote -

They aren't keeping up with the U.S. inflation rate, but so what? The
foreign investor only cares if the treasury is keeping up with that
investor's home country's inflation rate, correct (that is, if the
investor can/will hold to maturity)? Of course, the investor's home
country's inflation rate may be highly correlated with the U.S.
inflation rate.

- quote -

While this intuitively seems true, using Shiller's data that we've seen
presented here many times, there seems to be a low correlation between
interest rates and inflation rates. But then I've historically had a
hard time doing math against Shiller's data...

-Will

use-reply-to[at]spambegone.null (Michael Sullivan) wrote:


- quote -

China has a real problem with agriculture. While China has about the same land
area as the United States, it has 30% of the arable land and five times the
population. At the same time, they are losing farm land to development at a
fearsome rate.

They farm everything possible, even little patches where highways intersect. You
see extensive terracing. It is nearly impossible for them for them to compete
because so much of the land cannot be farmed by machine -- it has to be done by
hand if it is to be done at all.

-- Doug

On Fri, 17 Mar 2006 19:30:06 -0600, "$cott" <ezmortgageloanz[at]aol.comwrote:


- quote -

Please do not respond to this. If readers want to contact other
readers on personal matters (off topic), email is more appropriate
than the newsgroup.

Thank you.
-HW "Skip" Weldon
Columbia, SC

Douglas,

Are you the same Doug Johnson that use to work with Honeywell in MN?

Regards,

Scott Miller

Will Trice <wwtrice[at]paragondynamics.com> writes:

- quote -

No.

He's saying that a foreign investor who currently owns a bunch
of 10-year Treasuries does not want the yield to go up to
8% because that means he'll take a massive loss on his holdings.

Which is why said investor DOES care about inflation in the US.

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

Will Trice wrote:
- quote -

Will, I was commenting on whether I thought a foreign investor should
care about US inflation...my point is that a foreign investor holding a
lot of dollar-denominated bonds (like an Asian central bank) does care a
lot about US inflation, because the bonds drop in value when interest
rates rise (tautological statement). While they could invest
newly-obtained dollars at that 8% rate, their existing bonds would have
dropped a lot in value. And sitting on them until maturity doesn't help,
because those coupons aren't even keeping up with the inflation rate. So
it's in their best interest that bond rates NOT get to 8%, and inflation
remain low - the two are related really.

-Tad

Because inflation hurts bonds as it erodes the value of the fixed value
investment.
- quote -

Tad Borek wrote:

- quote -

So you're saying that foreign investors will buy less treasuries if they
yield 8% than they would if they yield 4.5%?

-Will

Douglas Johnson <johnson[at]classtech.NOTPARTOFADDRESS.com> wrote:

- quote -

It's interesting to note, however that where China's economic model is
*least* like ours -- agriculture -- it is floundering and largely
non-competitive, in sharp contrast to the manufacturing and (some)
service sectors which are doing incredibly well given the state of their
infrastructure and general wealth 10-15 years ago.


Michael

--
A: Because it messes up the order in which people normally read text.
Q: Why is top-posting such a bad thing?
A: Top-posting.
Q: What is the most annoying thing on usenet and in e-mail?

Will Trice wrote:
- quote -

But think if you're a central bank sitting on a few hundred billion in
dollar-denominated fixed-income securities. If the dollar becomes less
valuable, those securities become less valuable too. You don't want to
be holding 10-year Treasuries with 4.5% coupons when the inflation rate
is 6% and the newly issued Treasuries are yielding 8%.

-Tad

Douglas,

I lived in China for approx. 15 years in my youth (I say that with a
grin; early twenties to late thirties) before moving back to the US.

I saw skyscrapers grow like weeds in cities like Shenzhen; where there
was once dirt one week was being developed in rapid fashion the next.

The industrialized world has transplanted itself in China (the land of
the largest workforce and consumer base) and I would agree that it is
capitalism Chinese style.

As to whether they will succeed, they have already.

Regards,

Scott Miller
Commercial and Residential Lender

www.EZMortgageLoanz.com
www.RealEstate-IQ.com

Douglas Johnson wrote:
- quote -

Doug -

Yes, point taken - any model will vary significantly from culture to
culture and from locale to locale within the same culture. I wanted to
refer to the capitalist model in a broad sense. In fairness, it would
be a PhD thesis to interpret what the Chinese are doing with any
specificity, but it does appear clear that Chinese leadership is moving
away from communism and towards capitalism.

Venezuela, way back in the late 1970's, went backwards: just when a
viable middle class was taking root, communist propaganda and crooked
politicians led to the nationalization of the American (e-v-i-l
American) oil interests, and the country began a slide downhill that
has left people shooting each other in the streets, and an inflation
that is simply not measurable for its devastation. The exchange rate
had been 4.5 Bolivares to the $1 dollar for twenty plus years; today it
is over 700 - I haven't checked recently, and it may well be 1,700 by
now.

Hope that clarifies what I meant - I never intended to get down to
specific policies and cultures - and I will defer to your knowledge
(which sounds fairly specific) as regards the uniquely Chinese model. I
hope it is - that's part of what it's about, no? I mean, LA is not like
NYC, and NYC is not like LA, but *everybody* has cell phones! I did see
some photos of Shanghai and was astounded - I thought it looked like
Hong Kong, or Vancouver. (Rodeo Drive feels vacant and doesn't have
enough restaurants for my tastes, and if you want a place to park, you
have to look three blocks back - a little northeast just off Santa
Monica is a better place.)

Very interesting what you mentioned about state land ownership. There
was a big issue in Russia about ownership of heavy equipment that
stifled foreign investment. I don't know if they have that sorted out
yet. Have you done business in or with Chinese, or were you visiting?
I'm just curious about some additional specifics of the business
environment over there.