Tuesday, September 30, 2008

ideas on where to park your funds during this perfect storm

sep 29th, 2008

usual disclaimer: i am not a financial consultant, and you follow this or any other suggestion at your own risk. caveat emptor!

http://www.businessweek.com/magazine/content/08_40/b4102063709852.htm?chan=rss_topStories_ssi_5

but some of these ideas seem sensible. i am thinking of investing in some TIPS, assuming uncle sam ain't going to go broke, and that inflation is going to raise its ugly head in the us (stagflation?)

i think the real estate bubble will take 7+ years to work its way out. consider japan, it took a $440 billion bailout from the government, and seven years later, only 70% of the bad assets had been sold off. so, by extrapolation, it will take some 9 years for the us bubble to fully subside and the toxic mortgages to be out of the system

3 comments:

san said...

Yes, but in Japan's case, they did worse than a bailout -- they kept pumping public money into the bad banks, without even taking control over them. That made Japan's predicament even worse, and slowed down reform.

tat_tvam_asi said...

Why isn't anyone questioning the credit rating agencies?

You may disagree but I believe that allowing FDI in retail and continued preferential treatment to FIIs, will put India in a similar mess one day. China is sitting on a trillion $ forex reserves thanks to Walmart. Compare that to USA today.

nizhal yoddha said...

the credit rating agencies have been roundly criticized for not doing their due diligence.

san, in japan, finally they did allow a bunch of banks to go belly-up and the results (eg shinsei) are now stronger banks.

japan has another advantage: people save. and also during their deflationary cycle, saving was the rational thing to do, as you knew prices would go down and you could buy the same thing cheaper.

given americans' penchant for credit, and the fact that net us savings has been 0 (yes zero), i think the us is in worse shape.