| Author | Message | ||
     al leong New member Username: Wayfarer Post Number: 6 Registered: 8-2007 |
The last crisis back in 2000 is really terrible.There seems to be many foreigners planning to stay long term in BA.Any ideas how to prepare oneself for this ill fated event.But will the crisis scenario ever be done way in Argentina? | ||
| Roberto Board Administrator Username: Admin Post Number: 1271 Registered: 12-2004 |
Al, a crisis such as the one in 2001 seems unlikely at present. However, it is always a good idea to have some kind of plan b handy. For what is worth, such events are so disruptive and sudden that most argentines also get caught. A practical way to minimize the damage is to be in another currency or have an account ready in another currency so that exchanging pesos can be done quickly. I say this because a direct result of any local crisis will impact the value of the peso directly. Not even safes will be *safe* as those who went through the last debacle might know (banks opened them and confiscated/converted whatever foreign currency was held to pesos). Average Joe solution has been and probably still is... the mattress. Alternatively, if you are only considering milder crisis ranging from inflation risks to economic downturns then, there are other preventive measures. When inflation strikes it is best not to be in cash, particularly pesos. All assets may see an increase in value relative to the local currency. For downturns, well... cash is king and foreign cash reigns supreme. My opinion only. | ||
| Apartmentsba.com Intermediate Member Username: Saint Post Number: 183 Registered: 5-2005  |
I agree with Roberto. I don't think you will see a crises like 2001. Typically when a country devalues their currency that is the most turbulent time for them. IMHO, Argentina's worst days are behind it. That being said, there are constant crises in Argentina. About every 10 years there is some problem. You will find that many affluent families in Argentina did not suffer during the crash. In fact, they got even wealthier with the situation moving their money out or already having it out and moving it back in after the devaluation. There are always winners and losers in these kinds of devaluations. My advice is keep ALL of your cash offshore OUT of Argentina. There is really no reason to have large amounts of cash in Argentina bank accounts. The banks in Argentina are the worst. You can keep a small amount in the bank for convenience reasons but keep it in the USA, Switzerland, Frankfurt or other countries that have a stable banking system. People are in panic mode during and after a crises. My biggest mistake is not buying real estate right at the crash. I'm more of the conservative type and I wanted a good 1.5 years AFTER the crash but it was still a great time to buy. I have some properties I bought in 2004 and I sold them in 2007 and I sold them for almost 100% more. If there is another downfall and prices do what they did in 2002, I'll load up on real estate again. However, I think you will see that many locals got their money out of peso demoninated investments and put them into u$s dollar investments like real estate. It's the reason why the market continues to go up. There is nothing else really to put your money in here. Most locals don't even want to put their cash in safe deposit boxes held in banks. Even those here have been robbed by thieves. IMHO, the worst is behind Argentina. There are still problems but they now have a tourism market that spins off over u$s 1 BILLION per year and growing, their export markets are booming and unemployment is drastically down. Inflation is a factor for locals but if you are making dollars or euros here it's a dream. That is the reason why there is a surge in retirees from the USA and UK moving here in droves. I see a lot of that and I think that will continue. The best advice is to stay prepared and keep your cash out of the banks here. Best. Living in Argentina is great. | ||
| al leong New member Username: Wayfarer Post Number: 7 Registered: 8-2007 |
hi guys, So what you are saying if I have USD cash I will have to put in a safe box in my apartment. | ||
| Roberto Board Administrator Username: Admin Post Number: 1279 Registered: 12-2004 |
That is not a bad idea, Al. But Argentina is not even close to any of this. Get your 8% in pesos while it lasts so that you can accumulate more dollars  Always risky though. | ||
| Apartmentsba.com Intermediate Member Username: Saint Post Number: 184 Registered: 5-2005 |
I agree with you Roberto. As I mentioned, I believe that 2002's devalutation was the low point for Argentina. Things have improved dramatically and you can see the changes and the mood of the city since 2002. Even since 2 years ago you can see the differences. Something nice I really like is the park beautification projects that they City has spent money on. Many parks that were beaten down now are very nice (Las Heras / Pueyrredon - Plaza Barrientos) is one example of many. Yes Al, keep your cash out of the banks and you will be ok. Actually the city is not as cheap as it once was. A bottled water at McDonalds is almost 4 pesos which makes it about the same as the USA. A Big Mac combo meal which I use as a good indicator is about 17 pesos now. Inflation is a factor for the locals that are earning pesos but for foreigners or retirees living here the dollar is very strong now. | ||
| Benco New member Username: Benco Post Number: 12 Registered: 4-2007 |
So we all agree that it would be a bad idea to keep large amounts of cash in an Argentine bank account... In addition I would recommend to lower risks by investing in a diverse mix of asset classes. You can have some cash under the mattress, but this is not the ultimate solution. Buy some international stock, which should be out of reach for the government. Or you might buy some long-term foreign treasuries, or low-risk company bonds, or commodities, or maybe consider real estate investments. Choose a diverse mix of various asset classes that suits your situation. With a diverse portfolio of assets you will still be hurt by a crisis, but you will always get along reasonably well. And aside from Argentina's problems there is the possibility of a world-wide financial crisis (maybe triggered by subprime mortgages in the US, who knows?). US-Dollars are better than Pesos, but not perfectly safe. | ||
| Apartmentsba.com Intermediate Member Username: Saint Post Number: 185 Registered: 5-2005 |
Benco, Yes, diversification is the key. It's part of the reason why so many foreigners are interested in getting their money INTO the real estate market in Argentina. It's still relatively cheap compared to most world capital cities around the world. I've been flying around this year to evaluate real estate in many large cities throughout the world. It's amazing the value that Buenos Aires still represents. I was recently in London where property in Kensington was over u$s 25,000 a sq. meter!!! In Madrid and Barcelona where I was also researching it was about u$s 12,500 per sq. meter in prime areas/buildings. In Manhattan in many developments I was looking to buy into $15,000+ per sq. meter. In the ritziest area of Recoleta I can still buy for $3,000 or less per sq. meter and what's more incredible is that I can charge more per night than I can in Madrid or Barcelona! Case in point, I rented a million dollar apartment in Barcelona and I paid u$s 250/night. That same apartment in Buenos Aires would cost about $250,000 and I'd charge $275 per night. Diversification is good and the sub-prime mess is only the tip of the iceberg. I called the sub-prime mess publicly about 2 years ago. I predict it will get worse as more ARM (adjustable rate mortgages) set to go higher this and next year. The foreclosure rate in the USA is at an all time high. I predict the same thing that is happening in the USA will happen in London sometime in 2009 or 2010 (maybe sooner). They are handing out money there like it's free. The real estate has gotten so expensive that the finance companies and banks are being forced to give out loans to people that shouldn't be getting loans (same thing that happened in the USA). Some of the multiple ratios relative to the salary levels are insane. I think Benco you made excellent points. Diversification is the best thing. Yes, dollars are better than pesos but the dollar is an extremely weak currency around the world. I bought a ton of Euros and British Sterling a while back and they have all appreciated significantly and don't expect the dollar to get strong anytime soon. Look at the Canadian dollar. Remember when it was 65 cents on the dollar. In case people haven't noticed, it's 1:1 now. That should be a wake up call. The world is a changing place. Remember when you read stories not a great while back about people starving and waiting for bread in lines in Moscow. Look what happened there now. It's the most expensive city in the world. Starbucks just moved there and a large Cappachino is almost u$s 9 there! Almost double of New York. People are so pidgeon holed with a "the sky is falling, the sky is falling attitude" (especially as it relates to Argentina). History has proven that sometimes the best time to buy is "when the sky is supposedly falling". I saw the sub-prime mess in the USA and I'll start buying real estate again there once I feel it has hit the bottom which I think might happen in mid to late 2008. I think there will be some bargains out there. I first started buying real estate in Argentina in 2004 a good 2 years after the crash. I wish I bought at the bottom like my instincts told me and bought in 2002. Instead I wanted 2 years. Still, I'm buying more now than I did in 2004. I still believe you will see a big capital appreciation upwards in a country where there is nothing left to invest in besides real estate and the investment is in dollars NOT pesos. The locals can't and won't put their money in the bank and banks are itching to get into the mortgage market. All these things spell more supply side increase and supply side increase signals prices going higher. And you have a system that is almost all 100% cash now so these INVESTORS that bought real estate had 100% of the cash so the market is insulated and essentially bubble-proof UNLIKE the situation in the USA where it's all built on fantasy (credit). Good luck all. | ||
| Benco New member Username: Benco Post Number: 13 Registered: 4-2007 |
To be prepared I think one should look closely at what the government did during the last crisis. I tried to find more information on the remark that the banks have opened safes and converted everything they found to pesos. Does anyone know exactly what types of securities were affected? Was it cash only? To my knowledge the government tampered with exchange rates and restricted access to bank accounts. But even in the worst crisis Argentina has always respected ownership of companies (e.g. shares) or real estate titles. We are not in Zimbabwe, after all. Mike, I read your comments in the real estate thread about the recent bank run in the UK, and agree to what you say. A difference to note is maybe that what we see now is due to the misbehaviour of the banks. What happened in Argentina however was caused by the explosive dynamics of extreme national debt, and the banks are not to blame for that. In fact, the government forced the banks to buy bonds and later ruined them by imposing an artificial exchange rate that was asymmetric with respect to loans and deposits. The big foreign banks like Citygroup have lost enormous amounts of money and their massive investments ended in disaster. To add insult to injury the people blamed the banks for stealing their money. Nothing could be further from the truth. So this is what can happen to investors in Argentina... | ||
| WelcomeToMendoza.com New member Username: Welcometomendoza Post Number: 22 Registered: 7-2007  |
Hi Benco, In the defene of the aveage joe, if it were you, you would still throw the banks unde the bus for participating, albeit foreced, in such an estafa. After all, at the end of the day, mosty big shots ..were callig the shots. | ||
| Apartmentsba.com Intermediate Member Username: Saint Post Number: 198 Registered: 5-2005 |
Benco, I am not sure if the government opened safe deposit boxes. I haven't heard anything like that nor do I know of any one that happened to but I can't say for sure. I do know that bank safety security deposit boxes aren't always secure. About 2 years after I moved here I remember talking to one of my friends whose father had a safety deposit box. Thieves had apparently dug a tunnel and robbed the safe deposit boxes of a big bank here. There was talk about reimbursing clients but I'm not sure how they would prove the contents of the safe. It was after this that many locals stopped using even safety deposit boxes in banks here. It was in all the local papers here. The government has always treated real estate ownership sacred and there has never been any situation that I have heard of where the government did not respect property rights. They realize it would be a huge mistake to even think about doing that and I don't believe you will ever see that happening in Argentina in my lifetime or the future. The government is to blame for the crisis not the banks but the locals really don't care who was to blame. In the end, they lost money and that is what counts. That is why you have many people that will never trust the banks here again. They place all their money in cash or real estate. "Bricks" are one of the safest investments for a citizen of Argentina. The banks might not be to blame but you can be sure that the executives of these banks didn't lose anything during the fall. They knew a crash was likely. Honestly, I saw it coming in October 2001 before it happened. Many people that are connected or wealthy families got a phone call ahead of time letting them know to get their money out. In an economic disaster there are winners and there are losers. Most wealthy people didn't get affected by the crash. In fact, many of them got even wealthier after the crash as their dollars were worth much more. Also, consider there were other "winners" as well. Mortgages were more readily available before the crash and those with mortgages got their loans locked in pesos so after the crash they only had to pay pesos back. I've purchased from several locals in this situation and they talk about how lucky they were. I believe you will see Christina Kirchner have a difference stance than her husband. I believe she will distance herself from the likes of Chavez and take a bigger push towards foreign investment. I believe relations will improve between Argentina and countries like the USA, Spain, Mexico and other foreign nations. She is already making the rounds in these countries and plans to hit others. I've said it before after I moved here and I continue to say it today. "The Argentina of tomorrow will be different than that of today". I do see changes going on (slow as it may be) but I hope one day there will be more mainstream systematic changes that will improve the country as a whole. It will take a lot of time but I hope to see a more dramatic modernization of the entire business climate here and become more first world. I will consider it a big achievment if I can see this taking place in the next several decades. I do believe it will take more foreign involvement in the business community here. Eventually I hope it will be a snowball like effect affecting business as a whole. No one person or company will make it happen. It will take several across a variety of different sectors. One example is bank consolidation. Banco Santander which is a big Spanish based bank, bought Banco Rio which was a more regional bank. With that you see improvements in the banking system. Improvements cause other banks to improve to keep up. This causes more innovation and more competition which slowly improves things over time. That is my hope for Argentina. I do see this continuing. Again, I'm not saying it will happen overnight. I am an optimist by nature but I'm also a realist. Time will tell if my dream for Argentina will someday come true. | ||
| Benco New member Username: Benco Post Number: 14 Registered: 4-2007 |
I agree that people simply lost their money and that is what counts. They see banking executives, politicians, the administration and in general the upper class as a well-connected group and suspect a broad conspiracy against them. To a certain degree there is even some truth in this view, since as you noted the wealthy families have the advisers and connections to pull their money out in time, while the lower classes are hit unprepared. There is no doubt that the cost of a crisis is socially distributed in a very unfair way. It is interesting to look at the sophisticated investors who have lost their money. Obviously bond holders were badly affected, but at least the professional investors knew exactly what they were doing. When a bond pays 20 percent annually there is no doubt that you are taking a large risk. They placed a bet and lost, so I do not feel too sorry for them. Another group of losers are those who invested in expectation of a growing internal market. For example there was a car maker who built a huge and modern plant right before the crisis in view of the projected national demand. Many years later the real demand was still a few percent of the projected numbers. Looking into the future I have to admit that I honestly have no idea what is going to happen in the next three years. My feeling is that the next few months will be very important and will give us hints on what is to come. Here is my 2 cents: When Christina is elected and does not revert to a strict fiscal policy, when she continues fighting inflation with price controls and subsidies, then Argentina might be doomed again. Right now are the good times with high commodity prices and relatively low interest rates, but these things can change quickly. The strong growth of the last years was supported by existing idle capacities, but future growth will require big investments, for example in the energy sector. So we could face a slowing economy with accelerating inflation, which is every economist's nightmare. On the other hand, when Argentina remains stable for another couple of years, confidence will grow and attract the needed investments. Let's hope for the best. | ||
| Apartmentsba.com Intermediate Member Username: Saint Post Number: 199 Registered: 5-2005 |
Hi Benco, Yes, exactly. Most people that lost money really group all of those people into the same category. The main thing is they don't care whose fault it is. THEY lost their money or lost access to it. They don't want to put their money into banks again. I hope this can change over time. I do think it will as people tend to forgive and forget over time. Hopefully the banks and the government earn that new found trust in the future. I share your viewpoint that bond holders were a bit naive if they thought there was no risk. Those type of returns have a high risk to reward ratio. The truth of the matter is that the only thing certain about Argentina is there is NO certainty. There are periods of stability surrounded by periods of crises. It seems to be like that every 10 years or so. No one knows what the future will hold for Argentina. I'm not saying there could be future problems here. If history is any indicator, it shows us that Argentina indeed could have problems in the future. That is the reason why most don't keep their money in peso demoninated investments. The US dollar may be weak around the world but the locals favor "greenbacks" and probably always will. People can criticize the current government but it has done a pretty good job of bringing the economy back from a very chaotic situation. Those of us that were here right after the crash can speak first hand how much things have improved. So, whether you like Kirshner or hate him, you can't argue that things have drastically improved for most people. It is easy to play "Monday morning quarterback" or hypothosize how someone else could do things better but the reality of the situation is that the last few years have greatly improved. Inflation IS a concern for locals and probably will continue to be. Only time will tell how things will play out. Those that love Argentina are hoping for the best for it and it's people. | ||
| Roberto Board Administrator Username: Admin Post Number: 1312 Registered: 12-2004 |
A few facts for the nice gentlemen/ladies here... Fact 1. My sister had usd $xx,xxx in a safe deposit in a well known bank. When she went to pick up her money after the debacle she was given in return xx,xxx PESOS! In other words, 1/3 of her original dollar savings. For the record, not one of her high-powered friends could do anything about it. Fact 2. Very close friends were able to save their life savings because the day prior to the debacle *someone* suggested they take their monies and run... all the while the in-crowd was also loading the boat. This someone special happened to be a director in the central bank. The ones who really lost big were the investors who purchased assets throughout the 90's. Argentines -in a shrewd maneuver- realized that their companies weren't nearly as valuable as the 1-to-1 exchange led foreigners to believe and they cashed out, totally, completely and brutally. This was the biggest oversight in 'smart investing' history and should have tipped more than a few. Those who stuck to their overpriced investments -not many- were ONLY able to see the light in very recent years (depending on the industry). My view... There are still some long-term trends that will offer support to Argentina: India and China and their increasing need for soft commodities (agriculture) plus other possible industry segments. But contrary to what one might expect herein lies the greatest risk. Because this generous influx of dollars, despite its decrease every year, will help cover up all the problems that have been mounting for the last couple of years and will continue to be thrown under the rug. When will the next crisis hit? Instead of keeping our ears to the ground we should start courting the right acquaintances. (Message edited by admin on September 27, 2007) | ||
| Apartmentsba.com Intermediate Member Username: Saint Post Number: 203 Registered: 5-2005 |
Roberto, Wow, that story about the safety deposit box and your sister is VERY scarey! I do have a safety deposit box here in Argentina but I stopped using it after I heard about the story of the thieves digging a hole and robbing all the boxes some years ago. Yes, many people I know where also saved from losing their savings because of phone calls they got. I know one friend that got a call to push up his property closing. He was scheduled to close literally 1 business day after the crash. He was strongly urged to move up the closing one week before and he did. He bought a $95,000 property. As you know it was 1:1 before the crash so he paid 95,000 pesos. If he would have done the closing a week later he would have paid almost 300,000 pesos. I agree with you that in Argentina making the right "friends" is essential whether it's banking contacts, strong lawyers and especially law firms, accountants or governmental agencies or politicians. Preferably though...all of the above.. | ||
| Apartmentsba.com Intermediate Member Username: Saint Post Number: 206 Registered: 5-2005 |
Also, speaking of not trusting banks. Today when I tried logging into my online account at Netbank (A USA FDIC insured bank) I got a message they shut down! http://money.cnn.com/news/newsfeeds/articles/djf50 0/200709281658DOWJONESDJONLINE000790_FORTUNE5.htm http://www.fdic.gov/bank/individual/failed/netbank.html www.netbank.com Bank failures are rare but this is another bad sign. This bank failure was partly due to mortgage-related losses. I still say the sub-prime mess is going to affect a LOT of other banks and financial institutions. These collateralized debt obligations (CDOs) are going to become a wide-spread problem. Fortunately, Netbank is FDIC insured but there was still $109 MILLION that exceeded the federal deposit limit insurance protection. So these people that assumed their money was safe in a USA bank will have to see how much they lost if their deposits exceeded the limits. These CDO's and similar type of investment vehicles are going to cause more problems for other banks around the world, IMHO. | ||
| Roberto Board Administrator Username: Admin Post Number: 1315 Registered: 12-2004 |
Agree... some areas look vulnerable. Others are coming out of hybernation. Today, an editor from the WSJ on NPR mentioned the grain economy. Will we start hearing about grain barons and Cargill conspiracies again? And how long before evil grain traders take the spotlight from oil traders? On a more serious note, all this relates directly to Argentina -both good and bad- as it is pretty much a grain country. | ||
| Robbie New member Username: Ganavan Post Number: 23 Registered: 8-2006 |
May I just gently elbow my way into this forum? I think that - as apsba says, the banks in the US will slowly go the way of the Northern Rock in UK. To prevent the more important ones from going down the Fed will have to lower interest rates to cero or beyond! You know what that means: wholesale inflation on a Worldwide scale. The greenback will be slowly loosing its value (it already has in fact as we all know). 63% of central bank reserves across the World are held in USDs. This will mean in effect that all those trillons will loose perhaps 20 or 30 or 50% of their real value. This will make people across the World very angry with the printers of the USD. Over the last few years and today we are experiencing a monetary expansion as never in the history of mankind. It is deceipt on a magnanimous scale, but as it all takes place in slow motion, the masses don't realize. All this has been known since the dot.com bubble burst. It was a possible scenario that now is unfolding in front of us. The US led by GWB will distract the attention with wars and climate change and terrorism. Anything to get the people of the US and the world to get their minds off the fact that they are being robbed on an unimaginable scale. This was all done to protect the "markets" in the US and the "financial systems" at the time, that is the all embracing GWB cliche: National Security. For those from Argentina with enough age it will ring a bell: remember "La Doctrina de Seguridad Nacional"?. It all comes from the same school of thought. Those that know what is going on, do not say it as they will try to ride the waves to their own advantage. Argentina is a little player, but is important as a supplier of important commodities as is food. Food will be important when more of the sh*t hits the fan. It is also a "relative" island of peace as is so far away from most of the targets of the US and its alleged rivals such as China, India and Russia. There..a bit of a dogs dinner but it is a dogs dinner anyway! Robbie | ||
| Apartmentsba.com Intermediate Member Username: Saint Post Number: 207 Registered: 5-2005 |
Robbie, I think the more people that participate in a forum the better. It's good to get different people's perspectives on various issues. As long as the discussion is intelligent I think it's always best to get different people's opinion. The great thing about public message boards is you can see who was right and who was wrong over time. I know some people may dismiss what you posted or some may laugh at it. I've found that the masses laugh at or dismiss something that they don't really understand. People thought I was a lunatic when I moved to Argentina almost 4 years ago. Not only local residents of Argentina but foreigners as well. I remember after I first arrived here and I bought a big house to rent out. The seller's realtor asked what I planned to do with it. I told her rent it out to tourists. I remember she laughed at me and told me there was simply no market for that. Even though she risked losing a commission and not selling the house, she just had to tell me how stupid of an idea it was. I remember laughing back and telling her in Spanish that I would create a market for it if it didn't exist. Again, people laugh at what they don't understand. I turned out to be right on that one but I often get a smile thinking about that day. The problem with many Argentines is they reflect too much on "TODAY" instead of projecting out what could happen (good or bad) 3-4-5-6+ years from "Today". And the problem isn't only limited to Argentineans. It's a problem that exists with almost everyone these days. The typical American that goes out and gets a HUGE loan on a house. He reasons he only has to pay $X over 30 YEARS so sure..it's ok. Then he goes out and buys an expensive Luxury car. He reasons.... I only have to pay $X per month for 5 years...so it's ok. He goes out and buys a boat with a loan because there is a special financing deal. Then his kids are approaching University so he needs to start thinking about that but he blows it off. He didn't set aside a college savings fund for them. Then one day his company says, we may need to lay off or reduce some salaries....and he gets worried. "How will I pay for Johnny and Sarah's college education?". He didn't think ahead of time. He only thought of today. To make things worse, he finds out he got into some complex APR on his mortgage and his rates are going to go up starting next year and he can't get more credit. Basically that is the situation the USA is in now.... spend spend spend spend and maybe worry about it later. Foreign countries are basically financing our government and if it stops there are going to be some pretty big consequences. Gulf War and spending billions of dollars per week/month? Sure....let's do it. Hurricanes and natural disasters that happen.. sure we can take care of it. Bridges that are crumbing down and yet many more that will need to be repaired in the next few decades... sure, we'll find the money for that. Medical care and programs to help the less fortunate.... sure, we can find a way. THAT is the governments attitude. But at the end of the day you still need money to pay for all of these programs. At the end of the day, it's like the executive in the above situation. Happy times in the past but a really big problem down the road and someone loses in the end. In the example above...his kids college is at stake and he might lose his house.... in the example of the USA... too many examples to give of the possible losers at stake. I agree the dollar is becoming almost worthless over time. Look at what has happened over the years. Remember when the u$s dollar was stronger than the Euro? Now look at what has happened. 1 Euro = 1.42 dollars! That wasn't too long ago. An exchange rate chart is below for your review. Year Date Lowest Date Highest 1999 03 Dec $1.0015 05 Jan $1.1790 2000 26 Oct $0.8252 06 Jan $1.0388 2001 06 Jul $0.8384 05 Jan $0.9545 2002 28 Jan $0.8578 31 Dec $1.0487 2003 08 Jan $1.0377 31 Dec $1.2630 2004 14 May $1.1802 28 Dec $1.3633 2005 15 Nov $1.1667 03 Jan $1.3507 2006 02 Jan $1.1826 05 Dec $1.3331 2007 12 Jan $1.2893 27 Sep $1.4180 In fact, more and more investors over the past few years have getting their savings out of dollars and into Euros or British Sterling. I know I have and it made sense and you know what? Some people laughed at me a few years when I told them the dollar was becoming worthless. Look at the Canadian dollar. Remember in 2002 (which wasn't too long ago by the way). The Canadian dollar had a value of only $ 0.61 cents! Now the Canadian Loonie is above the value of the u$s dollar. I've said it for a few years now the USA is spending money it simply does NOT have. I think the dollar could weaken even further. More and more people are converting to Euros. Yes, Robbie I agree with parts of your post when you say that a lot of people are riding the waves to their own advantage....but then again...who can blame them? The writing has clearly been on the wall for some years now. The problem is some choose not to read that writing on the wall. They turn a blind eye to it almost as if it's graffiti. Sometimes it's good to read "the writing on the wall" for your own benefit and advantages. I'm certainly NOT saying the "sky is falling" in the USA. I am however reading the writing and the wall and have been acting based on what "i read on that wall". Many times people think they are ok, the economy is ok and life is ok because their governments say they are "fine". Yet what they don't realize is many times their governments are the ones to blame (or partly to blame) for the upcoming problems that will occur. Many times over the years people told me I was "lucky" or had a lot of "luck" making my businesses succeed but I assure you, it was NOT luck. It was reading the writing on the wall, working hard and acting on that "writing on the wall". Best to all. | ||
| Robbie New member Username: Ganavan Post Number: 24 Registered: 8-2006 |
Saint, your last paragraph is key. Just think that governments LIE. When they go out of their way to say everything is fine, you can bet it is not. When they are not even able to come out and say things are fine -such as now- it is because things are VERY bad and in freefall- out of control, in the hands of the gods. I see not a problem with people taking advantage of situations that are upside-down and riding the waves is fine for self advancement. I think those that speak the truth in circumstances such as the ones we live more or less continually, will always be regarded as mad, messengers of doom or purveyors of doom. The problem is the latter two sometimes get mixed up in the eyes of the beholder. If the medic says you are dieing, he is clearly not to blame, but neither is he seen with much simpathy. I wish you well in your business. Businesses that work well, amongst many other, are re-allocators of underutilized resources, and this can only be welcome, especially in a country like Argentina. I myself are moving back to Argentina after 18 years away to set up business, and are only hoping for the best in a country that is both enourmously attractive -even seductive- and incredibly frustrating. | ||
| Apartmentsba.com Intermediate Member Username: Saint Post Number: 208 Registered: 5-2005 |
Yes Robbie. Governments lie. They have and will for centuries. Doesn't matter if you are in Argentina, USA UK, Iran or Iraq. Some things will never change. Look at the situation in the USA. Everyone keeps saying things will be ok. The housing situation is contained. It's not as serious as it may seem. That isn't true. The problem is very serious and likely to get much worse. There will be millions of people that will face readjustments to their mortgage payments and many will lose their homes. This in turn WILL affect other parts of the economy. People aren't losing their jobs but they ARE losing their houses.... So when the government says "things are ok". "problem is contained" you can either believe it or you can take a look and question what you hear. People talk about the next crisis in Argentina but also it should be good to talk hand in hand about the next crises that will and is happening now in other areas. The real estate market will get much worse before it gets better in the USA. Buying now is like trying to catch a falling knife. With more and more houses going into foreclosures, more buildings desperate to sell and lowering costs and more current owners needing to sell or in many cases just walking away from their houses and abondoning them.....things aren't likely to get better for a while. Last time I checked, no one in Argentina was walking away from their apartment or house because they couldn't make their mortgage payment. There in lies a big difference between what is going on in the USA with their real estate market and Argentina where almost everyone pays for their properties with 100% cash. Sad but these kind of stories below are very common and will become more common in the USA over the next several months. --------------- “‘I don’t know how I’m going to survive,’ said Sana Masoud, a single mother facing a $600 a month increase in one of two mortgages she obtained to buy a two-family house in Brighton for $712,000 in 2004.” “That mortgage will reset on Dec. 1 to 7 percent, from 6.125 percent, pushing up Masoud’s total monthly housing costs to $4,350. She rents the second unit for $2,400 and earns $63,000 a year. But her income will not be enough to cover the mortgage and other expenses, such as property taxes, college tuition for her eldest daughter, and ongoing medical bills for her youngest daughter.” “‘I don’t want a foreclosure,’ said Masoud, who is asking her lender to renegotiate her mortgage.” The Staten Island Advance from New York. “Ada Diaz’s belongings are packed in boxes, ready to be moved sometime in the next 10 days. The bank recently sent her a notice to get out of the Mariners Harbor home she owned for 17 years before losing it in July to foreclosure, the result of a series of increasingly calamitous subprime mortgages.” “Ms. Diaz refinanced four times over the last four years, public records show. WMC Mortgage Corp., where Ms. Diaz got her last and what she says was her worst mortgage in 2005, was recently shut. A Long Island-based mortgage broker solicited Ms. Diaz and originated the last loan, allegedly falsifying her income in the process.” “‘We wish Ms. Diaz’s case was unique but it’s not. It’s happening all over America,’ U.S. Sen. Chuck Schumer said during a visit yesterday with Ms. Diaz at her Grandview Avenue townhouse. ‘It’s just criminal,’ he added.” “She said she was seeking some extra cash to finish work on her house. Loan documents show her income was listed by the broker as $8,000 a month. The broker also said she worked at a cleaning service, even though she was retired and not working at the time.” “What was supposed to be one mortgage payment turned into two payments of $1,769 and $550, respectively, for a combined total of $2,319. The first mortgage was slated to reset next year to $2,314, and the total monthly payment represented more than 90 percent of Ms. Diaz’s income.” ------ You can try to blame others but in the end you have to take personal responsibility as well. You can't blame someone else for saying you make $X per month when you don't and you going along with it... A politician or the government shouldn't need to tell you if you are making less than $100,000/year you should NOT be buying a $700,000+ house. Common sense always prevails. Consider this.... In Argentina you can CLAIM you make $100,000 per month so you can buy a house or apartment. Just because you claim you make that much doesn't mean a bank will give you the money for a loan. What an original concept! Don't loan money to people that can't afford to pay the loan. | ||
| Robbie New member Username: Ganavan Post Number: 25 Registered: 8-2006 |
Saint: The die is cast, the genie is out of the bottle, its just a matter of time before the patient dies..# Bloomberg's interview from China. He says what all Argentines with some sence remember from the 70's and 80's. Its called hyperinflation and that is what the Fed is preparing for the world to save its own skin (the skin of the bankers that is) "We already have too much liquidity in this system. Bernanke's been printing money at a rapid rate. Beginning of the last month he’s injected gigantic amounts of money into the system. This is causing huge amounts of growth in the money supply. It's causing more inflation, it's causing more weakness in the dollar which is going to cause more inflation. This temporary Band-aid’s putting...saving a few hedge funds or even a few sub prime mortgage lenders is not going to solve our problems. Every time the Fed turns around to save its friends on Wall Street, it makes the situation worse. They should be raising interest rates. They should be tightening the money supply. They should be doing something to ensure a sound currency and a sound economy again; instead of every time there is a problem racing through the rescue. Let some people go bankrupt. That is what capitalism is. Bloomberg is supposed to be a great capitalist network. Well, in capitalism, some people fail. If you don't let people fail, it's not capitalism anymore." We are in for a Disney style ride in the world of the falling greenback! Hang on and enjoy the ride! (sorry my sence of humour, but either you cry or you laugh) | ||
| Apartmentsba.com Intermediate Member Username: Saint Post Number: 209 Registered: 5-2005 |
Robbie and Others, I don't want to see problems in the USA or even with the US dollar. As a proud American it's always upsetting to see problems or hear about any negative issues in the USA as it has consequences around the world. That is not the purpose of my posts. It's not an "I told you so" situation. I just believe people should always be aware of what is going on around you. I've posted on Argentina pretty much since the crash in 2002 on various public forums. Many people refused to see what was about to happen after the crash. I posted about real estate trends, about the economy, about the future unemployment rates, about business, about exports, about the exchange rate between the dollar and the peso (I called it free floating between a rate of 2.75 -3.25 which has been exactly correct)and about tourism rising drastically in the future. I know that some people hate the fact that I have been spot on target with all my forecasts but I have. I'm not posting this to say "I told you so". I'm posting it to say that I am aware of what was taking place. Look at some of my old posts on this forum from 2 years ago. I did indeed predict the sub-prime mess. Read word for word what I wrote about banks lending out money and also ARM's that people didn't understand. That has proven to be EXACTLY true today. I'm not a fortune teller. I don't have ESP. I always believe to read the writing on the wall. See what is going on around you. Don't necessary believe in what the government tells you is "ok". It's ok to question authority and your government if what they are telling you is what you believe to be wrong. It's ok to invest in other places besides your "back yard". It's ok to diversify. It's NOT unpatriotic to get your investments and your money outside of the USA. In fact, I'd say it's intelligent. It's ok to get out of dollars and into other currencies. (in fact, doing so 2 years ago when I first started talking about the weakness with the u$s dollar would have helped you). I don't know if we are "in a Disney style ride in the world of the falling greenback". I DO believe the dollar can and will get weaker if the USA government continues to be foolish and do not take steps to make the right financial decisions that will be good for the USA, Americans and the u$s dollar. The reality is that banks no longer trust other banks. They don’t want to even lend one another funds with good terms. There is a big loss of trust in the banking system between banks. It’s frightening because banks exist to supply the economy and citizens with credit and they no longer want to loan funds to one another let alone the average Joe in the street. Credit has been too cheap and easy for too many years and everyone the world over is going to feel the pain for those “sins” now. A big part of the problem is that no one even knows what they are really down or lost or how bad it is. Most people have never heard of collateralized-debt obligations (CDO’s) but they should. These CDO’s are going to cause even more havoc in the coming months. It’s gotten so bad that Central banks the world over are having to inject liquidity into the markets. Billions and billions of dollars. The average Joe on the street probably doesn’t know, really understand or maybe even care about all of this. They don’t understand it. Their government tells them that things are ok, things will be ok and the ship is steaming ahead. You hear of politicians that say there will be investigations and people will get punished yet they don’t tell people what they really need to hear. When was the last time you heard ANY government tell it’s citizens, “we are facing severe problems and it could get much much worse”? It’s just not something you want to hear. Hey, I hope I’m wrong. I hope the USA doesn’t have any problems in the future. I hope that the dollar gets stronger and some day $1 dollar = 1.42 euros or $1 Dollar = 2 British sterling. I won’t hold my breath waiting for that to happen however….. Cheers all. | ||
| WelcomeToMendoza.com New member Username: Welcometomendoza Post Number: 23 Registered: 7-2007 |
Okay doomsdayers we get the picture So, since we are on a tight thread here, what are the smarts steps to take to benefit or not, but at least to protect ourselves comfortably in the coming era? Buy Euros still? isn't there a pullback due at some point? I've call these wrong before. Buy Gold? sheesh. Buy what? well land I guess it is, plus maybe some cool antiques. One thing I am pretty sure of is that what may happen in the USA, the accelerated shrinking of the middle class because of all of this, will continue to happen in a slower motion that what may happen here in Argentina as has happened for decades, for which one should continuously protect themselves against also. On the other hand I really hope Argentina pulls off the right move now and in the coming years with the shifting changes of the globe. I have always been a tremendous fan of Argentina, even in the 80's when most people I spoke with had no clue about the place and I was yelling "tango", "beef" , "the girls", "the country side", "the people", . the twighlight-zone-but-very -respectable "culture". It is amazing to see, though, things that don't change after 25 years, one being the perception that they are going to screwed again, after the elections in October. I kept thinking Argentina had hit bottom in 1983, 1988, 1990, and 2001, maybe I was right about the last, I hope. Right now it feels like there is better flooring in the economy than before, but there are the usual suspects raising new warning flags, like inflation and personal debt here. It is simply amazing to see advertised a toaster for 12 monthly payments of 4.99. Or asked at the checkout stand if you would like to have your credit card company easily advised you would like to put that $39 utiliy wrench on 12 monthly payments. And to think that people do it. But can you blame them a lot of them. It is the history of the culture to get in ridiculous debt (hmm...sound familiar?)...and the Argentine economy historically has been nimble, so it easily feels the "snaps" that happens over the years, especially after the 10 year manipulated-1-to-1 decade of the 90's Whenever the next "adjustment" occurs, I hope the powers that be have learned from history how to minimize the thud, just as long as they don't outright take advantage of the general public again - that would probably go un-tolerated. So, again, what do we, and the average Argentine, do..to hedge and go forward against potential adjustments coming.....? | ||
| Apartmentsba.com Intermediate Member Username: Saint Post Number: 210 Registered: 5-2005 |
Mendoza, I know you are being sarcastic but I am NOT a doomsdayer. I'm a "realist" and more important I'm an investor. And most good investors take a good look around them and evaluate EVERYTHING that is going on around them. I am not calling for some Armageddon. That wasn't my point. I'm saying that people should be concerned with their finances. I remember reading a Money Magazine article a little over a year ago saying how Warren Buffet was scared of the weak dollar and the potential to fall even further. THAT got my attention. Now, Warren Buffet is the greatest investor and one of the most brilliant minds of our time. If he is scared about a weak dollar.....don't you think you should be a bit concerned as well? (http://money.cnn.com/2006/06/15/pf/dollar_moneyma g_0607/index.htm) Mendoza, if you are asking for some magic formula or actions you can take... no one can give you that. There are problems the world over. Each country and each person has their own issues and problem. However, some people plan for this better than others. My advice? (which may be worthless to you so take it with a grain of salt) is to diversify a bit like Warren Buffet recommends. --- Get some of your portfolio overseas. There are many options these days including various mutual funds, stocks, real estate portfolio. Don't put too much of your portfolio in any one stock. Research, research, research. There are several good mutual funds that invest in foreign stocks. Minimize your exposure to the Dow stock exchange which is overvalued right now in my humble opinion. I'm not saying to get out. Just to reduce exposure. --- Get your disposable spending down. Don't buy what you can't afford or more importantly don't need. Most households are saddled in debt (mortgages, expensive cars, boats, credit cards, home equity loans, college fund repayment, etc). Get your debt ratio down or more importantly eliminated. It's amazing to see people in debt roll around into a new more expensive car because "they have to have the latest model". Before the sub-prime and mortgage meltdown you had people flipping houses like they were a new pair of designer jeans. Wanting to change out every year or two. People are seeing now real estate is a long-term investment and not some game. They can't refinance or get a loan to buy even if they wanted to. As I predicted over a year ago, lenders would get tougher and that would create less loans given out and that would further depress the market. Go back in this forum and you can see I posted this well over a year ago. --- Shift some of your portfolio into other investments like Gold. Sure, it's gone up quite a bit but it's still good to be diversified. There are MANY options to get into gold and I won't go into them. Ask your financial planner. ---- Think about getting some of your savings converted to other currencies that you believe will do better than the dollar. I believe the dollar can get weaker as I mentioned unless the US government takes steps to stregthen it. It's very easy these days for a USA citizen in good standing to open up an offshore bank account in a safe country in dollars, euros or Sterling. And you'd be surprised as the interest rates paid out are sometimes higher than our money market savings rates. Again, I'm NOT saying to ditch or convert all your dollars. Not at all. That would be foolish. I'm saying take a % that you are comfortable with and diversifying it in other currencies other than the dollar. As an American of course you will hold your principle savings in US Dollars which I agree with. --- In addition to what I suggested above about getting your credit eliminated along the same lines....build up a cash reserve fund. Stop spending. Start saving. Build up a cash pile and keep it in short-term liquid and easy accessible at any time type of investments like money market funds that are paying a good interest rate (most in the USA are paying over 5% now) and you can get out any time with no penalties. Save up a "rainy day fund" so that when things bottom out you can go on a spending spree. And no I'm not talking about buying new clothes or a new car. I'm talking about being able to pick up real estate cheap, mutual fund or stocks at discount prices. When there is "blood in the street" you will be there and will benefit and be prepared for it. --- Stay away from real estate right now in the USA. You may think you are getting a bargain because the price went down 20% or more since you looked it at before but the reality is it could go down another 30% or so before it's all said and done. There are a record # of houses that will go into foreclosure this year in the USA. There are tons of builders that have too many properties that they can't sell and some of these builders you will find will go bankrupt. Some people are even walking away from their houses. ALL of this inventory (and much more) will go on the open market this year and next year probably will get worse so prices should continue to fall. Wait until the middle or better yet end of 2008 and you should get some fantantic bargains for the same property. Buying now is like trying to catch a falling knife. --- Avoid long-term bonds. US Treasury bonds have fallen as much as 10 full points or $10,000 per $100,000 of face value over the past year. And bond prices are expected to fall further. The cheap and weak dollar almost guarantees that. Again, I'm not a doomsday type of person. In fact I'm a big optimist and those that know me very well know that. I'm an optimistic person but more than anything I'm a realist and being a realist has kept me in a pretty good position over the years. Best of luck to all. Here is the article cut and pasted above from the link I posted above for those that are interested: Protect yourself from a falling dollar Buffett is scared, and some other big names are too. Here's what you need to know. By Stephen Gandel, MONEY Magazine senior writer June 15, 2006: 11:53 AM EDT NEW YORK (MONEY Magazine) - Financial markets have gotten jumpy as investors debate whether the U.S. economy is growing too hot or too cold, whether interest rates are too high or too low, whether stocks are about to rebound from their spring swoon or fall another 10 percent. It's interesting (and mildly disconcerting) talk, but if you've got a long-term horizon and a diversified portfolio, you can tune it in or out as you like. There is a concern, however, that you do need to be aware of, especially if you have a long-term outlook. And that's the future of the dollar. Its position as the world's preferred currency is a big plus for your standard of living and your investments. Unfortunately, some of the best financial thinkers around, including Warren Buffett, are worried that the buck, down nearly 30 percent against the euro since 2002, will soon fall from grace in a way that will make recovery very hard. Now, Buffett has fretted about, and bet against, the dollar before. But at BerkshireHathaway's annual meeting in April, he announced that his company would pay $4 billion for Israeli toolmaker Iscar, its first overseas acquisition, in part because of his fears about the dollar. "My views on the likelihood of the dollar weakening are as strong as ever, perhaps a bit stronger," Buffett said. Pimco's Bill Gross, who manages the world's largest bond fund, and renowned strategist and author Peter Bernstein have also warned clients that the dollar's decline of late could presage a long-term rout or a period of severe volatility that leads to higher U.S. inflation and interest rates. Here's why that might happen and what you should do about it. 'Squanderville' The problem: Americans - both individuals and the government - are gluttonous consumers and poor savers. Buffett calls the U.S. "Squanderville." The federal government spends $300 billion more a year than it takes in from taxes. To finance all that excess spending, the U.S. sells Treasury bonds. Meanwhile, in 2005 we bought $725 billion more in goods and services from foreigners than we sold to them, leaving overseas companies and governments swamped with dollars, many of which they invested in Treasuries. In fact, because American families and corporations don't save enough to buy all the Treasuries the government churns out, nearly 50 percent of outstanding Treasury bonds are held by foreigners. To date that hasn't been much of a problem. But two recent trends are cause for concern. First, the trade deficit remains stubbornly high despite the falling dollar; perhaps the world will choke on dollars. Second, Europe and Japan are raising interest rates, making their bonds more competitive with ours. Result: Overseas investors have less appetite for the dollar, and traders have begun betting against it. That's not necessarily bad. If markets react calmly, the dollar will drift down, and then the benefits of the decline will kick in. A falling dollar, after all, is good for U.S. manufacturers; it makes our stuff cheaper compared with foreign makers'. "A weak dollar makes us more competitive, not less," says strategist Ed Yardeni of Oak Associates, a money-management firm. If Yardeni's right, corporate earnings go up, growth continues, the dollar strengthens. What's to worry? That's the textbook course of events. The fear among Buffett and other dollar bears, however, is that our debt levels are so high now that the correction will be anything but normal, proceeding instead along these lines: The dollar is dropping, making Treasuries worth less to foreigners... So they sell, and buy other currencies, further depressing the dollar.... Desperate to retain investors, the U.S. boosts interest rates.... But as rates rise, American consumers and businesses, and the government, cut back on borrowing and spending, which slows economic growth, hurts housing prices, lowers corporate earnings and depresses stocks.... Overseas investors react by selling U.S. stocks, real estate and still more Treasuries, and by dumping more dollars.... The cycle repeats. "What I am concerned about," says Bernstein, "is people in other countries and even in this country reaching a point where they say the dollar is not only valueless, it's nothing. Then the decline becomes very abrupt. There's no time for adjustment, interest rates go through the roof, and everybody gets hurt." Now, Bernstein, to be sure, isn't saying this will happen, only that you might be wise to hedge against such a calamity. Buffett, for his part, seems certain that the dollar will fall precipitously; he's just not sure when. Gross envisions violent upswings and downswings in the buck, threatening economic growth here and throughout the world. All of which leaves you with an urgent question:How do you protect yourself without investing as though Armageddon is imminent? Follow Buffett He says the best way to play a long-term dollar decline is to invest overseas. Gross is of the same mind. It's not so easy, though. Overseas stocks have flourished and are no longer bargains. Besides, European and Japanese multinationals sell so much here that their stocks might suffer if the dollar craters. Gavin Dobson, a strategist at Oppenheimer Funds, suggests instead buying the stocks of small foreign companies that sell little to the United States. Their fortunes won't be affected by a dollar dive. The MONEY 65's T. Rowe Price International Discovery fund (PRIDX) is a solid choice here. Note that "small" doesn't mean emerging markets stocks, which are tied to commodity prices and have fallen hard of late. Buy emerging markets debt Emerging markets bonds, on the other hand, are now a favorite investment of Robert Arnott of Research Affiliates. They often pay two percentage points more in interest than debt back home, and Arnott thinks rising prosperity around the world lessens their riskiness. The Pimco Emerging Markets Bond fund (PAEMX) is up 17 percent annualized for the past five years. For a less concentrated approach, the Templeton Global Bond (TPINX) fund has 15 percent of assets in emerging markets. It returned 13 percent annually for the past five years. Rediscover large-caps Big U.S. companies often get 40 percent or more of their sales overseas, and their earnings are boosted by a weak dollar. Yardeni likes materials, energy and industrial stocks, even though they've soared during the past couple of years, on the theory that the global boom will continue. T. Rowe Price New Era (PRNEX), a MONEY 65 fund, invests in these kinds of businesses. If you buy individual stocks, check out Michael Sivy's take on three falling-dollar beneficiaries. Finally, an S&P 500 index fund will give you exposure to a broad range of U.S. large-caps, including many that look undervalued today. | ||
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