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al leong
New member
Username: Wayfarer

Post Number: 6
Registered: 8-2007
Posted on Wednesday, September 05, 2007 - 8:59 am:   Edit PostPrint Post

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?
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Roberto
Board Administrator
Username: Admin

Post Number: 1271
Registered: 12-2004
Posted on Wednesday, September 05, 2007 - 3:54 pm:   Edit PostPrint Post

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.
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Apartmentsba.com
Intermediate Member
Username: Saint

Post Number: 183
Registered: 5-2005


Posted on Wednesday, September 05, 2007 - 4:45 pm:   Edit PostPrint Post

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.
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al leong
New member
Username: Wayfarer

Post Number: 7
Registered: 8-2007
Posted on Thursday, September 06, 2007 - 11:31 am:   Edit PostPrint Post

hi guys,

So what you are saying if I have USD cash I will have to put in a safe box in my apartment.
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Roberto
Board Administrator
Username: Admin

Post Number: 1279
Registered: 12-2004
Posted on Friday, September 07, 2007 - 10:21 am:   Edit PostPrint Post

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.
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Apartmentsba.com
Intermediate Member
Username: Saint

Post Number: 184
Registered: 5-2005


Posted on Sunday, September 09, 2007 - 1:52 pm:   Edit PostPrint Post

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.
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Benco
New member
Username: Benco

Post Number: 12
Registered: 4-2007
Posted on Tuesday, September 11, 2007 - 11:42 am:   Edit PostPrint Post

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.
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Apartmentsba.com
Intermediate Member
Username: Saint

Post Number: 185
Registered: 5-2005


Posted on Tuesday, September 11, 2007 - 12:11 pm:   Edit PostPrint Post

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.
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Benco
New member
Username: Benco

Post Number: 13
Registered: 4-2007
Posted on Monday, September 24, 2007 - 7:22 pm:   Edit PostPrint Post

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...
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WelcomeToMendoza.com
New member
Username: Welcometomendoza

Post Number: 22
Registered: 7-2007


Posted on Monday, September 24, 2007 - 8:44 pm:   Edit PostPrint Post

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.
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Apartmentsba.com
Intermediate Member
Username: Saint

Post Number: 198
Registered: 5-2005


Posted on Wednesday, September 26, 2007 - 4:46 pm:   Edit PostPrint Post

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.
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Benco
New member
Username: Benco

Post Number: 14
Registered: 4-2007
Posted on Wednesday, September 26, 2007 - 8:48 pm:   Edit PostPrint Post

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.
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Apartmentsba.com
Intermediate Member
Username: Saint

Post Number: 199
Registered: 5-2005


Posted on Wednesday, September 26, 2007 - 9:15 pm:   Edit PostPrint Post

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.
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Roberto
Board Administrator
Username: Admin

Post Number: 1312
Registered: 12-2004
Posted on Thursday, September 27, 2007 - 12:00 am:   Edit PostPrint Post

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)
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Apartmentsba.com
Intermediate Member
Username: Saint

Post Number: 203
Registered: 5-2005


Posted on Thursday, September 27, 2007 - 11:08 pm:   Edit PostPrint Post

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.. :-)
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Apartmentsba.com
Intermediate Member
Username: Saint

Post Number: 206
Registered: 5-2005


Posted on Friday, September 28, 2007 - 9:46 pm:   Edit PostPrint Post

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.
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Roberto
Board Administrator
Username: Admin

Post Number: 1315
Registered: 12-2004
Posted on Friday, September 28, 2007 - 11:57 pm:   Edit PostPrint Post

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.
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Robbie
New member
Username: Ganavan

Post Number: 23
Registered: 8-2006
Posted on Saturday, September 29, 2007 - 5:48 am:   Edit PostPrint Post

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
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Apartmentsba.com
Intermediate Member
Username: Saint

Post Number: 207
Registered: 5-2005


Posted on Saturday, September 29, 2007 - 10:43 am:   Edit PostPrint Post

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.
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Robbie
New member
Username: Ganavan

Post Number: 24
Registered: 8-2006
Posted on Saturday, September 29, 2007 - 12:21 pm:   Edit PostPrint Post

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.
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Apartmentsba.com
Intermediate Member
Username: Saint

Post Number: 208
Registered: 5-2005


Posted on Saturday, September 29, 2007 - 2:30 pm:   Edit PostPrint Post

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.
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Robbie
New member
Username: Ganavan

Post Number: 25
Registered: 8-2006
Posted on Saturday, September 29, 2007 - 5:26 pm:   Edit PostPrint Post

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)
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Apartmentsba.com
Intermediate Member
Username: Saint

Post Number: 209
Registered: 5-2005


Posted on Saturday, September 29, 2007 - 7:55 pm:   Edit PostPrint Post

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.
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WelcomeToMendoza.com
New member
Username: Welcometomendoza

Post Number: 23
Registered: 7-2007


Posted on Saturday, September 29, 2007 - 10:18 pm:   Edit PostPrint Post

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.....?
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Apartmentsba.com
Intermediate Member
Username: Saint

Post Number: 210
Registered: 5-2005


Posted on Sunday, September 30, 2007 - 10:10 am:   Edit PostPrint Post

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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WelcomeToMendoza.com
New member
Username: Welcometomendoza

Post Number: 24
Registered: 7-2007


Posted on Sunday, September 30, 2007 - 10:31 am:   Edit PostPrint Post

Apartments,

yes of course I was being sarcastic, ,I notice the smiley's don't come through on the emailed posts, but stay posted on the board:-)

And I didn't mean just you, in fact I think it's great there are at least 3 people on this thread who point out more possibilities than just the rosy ones.

I was just trying to scoot the direction of this thread back to general theme of post # 1, and I think it's very good that suggestions , like yours, get posted in the mix of the responses. Good stuff ....now.....I wonder how these 12 month payment plans on toasters will affect the Argentine economy going forward....any input there? thanks.
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Apartmentsba.com
Intermediate Member
Username: Saint

Post Number: 211
Registered: 5-2005


Posted on Sunday, September 30, 2007 - 7:52 pm:   Edit PostPrint Post

I believe you shouldn't really spend too much time worrying about how a 12 month payment on a toaster (and other items) is going to affect the economy. Look more at bigger items. Look at the fact that the year over year new car sales are exploding over the past few years here in Argentina. They keep going up month after month. Yes, inflation is a concern but there are plenty of people that have money to spend on cars and keep in mind although banks DO give out car loans they aren't like the USA and are careful on the salary to payment ratios. Unlike in the USA and other countries, here in Argentina the banks actually do check to see if someone has the job and is making the money to pay for the loan. (again, what a novel concept). Prices of items are going up. But you know what? Salaries are continuing to go way up as well. The salaries are going up faster than inflation for many, many people.

Look at the fact that LOCAL residents of Argentina are driving up real estate prices. People can spin things to try to say it's the foreigners that are driving up prices but that argument isn't sound. Sure, foreigners are not hurting things but the buying is still driven by ARGENTINES that have nothing else to really put their money into. I pointed this fact out after the crash in 2002 which was spot on. I'm still seeing more and more residents of Argentina continuing to fuel their money into real estate and I don't blame them. It's a safe investment to them compared with most other options in Argentina. I'd much rather spend time looking at indicators like this than how 12 month payments on toasters are going to affect the economy.

I'd look at the fact that AFIP is taking in a lot more tax revenue year after year. Still, AFIP needs to do more to take in legitimate tax receipts. No one likes to pay taxes but it's a social responsibility that I wish more locals would take. Even if locals paid just a partial tax of what they should Argentina would be in much better shape. Tax receipts are going up month after month but more can be done.

Like I said before, problems can and probably will occur in the future in Argentina but no one can deny the amazing recovery that took place and is still taking place in Argentina since the crash. So, instead of worrying about how 12 month payment plans of toasters will affect the economy, personally I'd spend more time looking at other more important indicators.

Yes, the government is lying about the inflation numbers. Everyone knows that. Newsflash! Governments DO manipulate numbers. It happens every day in almost every country around the world. Yes, maybe unemployment rates are higher than claimed but they are still amazingly low compared to after the crash. The recovery has been amazing.

People like to speculate all kinds of doom and gloom scenarios for Argentina, which I don't necessarily think is a bad thing. I just think you should also look at the other side of the story as well. Look at indicators like the things I mentioned above.

I'm certainly NOT saying Argentina won't have problems in the future. If history has taught us anything, it is that Argentina in between calm periods of splendor has chaotic cycles as well. Personally, I believe that every economy needs these corrections to inject some reality into the situation. There are some countries right now that are just totally unrealistic and spending too much money and at the end of the game of "musical chairs" some people will be left without a seat.

Best to all.
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WelcomeToMendoza.com
New member
Username: Welcometomendoza

Post Number: 25
Registered: 7-2007


Posted on Sunday, September 30, 2007 - 9:13 pm:   Edit PostPrint Post

I'm surprised you minimize the 12 month payment plan on toasters - this is a micro but cumulative factor here, pretty much just as or more dangerous to one's account payable status, than the sub-prime stuff in the USA. Expect that at least with a sub-prime you know in advance what you are facing. Here, with 12 monthly payment plans on impulse purchases like toasters, wrenches, hair irons, coffee makers, hair dryers, rugs, blinds, sheets, ashtrays, cups, forks, clothing, cigarettes, water, toothpaste, and mate's, this is a debt loving paradise.

With constant credit deals always lurking like "get credit with no credit check or income check", which DOES exist here on these items, this is really concerning, and fuels the speculation that Argentina is in for a some kind of a dip again.

But, there is no doubt the actual sub-prime sitch will help keep house prices down in the USA for a while.

I know several people including my wife who applied for a car loan here in Argentina and got the deal based on no verification of employment.

There is no doubt that the cash payment history of houses puts solid flooring in the perceived values here.

Yes some locals are driving up the prices wildly in some areas as some of them try to greedily capitalize on the tourist/real estate boon. When you hear people saying the foreigners are driving up the prices, what they mean is that some foreigners are actually paying asking prices, helping to validate the local sense that they can sell much higher to foreigners, as you surely have run across in the past.

I only mentioned 12 month payment plans on toasters but implied the financial culture is risky by nature, and 10 to 20% inflation is no biggie for a local - they are used to it and almost feel good it's only 20% - they have had MUCH higher than before, and most feel it will get worse now that it seems to be ramping in general.

What I hope is that someone grabs this nut by the tail and gets the economy fully thinking of the long term future instead of 6 months down the line. This is real tough here since so much changes overnight.

I don't enjoy speculating about doom and gloom on Arg - in fact I like to stay in the mind frame of preparing better - the topic of this thread. People also like to forecast gloom and doom in the USA and the world – it’s just their nature.

One possible scenario is the Argentine government may maintain the dollar at low 3's while inflations runs it course over the next few years - maybe even creeping up to the 30% level.

My top 3 prep suggestions are:
1) If you live here or planning to move here, pad your budgets by 20% at least. You will not regret this.
2) for any operating cash you have in a local bank, to pay bills, etc, make sure you have in hand your debit card...these were accepted during the last crisis, to buy stuff. But you couldn’t get your money out of the bank in cash.
3) take advantage of any interest free loans out there (like car loans), in fixed peso payments, if you qualify by having a DNI and a little credit history.

The next “crisis” could happen next year or 10 years from now, but it is mostly question of when, based on continued behavior, and not to downplay the “recovery” which is amazing, but most Argentines fail to re-invest their boon pesos back into infrastructure, as you know.

Don't get me wrong, I love this place, just as many foreigners and locals in the US love the USA no matter what is happenng.

Cheers
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Adam Walker
Junior Member
Username: Adam_walker

Post Number: 35
Registered: 4-2007
Posted on Tuesday, October 02, 2007 - 9:06 pm:   Edit PostPrint Post

Well, I must say, i feel like slitting my wrists right now. When did life get so difficult?

So listen - you guys are obviously intelligent - advice for the "unintelligent" ones this forum - ie. me!

I am a 26 year old English guy, so the savings I do have are in pounds. I work remotely (for the moment Argentina!) and was thinking about buying a flat/house here as buying in the UK (particularly London, where I am from) is almost impossible right now, and I would love to spend the next 5-10 years in Argentina, (I havent bought anything in the UK).

Can I do this? Can foreigners simply "invest in real estate" etc, and is it advisable or do you tink there are better investments? Also, would I get some sort of ability to get an Argentine visa, and stay here more permanently rather than wandering around on a tourist visa?

Sorry, I don't mean to use you as some sort of financial adviser - but I am just waking up to the fact that at the age of 26 years old I need to start thinking about all of this properly, but my brain isnt well set up to understand the economics like you lot...
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Apartmentsba.com
Intermediate Member
Username: Saint

Post Number: 214
Registered: 5-2005


Posted on Thursday, October 04, 2007 - 9:37 am:   Edit PostPrint Post

Adam,

You don't need to feel like "slitting your wrists". I know you are joking.. ha, ha. Life I do think is more difficult today than it was in the past. I think there are many things that contribute to that fact. Remember when you were a kid and you could just leave the house maybe even without telling your parents? You could go to bed at night without locking the door, you weren't worrying about terrorism, flying with any airline was a breeze, and a hundred other examples.

Before, you worked for a company for decades, retired with them and you got a pension that took care of you. Those days are gone. The company isn't going to take care of you. Remember the days of thinking that you are paying into social security (or some equivalent in your country) and thinking, I will live off these government savings accounts? Well, most countries won't have the money to pay those of us that are younger. Those days are LONG GONE and the only one that is going to take care of YOU is YOU.

I don't think you have to be an Economist to understand all of this. 26 is young but time flies by. We are already in October of 2007. The years fly by faster and faster and unless you are taking steps for the future, you will find yourself a 36 year old or 46 year old or 56 year old with no real plan.

So the thing I recommend is on paper, write your plan. Make a 5 year and 10 year goal of what you want to accomplish and how you will accomplish it.

You said, "It's impossible to buy a flat now in the UK". You know what? I agree with you! I still say the UK will experience problems similar to the USA with their sub-prime problems. The property prices have exploded and they are handing out money like it's candy and that is going to have consequences later. Cheap easy credit has a price later on. So don't feel so bad not to be buying if you can't afford the payments on the house.

Just make a game plan of your life and where you want to be in the next 5-10 years. You say you would love to spend the next 5-10 years in Argentina. Heck, I think every 26 year old single guy would like that! Still, ask yourselves basic questions like, "what will I do for a living? How much money will I make? How much money can I save up for the future?"

Many foreigners come here but they don't realize that it's not so easy to make money here. It may be more affordable then back home but then again back home you will make a LOT more money. I still think places like the USA is the best place to make money. Any intelligent, educated individual that has a drive to work with a strong work ethic can find a job and make money there in the USA. Here in Argentina that is NOT the case. It's a great country and one that I love but if they are not paying their doctors and lawyers and accountants much, why would they pay a foreigner? In Buenos Aires you will find some pretty educated and intelligent taxi drivers driving because they make more driving a taxi than they can hope to make somewhere else in a professional job. In the USA, most of the taxi drivers in big cities comparable to Buenos Aires can barely speak English, and is a foreigner from another country. Keep those kind of questions in the back of your mind and consider them. Make a game plan of your life. Again, make a 1 year, 3 year, 5 year and 10 year goal.

Consider things like...even if you can make enough to get by and have a decent life here in 10 years. What then? You are 36 in 10 years and if you didn't make a lot of money to save for the future, are you going to be ok? What if you get married and have kids? Your kids education? Will you send them to the private school here? Think about all of these things. Life is like one big chess game.....you must always think of your next move ahead of time and think of how the current move you are making will affect the "game" of life.

Yes, foreigners can buy real estate. Read this entire forum as it's been discussed in detail. Best of luck to you.
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Robbie
Junior Member
Username: Ganavan

Post Number: 26
Registered: 8-2006
Posted on Thursday, October 04, 2007 - 11:09 am:   Edit PostPrint Post

Adam,
I have been away for 18 years from ARgentina in the UK. Now I am going back. They say you return to your first love...well when you decide to go for Argentina, think of it as you would about your wife-to-be. Think if you want to spend the rest of your life (or the foreseable future) with her and with all her problems. Also whether the assets are greater than the associated liabilities. If the answer is yes, then jump into the pool and swim!
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Apartmentsba.com
Intermediate Member
Username: Saint

Post Number: 215
Registered: 5-2005


Posted on Thursday, October 04, 2007 - 11:34 am:   Edit PostPrint Post

Robbie,

I am seeing ALOT of what you are about to do. (Move back to Argentina after being gone X # of years). I see more and more Argentines that got out of Argentina in their youth (or relative youth) and now retiring or really just miss the country and coming back to live or retire here. In fact, I think you will see a big move with the retirement community around the world to retire part-time or full-time in Argentina. The cost of living here is extremely low if you have dollars, euros or Sterling to spend. Especially those that have some fixed pension or retirement plan or just living off their savings. It goes a LOT further here in Argentina.

I've always said retiring in the USA and probably the UK as well is a bit depressing. An "exciting evening" is usually ordering a pizza after 9:30 PM. In Argentina you can see senior citizens drinking expressos and coffee at 1 or 2 AM. They really know how to enjoy life.

I think some smart entreprenuer that is well financed will start making retirement communities here in various parts of Argentina and those seniors will live a really great life at a fraction of the cost of back home.

I agree with Robbie about returning to your first love. I fell in love with Argentina and it caused me to totally change my life. (Kind of like meeting a new woman and just falling totally and madly in love with her). I quit my job, sold my house and possessions and moved out of the USA. Definitely it was the right decision so never let someone tell you it can't be done. Where this is a will....there is a way.
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Robbie
Junior Member
Username: Ganavan

Post Number: 27
Registered: 8-2006
Posted on Thursday, October 04, 2007 - 4:43 pm:   Edit PostPrint Post

Saint,
Although I am not ready for retirement, I know there are some interesting real estate investments starting up retirement "villages" in Mendoza, Rio Negro and Buenos Aires. I am sure there are many more. They are not sold as "retirement villages" as this has some stigma attached (the "old" peoples village). I remember when I lived may years ago in California, there was a Sun City, which is probably still there, and it had very nicely groomed houses all of which had plastic lawns. It was I must say something of an anti-climax for the visitor.
I think in many instances you have to follow your heart, so I am with you there Saint. I think there is hidden intelligence in back of our minds and it only comes out unfiltered by our conciousness when we "just do it".
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WelcomeToMendoza.com
Junior Member
Username: Welcometomendoza

Post Number: 26
Registered: 7-2007


Posted on Thursday, October 04, 2007 - 8:46 pm:   Edit PostPrint Post

Yes many parties have been working since early 2000's on part or all-year living scenes in Mendoza, Salta and Cordoba also. For foreigners and locals.

Thankfully only a relatively few good ones come off as St. Petersburg Florida "perfecto" communities, since most people would rather enjoy the individual Argentine styles and surroundings found in these provinces and others.

Each community, is in it's various stages of evolution including their really good features and really, um, other features, lol….

For the most part, the outside spaces (if not a highrise) range 500 to 1000 sqm

Here in the Mendoza province, there is a growing mixture of folks from BA, and nationals from across the Americas, Europeans, Australian, some Asian, etc....

It appears to be a tie between foreigners who end up in these communities ..versus ..ending up in part/all year living bigger space that includes a killer mountain view, tall alamos, weeping willows, mountains nearby, trout fishing nearby, and several acres to yourself, and Andes water, not to mention the crops/personal vines easiness.

It is currently cheaper, for the most part (some items cost more here but that is the offset) , for most foreign currency users, but keep in mind it is getting more expensive here again..seems to be on par with the nationally-predicted 10 year cycle phase. Maybe not.,..but worth following these accelerating cost increases (on track for 20%+ this year) inflation and how firm they hold the current exchange rate of the dollar/peso over the next few years. Pad them budgets…
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Adam Walker
Junior Member
Username: Adam_walker

Post Number: 40
Registered: 4-2007
Posted on Thursday, October 04, 2007 - 9:13 pm:   Edit PostPrint Post

Saint and Robbie - thanks for the words of advice and I agree - gotta the good and the bad, like with anything!

The advice, Saint, is sound too... I am confident I can put money to one side, it's just where to put it! I am definately waiting for the UK market to crash now, only thing is they say this every year, and it just goes up!

Think I will look into a plac in Recoleta/San Telmo...

Thanks guys!

And Robbie - welcome back!!!
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Apartmentsba.com
Intermediate Member
Username: Saint

Post Number: 225
Registered: 5-2005


Posted on Monday, October 22, 2007 - 3:22 am:   Edit PostPrint Post

You are welcome Adam. Also, keep an eye out for Palermo Soho/Viejo/Hollywood area which has grown tremendously (as I called it would a few years ago). I have been adding to my personal portfolio properties in this area for myself and my clients and it was a good decision. Rental rates there are GREAT and the values continue to go up and I see that continuing for a while.

Don't worry about trying to pick up a place in the UK cheaper in the future. I predicted the sub-prime mess in the USA 2 years ago. Really I was NOT surprised in the least that it was going to happen. I knew it was only a matter of time. I hate it that people I know in the USA are experiencing problems with this but really for those of us that knew it would happen have to contain our excitement. I liquidated all my real estate I held in the USA and I'm waiting to buy again there and I know many others are as well. I talk to some of them and they are in the same position not being able to show their excitement more at what is happening in the USA. I'm sure it will go down even more as more APR's are set to reset next year. More houses will go into foreclosure and prices there should continue to fall. For those of us that are waiting to invest in real estate in the USA again it's all pretty exciting. Again, I feel sorry for those that are going through the pain but remember that real estate is an investment. There will always be winners and there will always be losers. Too many people "own" that should be renting there. Expect more problems to come.

For you as a Brit that is looking to buy real estate cheaper there (UK) in the future... I think you will have a great chance of picking up property there cheaper. I've flown there many times including earlier this year to look at the real estate market.

You will find lenders there will reduce their lending just as they are in the USA. Lenders in the UK are already reducing their lending. Look at companies like Paragon and Bradford & Bingley there (which accounts for about 30% of the buy-to-let market) have already started to get rid of many of their mortgage products and replace them with higher rate mortgages. This should significantly reduce the amount of people buying properties. You will see more and more banks and finance companies also withdraw from the market.

It's estimated that over 25% of the purchases in the UK in the last several years was from buy-to-let and subprime. Many of those sub-prime mortgage rates have risen from 7% just in July 2007 to over 9.25% now. And some rates have risen as high as 11.25% What do you think is going to happen to many of these people who could barely afford their monthly payments before??

It's not just these smaller players that are cutting back on loans either. Look at HBOS, the largest mortgage lender in the UK. They are also getting rid of many mortgage products and cutting back on loans they are giving and expect this to get much worse.

You will find the market in the UK will have similar types of problems as the USA is having now. It will take a bit of time but any economist worth a lick can see this.

Frankly, I'm amazed when I see so called financial geniuses like Alan Greenspan appear in interviews now and saying he had no idea until last year how sub-prime would affect the market so much. This is why I don't trust what comes out of the government (or their officials mouth). People were living in a dream world if they thought allow sub-prime loans to people who clearly couldn't afford them would maybe be a bad idea.

I've seen and heard many ignorant people over the years on many different message boards. It's a bit funny as many of them argued with me on these boards about various issues going on and now once they see everything I predicted came true, all of a sudden they disappear or I never hear anything about how I was right.

I remember on TripAdvisor.com about 1.5 years ago this poster was telling people how "dangerous" it was to invest in the real estate market in Argentina. I posted the other side of it. She kept going on and on and I told her that the USA market actually had a risk of problems and she and others blew this off. She kept talking about her vacation home and how there was no risk to her. You know what? Her along with many others believed there was no risk in the USA and property values would continue to go up forever. Now they are seeing they were dead wrong.

I remember another guy. I was filming a TV show last year in Punta del Este on real estate. The producer who was a really great guy was telling me how the market here in South America was too difficult as all cash was needed to buy. I told him It was tough but I preferred it as it keeps serious buyers/investors in the market and insulates the market as there aren't people like in the USA. I also told him that the sub-prime mess (that is happening now) would happen. He dismissed what I was saying and in fact told me how he and his wife got an ARM mortgage. An interest only loan. So he was bragging how he had very low payments on his mortgage and "only had to pay the interest on the loan" while property rates keep going up. So he said it was like "free money".

That is the problem.....too many people are complaining now or trying to blame someone else for the sub-prime mess but people are realizing now...there is no such thing as "free money".

So Robbie...i do think you can buy in the UK in the future cheaper.
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Apartmentsba.com
Intermediate Member
Username: Saint

Post Number: 226
Registered: 5-2005


Posted on Monday, October 22, 2007 - 2:29 pm:   Edit PostPrint Post

Also, something very interesting is that even as this sub-prime mess is playing out in the USA something interesting is that I've found the interest in buying real estate in Argentina has actually increased by foreigners (especially Americans). For one thing, the people buying real estate in Argentina are INVESTORS that have money and not gamblers like in the USA.

About 2 years ago as I predicted the sub-prime mess to many. Many told me how if there was a mess in the USA there would be no interest anymore by Americans buying in Argentina. I dismissed this as I could see the investors buying in Argentina generally are a different breed of investor.

I'm in Spain now on holiday. I was also here a few months ago on holiday and to look at the real estate market here (Madrid and Barcelona). I determined then the real estate market peaked and actually I estimate prices here are about 20% too high and due to fall over the next few years. Many Spanish investors agree and I see many property owners exiting out of the real estate market. Guess what? Many are looking at other opportunities including in Argentina. The same with the UK market and also Ireland. Those markets/areas are all overvalued and the smart money is already exiting those areas in search of good opportunities.

I'm in a unique position to evaluate trends in real estate by foreigners. I am one of the largest buyers of residential real estate in Argentina. I find it very interesting with this trend of Americans and other foreigners searching for a "flight to simplicity" in investing. I've always said I like the "old school" form of purchases here in Argentina. Don't buy something unless you have the money for it first. What a novel concept. Most people I know in Argentina don't buy cars or apartments unless they saved up 100% of the purchase price.

In the USA, most people THINK they "own" their homes but they do not. The banks do. In fact, most Americans have never seen the title deed to their property and you know what? Many will never see their deeds to their title deeds and someone else (their bank) will always be the "owner" of the property. Even today, you have many people that have been paying on their homes in the USA for 20 or 25 years and they STILL do not have the deeds to their property. Why? Because the financial community told them how great of an idea and how "it would be good for them" to refinance and take equity out of their homes via "low cost loans". These people took out equity out of their funds using their house almost like an ATM card. So although they got the money, they spent it on cars, vacations, boats or credit card debt. Many people took out equity to pay their credit cards only to spend even more on their credit cards so they have nothing really to show for all the money the bank gave them. And now many of their loans have readjusted to higher rates.

The average person doesn’t understand what is going on in the USA. It’s NOT just sub-prime loan problems either. Look at all these big banks that are reporting disappointing quarterly financial results lately. Look at all the big USA banks. They are raising reserves for loan losses by over $6 BILLION over the 2nd quarter. What does this mean? This means that these executives know that consumers (their customers) will not be able to make their payments on loans they took out. Not just mortgages either. It’s across the board. Mortgages, home equity lines of credit loans, car loans and especially credit card payments.

Look at new car sales in the USA. My friend owns a car dealership in the USA and he tells me these days not many people are buying and those that did are falling behind on their car payments. Talk to any F&I executive that works at your local car dealership. They can probably confirm to you that people are defaulting on their car payments as well.

Anyway, those that aren’t interested in these kinds of things can skip my posts. But those of you that follow my posts and have for years can look at these kinds of trends. These are the kind of economic signs that I look at around the world. I travel more than any one I know. I travel around the world often and although I mostly travel for leisure I always follow real estate and look at all these trends. I study things very carefully and so far that has paid off.

Again, it’s interesting in all the madness in the real estate market in the USA I’m actually seeing increased interest in buying here in Argentina. I think this is something that most people would find extremely interesting. I’m certainly NOT saying real estate will keep going up forever here. But still, it’s still very cheap compared to world capital cities around the world.
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Benco
New member
Username: Benco

Post Number: 22
Registered: 4-2007
Posted on Wednesday, October 24, 2007 - 9:23 am:   Edit PostPrint Post

Hi all,
due to the elections Argentina has been covered in some well-respected international journals - here is a sound and concise article that points out the current key concerns:

www.economist.com/world/la/displaystory.cfm?story_ id=9988808
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Tom
Advanced Member
Username: Diverdown48

Post Number: 444
Registered: 6-2006


Posted on Thursday, October 25, 2007 - 6:36 pm:   Edit PostPrint Post

I am not worried about Argentina. The government's job is to take care of the people, all the people.
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Apartmentsba.com
Intermediate Member
Username: Saint

Post Number: 232
Registered: 5-2005


Posted on Saturday, November 10, 2007 - 11:09 am:   Edit PostPrint Post

Posted September 28, 2007 by ApartmentsBA.com:

"These collateralized debt obligations (CDOs) are going to become a wide-spread problem. "


I hate to say "I told you so" but as I predicted, these CDO's as I predicted are now proving my point about how problematic it would be. I KNEW the banks around the world would be getting hit hard because of their exposure to these CDO's. Look in the paper everyday and you hear about more banks taking multi billion dollar charges in the 3rd quarter. Once I saw this in late September I started shorting the banking stocks and it was the right call. The forth quarter should be pretty brutal as well. The problem is that none of these banks really knows it's true exposure to their CDO's.

You can expect home prices to continue it's downward descent in the USA. Even the USA government estimates that about 2 million more homes will go into foreclosure in 2008. It's a bit scarey to see the number of mortgages that will readjust higher in 2008. Most of these people won't be able to pay their mortgages and will also go into foreclosure. All these houses will be flooded on the market so this should keep prices down in the USA.
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WTMendoza.com
Member
Username: Welcometomendoza

Post Number: 51
Registered: 7-2007


Posted on Saturday, November 10, 2007 - 8:16 pm:   Edit PostPrint Post

Good call Mike - the public awareness of this just blew wide open in last several weeks - what a shame - btw I picked up some citi in the low 30's this week...gulp...

Speaking of stock markets and the topic of this thread, I would be interesed in your thoughts of the much-less-liquid-but-interesting-Argentine stock market and what opportunities may ebbing forth there...

As with most things Argentine, the Merval has had a gut wrenching ride this year but nicely up on a whole...see graphic

http://finance.yahoo.com/q/bc?s=%5EMERV

What do you think of the some of the componets on a long basis, like PAMP.BA ?

What do you think about the trustworthiness of allocating some pesos into Argentine stocks?

thanks
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Apartmentsba.com
Intermediate Member
Username: Saint

Post Number: 237
Registered: 5-2005


Posted on Sunday, November 11, 2007 - 10:32 am:   Edit PostPrint Post

Hi Mendoza,

Yeah, you are hearing alot about CDO's just in the last few weeks....i knew back in September the thing would blow wide open. I didn't trust the big banks when they were saying things like "our exposure is limited to CDO's and SIV's". I knew they were lying. Just like a few months ago when the USA government said that the "housing situation problem is contained in the USA" and all of a sudden now a few months later they are admitting there are widespread problems.

Citigroup was actually one of the stocks I shorted back in early October. (actually October 5 at $48). I do NOT very often short stocks as I think you have to be very very careful but I was 100% certain they all had huge exposure to CDO's and SIV's. I covered my short position on Citigroup at $35. I do think it can fall further but I think if you are buying for the long term you will be ok. I'm not bullish on ANY banks right now however because they don't even know how much their exposure is to their CDO sour portfolio. It's VERY complicated and hard to gauge their exposure to it. You most likely will read in the paper in the fourth quarter about more multi-billion dollar losses so again I'm not too bullish on banking stocks but I think if you are holding for the LONG term this was a good time to buy. Citigroup was almost $50 just a few months ago.

I actually don't invest in the Merval. It's been on a wild ride this year and very volatile. It's less liquid as you mentioned. I don't like investments that are highly volatile so I stay away from them. Not to say that I think it's a bad investment. Just personally for me and my investors I think there are better investments out there.

I actually don't hold any investments in pesos. I prefer dollars, Euros and Sterling. I started buying Euros and Sterling 1.5 years ago and it was a great decision. Look at my post just from the end of September above (September 29, 2007). Look what I said about the weak dollar and strong Euro. Just since I posted that the Euro hit a high of $1.47 against the dollar! And the British Sterling 2.10 against the dollar.

I really can't recommend the Merval as I personally don't invest in it for various reasons including the volatility of it. I prefer real estate. It's much more stable and really it's predictable. It's interesting. Even before I buy a property I can plug in all the numbers on a rate of return spreadsheet and I typically have been spot on within 1%-2% what I will NET each year on it. It's very predictable as the expenses are pretty much set. Things like condo fees, property taxes, utilities are all fixed for the most part and don't change.

I think you CAN make money in the Merval but I think there are too many other better things you can invest in that are much more stable. The risk/reward ratio isn't worth it for me.

Cheers.
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Dan Sandefur
New member
Username: Panamadan

Post Number: 11
Registered: 4-2007
Posted on Sunday, November 11, 2007 - 12:39 pm:   Edit PostPrint Post

That was a good idea to short sell the bank stocks. I should have thought of that too. Instead I was and am still shorting the USD, and buying lots of gold & silver. They are doing very well, of course. My trading account is in Euros too, so that way even the money in that account that is not invested in anything, is still making money, compared to the USD.

As for real estate, I am more comfortable investing in it also, even though it is much less liquid, and more problematic.
However, the bad RE market in the US is affecting Central & South America too. I am living in Panama now, and I know of many people in the US, who plan to buy RE here and elsewhere, but cannot until they sell their properties in the US. Of course, they are having major problems with that, and so it is negatively affecting the RE market here also. I presume it is the same for the rest of Central & South America too. Panama RE is in a small bubble now too, so the best deals are in South America. Brazil and Argentina, in particular. That is why I am looking there now.

Right now, I would rather have NO paper currency, and be totally invested in commodities and real estate. Most commodities have outperformed most stocks this year anyway. I foresee that to continue for a few more years. The negative thing about RE, is that it is relatively illiquid, compared to commodities. It is better than holding a currency that is devaluing though. Like many other countries and people, I'm getting out of USD...
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Apartmentsba.com
Intermediate Member
Username: Saint

Post Number: 239
Registered: 5-2005


Posted on Sunday, November 11, 2007 - 5:16 pm:   Edit PostPrint Post

Hi Dan,

Yeah, short selling the banking stocks once I started seeing the obvious problems with the sub-prime mess with the CDO's and SIV's was an easy call for me. I never advise short-selling stocks unless you are very careful. You can get killed shorting stocks but in certain cases it makes a lot of sense.

Alot of people are "shorting" the US Dollar now for obvious reasons. I still think the dollar can get weaker for many different reasons (many of which I mentioned earlier in this and other threads).

Yes, real estate is NOT for everyone. Especially in South America. I think anyone that invests here should do a lot of due diligence and have a good game plan of their exit strategy and their time horizon for the investment. Also, for many people it doesn't make sense. You have to carefully look at the monthly expenses, tax issues, property management issues, etc. It does NOT make sense in many areas. I just spent 20+ days traveling throughout Europe and I looked at real estate in each city that I went to. It didn't make sense in most of the areas because the monthly expenses were so high and the rental income was low.

I heard that the market in Panama was suffering. There are people that want to buy there but as you mentioned many (who are from California) need to sell their properties first. There are a lot of people hurting that "gambled" in real estate in the USA. I say gambled because they had no real clue what they were doing. Many can't get out no matter how much they reduce their prices. Look at the number of "short sells" going on with houses in the USA now by banks and mortgage companies.

Yes, as you mentioned, real estate is not as liquid as stocks/bonds but still in good markets if you are buying good real estate investments you can always sell it. I recently listed a property in Recoleta that I owned. I sold it for just about 100% of the price I purchased it in 2004 and I sold it in 2 weeks and had 3 offers all at the asking price. From start to finish (the time the money was deposited into my bank account) it was less than 30 days.

If anything I've noticed that the real estate mess in the USA hasn't affected the demand by foreigners investing here. If anything I've received more interest now from foreigners than before which even I was a bit surprised at. I admit the profile of my average client is different than many other areas of people buying real estate because I mostly deal with affluent investors that have the funds to pay 100% cash for a property. In many areas including Panama you can still finance properties. In Argentina that is just about impossible for a foreigner. I've actually always liked that aspect about Argentina. It is all serious investors that have the cash and the market is more stable because of it. The market is still driven by the locals buying.

For the Europeans and British they are buying here in droves now because real estate because is priced in us dollars so it is extremely affordable to them. Their currency is strong so real estate here is cheap. I'm seein the biggest demand for real estate by British investors followed by Spanish investors...

I agree with you. Brazil and Argentina I believe have a lot of potential. I have been traveling back and forth in Brazil looking at real estate there as well. The economy is strong there and has the potential to really become a power house in South America.

I disagree with having no paper currency. I've always recommended to save up a "rainy day fund" and go on a spending spree as the market gets hit. I'm watching the real estate continue to tank in the USA and I'm confident I can pick up good properties cheap in 2008. It should be a field day for investors with cash waiting on the sidelines. I still don't think now is the time to buy but in late 2008 I think there will be a lot of deals. The market is not turning around there any time in the immediate future.

The good thing about cash is it's very liquid. I've been saying for 2 years the dollar was going to get weaker. I wish I purchased even more Euros and Sterling last year. Oh well..hindsight is 20/20. I think you will see more people getting out of USD. The real nightmare will be if China starts getting out of USD. Even hints of them starting to diversify caused ripples in the market. I'm very confident they will start getting into other currencies and this will be like a vicious circle causing the dollar to decline even more.

The really sad thing is that most Americans have no clue what is going on and really they don't care....
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Dan Sandefur
New member
Username: Panamadan

Post Number: 12
Registered: 4-2007
Posted on Sunday, November 11, 2007 - 7:22 pm:   Edit PostPrint Post

Hi Saint,

Yes, I will be ready for the buying opportunities in the US next year. When more of the ARMs reset to higher rates, it will be even more of a buyer's market there than it is now. Especially for cash buyers. Just like buying the bank stocks when they are bottoming out. Like you said, shorting stocks is very risky, except in certain rare cases.
Shorting the USD is not a sure thing either, since it has had ups and downs, but the overall trend is down.

Most Americans are either ignoring the "writing on the wall", or they are in denial. Heck, most Americans don't even know what the "fed" really is, and believe its propaganda, along with the government and news propaganda. If things get much worse there, which they easily could, I am not sure if I would want to buy RE there at all.

As for South America, I see more opportunities in Brazil than Argentina. Earlier this year I looked in Argentina. More recently I have been looking in Brazil, and find it to have more opportunities. I looked in Uruguay too, but like some one else said, Uruguay is already too played out.

Part of the RE market problem in Panama is that they are also on the USD, so those problems also affect its entire economy.
I noticed that the USD is falling even against the Brazilian Real, not just the CAD! At least it is holding steady against the Argentine Peso.

It may not be a crisis, but it is not looking good...
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Apartmentsba.com
Intermediate Member
Username: Saint

Post Number: 240
Registered: 5-2005


Posted on Sunday, November 11, 2007 - 8:11 pm:   Edit PostPrint Post

Dan,

Yes, there are going to be tons of great bargains next year. It's no guessing or speculation. I can tell you DEFINITELY there will be bargains. Look at the Argentina Real Estate section on this website and you can see that I clearly called the sub-prime mess about 2 years ago and especially in March 2007 I posted in detail about what was about ready to happen. Basically EVERYTHING that is playing out today I forcasted in March 2007. For me it wasn't a surprise at all. And for the record I will call it now.... There are more ARM's that will readjust in 2007. Probably 2 million houses or possibly more will go into foreclosure in 2008.

You are 100% spot on. Americans are in denial and so is the USA government. Look just a few months ago top governmental officials were saying the housing problem wasn't really a big problem.

You want to see how much denial they are in? Go to this link below.

The thing is that even with all this mess with sub-prime the government is still in denial and because of this the situation will get worse. When the chairmain of the US Federal Reserve Bank says that we need to raise the GSE to $1 million this is a CLEAR example of the systematic problems in the USA. People can't afford to get the loans they are getting now! So the solution??? Increase the amount of credit they can get....

I do feel sorry for those that get caught in this crunch in the USA but most of them brought it upon themselves and deserve it. It will be a good feeling buying up real estate in the USA cheap in 2008 and 2009.



http://www.cnbc.com/id/21694647


I didn't see the testimony of Ben Bernanke on Capitol Hill because I was on an airplane coming back from Chicago. It's probably a good thing, because I wouldn't have believed what I heard. Only now that I see it in print, in an email from the office, can I read it over and over again and force myself to accept its veracity.

At the very end of the hearing, Sen. Schumer, the Chairman of the Joint Economic Committee, asked the Fed Chairman what his recommendation would be should the Congress increase the loan limit that the GSE's are allowed to purchase (the limit now stands at $437,000).

Bernanke replied simply, "A million." Ok, now in case you're not well-versed in what the GSE's are about, or at least what I thought they were about, well they were originally designed to offer low-middle income borrowers mortgages that were not exactly backed by the federal government, but the federal government would be the chief investor in the loans, so they would be sort of backed by the federal government.

"For more than 30 years, Fannie Mae's mission has been to provide products and services that increase the availability and the affordability of housing for low- moderate- and middle-income Americans," says the Fannie Mae web site. The GSEs were in fact created by the federal government way back when, but were then rechartered by Congress in 1968 changing it to shareholder owned companies.

But back to my point: So when did a million-dollar home become low, moderate, or even God-forbid middle income?? According to the National Association of Realtors, the median price of a home is around $220,000, and I know I don't have to explain the meaning of median to an economist, but come on!


So apparently Mr. Bernanke thinks that instead of letting the housing market correct itself, that we should just take one of the most trusted types of lending institutions out there and let them play with the big boys and their big bad mortgage backed securities. Never mind that the market went completely haywire during the recent housing boom, and was fed by often negligent mortgage products, and that perhaps the focus should be on bringing affordability back at least into the nearest stratosphere.

I hope Mr. Bernanke was joking or perhaps surmising what it might take to get jumbo loans back in business, or perhaps there's another perhaps that I'm not thinking of.

Have we learned nothing these past few months?
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Roberto
Board Administrator
Username: Admin

Post Number: 1374
Registered: 12-2004
Posted on Sunday, November 11, 2007 - 8:31 pm:   Edit PostPrint Post

Buying silver here. And CDE. Generally bearish about stocks though. If anyone else reads iTulip.com there is some nice (very long term) analysis in there. Stocks took 3 years to die after the 1929 peak, 16 years to die after the mid sixties peak and current speculation is that it may take a few decades to declare stocks dead at current peak levels... in terms of real (not nominal) currency. Maybe buying real estate in 2008 is still too early in the downdraft.

Noone looking to invest in soft commodities in Argentina? How about manufacturing opps with an export strategy, specially in regards to flourishing industries (green, solar, biofuels, specialty food, natural gas conversion plants, chinese markets, etc)?

I am looking for passive cash flow... aside from domaining.
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Roberto
Board Administrator
Username: Admin

Post Number: 1375
Registered: 12-2004
Posted on Sunday, November 11, 2007 - 8:32 pm:   Edit PostPrint Post

Ah... forgot this
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Adam Walker
Junior Member
Username: Adam_walker

Post Number: 46
Registered: 4-2007
Posted on Monday, November 12, 2007 - 7:31 am:   Edit PostPrint Post

I don't understand a lot of this, however I do know the investment banks.

One I think will be announcing big losses after the Credit/CDO problem is BarCap - over the last 4 years, in the UK in particular, they have been recruiting any half decent CDO person available, and paying them a good 20% above market rate in guaranteed bonuses to ensure they get the guy (as opposed to the oppostion)... while they have a strong equity floor, I reckon there are some big positions on their books, and they are paying out a lot of money to a top-heavy credit team.

If you want to invest in an Investment bank that looks healthier, look towards those with strong Energing Market businesses or Asia operations - these markets are booming right now. Credit Suisse announced impressive Q3 results regardless of the CDO and SIV problems, and continue to strengthen through an integrated banking model. This being said, nobody knows what their prop desks have been doing, I hope we don't hear about them cooking their books or anything (like Deutsche last year!).

I would certainly not continue shorting on the Invesment Banks - in my opinion, they the strongest set of firms out there, with an amazing durability through every market. Even UBS, who announced huge losses, can take those losses and be back to full strength within a couple of years, because they always recruit the best people, and can cut costs easily (via outsourcing and redundancies in back office functions).

How are we feeling about the economy here in ARG since Kristina's election? Any big changes forseen?
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Benco
New member
Username: Benco

Post Number: 23
Registered: 4-2007
Posted on Monday, November 12, 2007 - 9:07 am:   Edit PostPrint Post

Since making a lot of money with smart investments is clearly a good way to prepare for the next crisis, this thread is still on topic :-)

In my view a good strategy is to invest in a diverse mix of assets and hold on to it for many, many years. You will get an average return on your investments and that is fine. When it comes to the quest for "alpha", this is a very difficult game that is played by highly professional investors.

I would never consider to fight against a professional boxing champion, and I would not bet my money on a football match between me and my friends and a first-league team. And I will never bet against investment banks, hedge funds and other professional investors. They have teams of very intelligent people, lots of experience, low transaction costs, sophisticated computer models, access to all sorts of information, and so on.
When you are buying, guess who is selling?

Many people are fooled by randomness and it is tempting to attribute successful investments to one's own skills rather than luck. In reality, you can be the smartest kid in town and it means nothing, unless we are talking about New York or London.

Well, when you have specific knowledge in a certain sector, then you may know more than the banks. Real estate in an emerging economy might be an example. But with currencies, commodities, stocks or bonds, I have my doubts. I assume that everything I know in these fields is either already priced in or wrong :-)

About the Argentinean economy there are no dramatic news. We will see how Cristina tackles inflation and energy problems, and whether she will get fiscal spending under control.
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Apartmentsba.com
Intermediate Member
Username: Saint

Post Number: 241
Registered: 5-2005


Posted on Monday, November 12, 2007 - 9:25 am:   Edit PostPrint Post

Roberto - I agree with you. I'm also bearish on stocks. I think the USA could go into a recession next year or the year after possibly. If I did buy a stocks I'd buy some that had more of a global mix of business. Those companies that expanded outside of the USA are doing much better. Still, I'm also bearish on the stock market for the most part.

I agree with you as well that 2008 may still be too early to buy real estate in the USA. I think possibly at the end of 2008 or early 2009 but I think also it's impossible to always catch the absolute highs and the absolute lows. If you are buying for a long-term investment horizon then the end of 2008 should produce good returns in the future.

Benco makes good points. I certainly do NOT advocate or advise to short the banking stocks (or any stocks for that matter). I just mentioned what I did once I saw the problems with the CDO's. I certainly wouldn't advise people to short at these depressed levels. However, as I mentioned before, I still think you will see some big multi-billion dollar write downs in the 4th quarter with these big banks. Not many of them are sheltered against this mess.

I agree that these posts are on topic because part of surviving the next "crises" will be staying cash rich. In any crises people suffer but there is another segment that gets even wealthier during downturns in the market.

As Benco mentioned, there is no dramatic news since it was announced that Cristina won. I was in Europe the past 20 days and many newspapers and magazines had stories on the election. Most had the same message. That she has a lot of work ahead of her but that probably nothing too major will change. They MUST get spending under control. Also, Argentina MUST get big foreign investors into Argentina as well which Cristina realizes and the reason why you see her making the rounds to Spain, USA, Mexico, Europe. I believe Cristina will do a much better job at foreign relations than her husband.... Time will tell.
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WTMendoza.com
Member
Username: Welcometomendoza

Post Number: 52
Registered: 7-2007


Posted on Monday, November 12, 2007 - 11:07 am:   Edit PostPrint Post

ABA thanks for your feedback on the Merval.

As far as C, since I am such a chicken on this stuff, it is a short term trade with an autosell in place at 39.50 for a projected 20% gain with a time frame of a few months or less. Stop out at 29.

Now, let's see how Argentina does through the coming months and 2008. Christina has a quite a role to step into, especially handling the seemingly self-fulfilling prophecy of 10 year economic cycles.
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Roberto
Board Administrator
Username: Admin

Post Number: 1376
Registered: 12-2004
Posted on Monday, November 12, 2007 - 11:54 am:   Edit PostPrint Post

WTM... speaking of missing the boat... Merval went through the roof. Not sure which one looks scarier whether the bovespa, merval or shangai's.

Benco, you nailed it. Lost my shirt shorting nasdaq in December 1999. Got it wrong for 3 months and that was enough of a toast, haha. Unless a floor trader (rapidly extinct) or having unlimited funds to rollover shorts it is a losing game for a small fry (like me). Hard to control fear and greed!

ABA, what if inflation picks up? Wouldn't real estate be dead money -inflation adjusted- for a long time? I agree there may be good bargains out there if you are in need to switch homes but as far as yearly appreciation... Can you compare renting vs flipping? Or commercial space?
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Apartmentsba.com
Intermediate Member
Username: Saint

Post Number: 242
Registered: 5-2005


Posted on Monday, November 12, 2007 - 1:04 pm:   Edit PostPrint Post

Roberto,

Yes, I don't short often. And when I do I ALWAYS use stop losses as well. WTM mentioned he is short-term trading and when I do that I always use GTC orders and it has really kept me disciplined when I'm short-term trading but these days I don't trade stocks much.

Actually I don't think real estate in the USA is the best investment for a lot of people. Many people got caught up with this mess because everyone thinks the American dream is owning a home when in fact most Americans don't truly own their homes and never will. I don't know too many people that have ever seen their actual title deed to their homes. Many people should be renting vs. owning homes.

As you mentioned the best deals will be for people that have to switch homes. You make good points with inflation but in the end I always look at two things in real estate. (1) the cash flow I will make on the rental of it; and (2) the capital appreciation potential. Besides raw land, I really never buy real estate just for the capital appreciation potential. I always must have cash flow or I typically don't buy it.

So, when you look at the potential for picking up property cheap in the USA I look at many factors but especially what the property tax situation is like there, what rental rates are like, insurance rates or ease of getting property insurance, etc. Many areas simply aren't worth it to me as the rental rates are lousy relative to the property values. Some areas are good with things like college campuses nearby and rental rates very attractive relative to the cost of the property.

I also look at my time horizon for the investment. I do think the property rates will continue to fall in 2008 and maybe even into 2009 but I do believe that property rates will rebound eventually. Look at things like the Chairman of the Federal Reserve Bank who wants to increase limits to u$s 1 million (essentially more than doubling the current limits). I don't think you will ever see a repeat of what is happening now but things will eventually loosen up a bit.

Again, I wouldn't necessarily simply buy to buy. I would focus on good areas that have good chances to lease out the property. I truly believe real estate is a mid to long term investment. Part of the problem in the USA is too many people thought "flipping" a property was automatically a way to make money and we know that isn't the case.

Even here in Buenos Aires. I HAVE sold some properties but almost always they were unsolicited offers. I only listed 1 property out right. The rest that I sold were unsolicited offers. I still believe there is room to go up and in the meantime I'm making amazing cash flow via short-term rentals. I don't know of anywhere in the world you can make this kind of rentals, pay such cheap property taxes and especially the utility bills are so affordable yet the income is high. For example, I recently finished renovating a small two bedroom apartment in Recoleta that I bought and renovated myself. The monthly income on it is u$s 4,500 per month or $250/night. A day after renovating it I rented it for 2 months at u$s 9,000 for 2 months. The executive in the property has been in it for the past 3 weeks and was in the Four Seasons before and said he would never go back. There is NO way you can make this kind of rental relative to the monthly maintenance costs and the purchase price.

So in the USA I'd say I'd look at a LOT of different factors before I buy. I certainly will NOT be buying to live in it. I will buy a few properties probably the end of 2008 and look for areas with low property taxes, high rental incomes and high occupancy rate areas. Also, I've also had a few big companies and 1 bank that talked about taking my business model and doing it in the USA which I think would also work in some large cities that have great tourism rates. So I'm also looking at areas where that might be a possibility as well.

In fact, the ROI should be through the roof with that kind of business model. Why? Because there is CHEAP credit in the USA to purchase a property. So if I buy a house, furnish it VERY high end and rent it with extremely high end furniture, LCD tv's in each room with DirecTV in each room, high end furniture/lighting, etc. I can compete with the hotels and probably charge anywhere from u$s 300-$700 per night. If occupancy is decent (which it should be as I know how to market and I can channel my own clients into those properties) the rate of return should be sky high.

I think there are a LOT of ways to make money in real estate. For me, there is no shortage of opportunities...there is just a shortage of time. I work LONG hard days but I still am getting a lot of interest in the franchises I own. I think eventually I'll end up setting up a franchise in the USA. I think in many USA cities there is an absolute killing to be made. Here in Argentina it's tough as my investors and I are paying 100% cash up front. In the USA we can easily leverage so I could go into a development buy up a lot of units and then do luxury short-term rentals in apartments or houses.

Anyway, lots of opportunities.... Hope that helps.
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WTMendoza.com
Member
Username: Welcometomendoza

Post Number: 53
Registered: 7-2007


Posted on Monday, November 12, 2007 - 1:27 pm:   Edit PostPrint Post

Actually I don't trade on a regular basis at all, but C was compelling and was referred to me by a sucessful stock friend who said he was buying SOME of it here for the long term. I also had my butt kicked in stock trading back in 99-00-01. I shorted, longed, ,and yes you have to be discplind to the hilt, use conistent motions, and understand much the financial markes. That's quie a task for most of us. I watched one friend short JDSU from 50 to 100 to 200 to 300 to 400 and while he was right in the end, it was too late for him and his portfolio at the time.
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Benco
New member
Username: Benco

Post Number: 24
Registered: 4-2007
Posted on Monday, November 12, 2007 - 7:35 pm:   Edit PostPrint Post

Roberto and WTMendoza, sorry to hear about your bad luck. It is kind of ironic that the rapid upward motion just before the burst of a bubble often hurts those who are actually doing the right thing and go short. As the saying goes, the markets can stay irrational much longer than you can stay solvent...

The financial markets are interesting and exciting, and one can learn a lot from playing around a bit. But unless you have better information or better models than the banks, you will lose on the long run when you trade around too much.

While ordinary banks and insurance companies make money from selling useless financial products to naive people, the investment banks take the game to the next level and fool intelligent people :-)

My view is that for extraordinary returns one needs to know the respective market inside out. So ApBA, probably many people will envy you for your excel sheets, which clearly give you an edge over other investors.
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Apartmentsba.com
Intermediate Member
Username: Saint

Post Number: 243
Registered: 5-2005


Posted on Monday, November 12, 2007 - 7:54 pm:   Edit PostPrint Post

Benco,

I TOTALLY agree with you. The biggest mistake people can make is overtrading. It's a tough game the stock market. In the past I've made a LOT of money in the stock market but I've also lost a lot as well with the meltdown of the Nasdaq several years ago. I much prefer VERY selective trades (short or long) and especially real estate investments as they are more predictable to me.

As you mentioned, it's all very exciting but there is nothing exciting about losing your money. For those that have shorted the market or had very large margin positions getting called out isn't fun.

I do strongly agree with you that extraordinary returns are best with people that have an expertise in the market. Also for those that have the will and guts to move forward and follow a path because they can plan ahead and see what is coming. Some of the wealthiest people are people that have vision and saw what others couldn't see. People that didn't just think about today or tomorrow but projected out 5, 10 or 20 years from today. These investors with vision often make untold fortunes following their vision. My personal investment heroes are billionaires Li Ka-Shing in Hong Kong and Warren Buffet. These guys study the market, they have good timing and they have the guts to move in a direction they know is the right call even when others are saying they are wrong they have proven they saw what was coming.

Good fortunes to all.
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Adam Walker
Junior Member
Username: Adam_walker

Post Number: 47
Registered: 4-2007
Posted on Tuesday, November 13, 2007 - 5:58 am:   Edit PostPrint Post

I thought I would share this story, you may find it boring, but anyway...

The only time I invested anything into the stock market was straight after 9/11 2001. I was only 19, and really don't have a clue about the stock market. I remember all the airlines share value plummeting and everyone panicking, and I looked at British Airways. it went from 280p to 131p a share - I just couldn't see BA going under, they were the pinnacle of the British air industry, so I mustered all the money I had and put it down - 200 pounds :-) I begged my old man to lend me a grand, but he declined - my Dad had 20k he wanted to invest somewhere, so I told him to put it on BA too - he put them in bonds. A few years later I sold at 384p a share almost trebling my 200 pounds, while my Dad got zip from his investment!

Wish I'd had 20k to put down now...

My hero - Richard Branson - he is an absolute legend, and Virgin is a great company. Oh, and my Dad, even though he never listens to his son :-)
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Apartmentsba.com
Intermediate Member
Username: Saint

Post Number: 249
Registered: 5-2005


Posted on Thursday, November 15, 2007 - 4:49 pm:   Edit PostPrint Post

"We have not seen a nationwide decline in housing like this since the Great Depression," said Wells Fargo CEO John Stumpf.

"Because it's so hard to know how much some investments are worth in the tight credit markets, Wall Street remains uncertain how high losses really are. Certain accounting rules require companies to price their holdings according to the market value; when there is no market, they have to estimate".

"Neri Bukspan, chief accountant for Standard & Poor's credit market services, likened the process to figuring out how much your house is worth when no one in your neighborhood can sell theirs -- a scenario many U.S. homeowners can relate to right now."


http://biz.yahoo.com/ap/071115/mortgage_writedowns .html?.v=2



Barclays, Others See More Writedowns
Thursday November 15, 4:16 pm ET
By Madlen Read, AP Business Writer
Another Day, Another Batch of Writedowns: Barclays Says Portfolio Has Taken $2.7 Billion Hit

NEW YORK (AP) -- Checking to see which bank is revealing billion-dollar losses in its portfolio has become something of a daily routine on Wall Street. On Thursday, traders fretted about Barclays' multibillion dollar writedown over their morning coffee.
The British bank estimated it would write down $2.7 billion for losses on securities linked to mortgages for borrowers with poor credit. Barclays, along with Wells Fargo & Co., SunTrust Banks Inc. and General Electric Asset Management joined the slew of financial companies anticipating, in total, more than $30 billion in losses this quarter.

That figure doesn't exceed the approximately $44 billion written down by financial institutions in the third quarter, but the fourth quarter is only half-way over -- leaving investors wondering how many more writedowns are on the way.

Deutsche Bank analysts estimate that over the next few years, the current credit crisis will have led to about $300 billion to $400 billion in losses for companies with investments exposed to subprime loans.

Wells Fargo and SunTrust executives said Thursday they anticipate more losses from defaulting mortgages this quarter, although they have little exposure to the problematic debt instruments known as collateralized debt obligations.

"We have not seen a nationwide decline in housing like this since the Great Depression," said Wells Fargo CEO John Stumpf.

Stumpf's assessment helped push stocks down Thursday. The Dow Jones industrial average lost more than 120 points.

Also Thursday, General Electric Asset Management said outside investors have withdrawn $600 million from a $5.6 billion fund involving mortgage-backed securities. Late Wednesday, NovaStar Financial Inc. said it lost about $252 million due to mortgages.

Many investors are bracing for UBS AG to report a substantial writedown -- a Lehman Brothers analyst is reportedly estimating a writedown of $7 billion to $8 billion. However, the Swiss bank said it expects to post a fourth-quarter profit.

Earlier this week, Britain's HSBC said it would write down $3.4 billion; Bear Stearns Cos. announced a writedown of $1.2 billion; and Bank of America reported a $3.3 billion writedown. Those followed even larger estimates a few weeks ago from Citigroup Inc. and Merrill Lynch & Co., which expect writedowns as much as $11 billion and $6 billion, respectively.

A writedown is a calculation of how much one's debt holdings -- in either actual mortgages, or instruments like CDOs that have mortgage exposure -- have lost value.

Because it's so hard to know how much some investments are worth in the tight credit markets, Wall Street remains uncertain how high losses really are. Certain accounting rules require companies to price their holdings according to the market value; when there is no market, they have to estimate.

Neri Bukspan, chief accountant for Standard & Poor's credit market services, likened the process to figuring out how much your house is worth when no one in your neighborhood can sell theirs -- a scenario many U.S. homeowners can relate to right now.

"Some argue this is highly judgmental, that management could introduce their own bias," Bukspan said.

Furthermore, if the credit markets worsen, banks will inevitably have to write down their portfolios further.

The credit markets tightened up in August, when concerns about plummeting home prices and missed mortgage payments came to a head.

Industry experts say home prices will likely keep falling because lending standards were the most lax in late 2006 and early 2007. The adjustable-rate mortgages issued then won't reset until late 2008 or early 2009, so investors should brace for a couple more years of increasing foreclosures -- and in turn, scarce demand for mortgage-backed securities.

Banks appear to be erring on the side of caution, said S&P bank analyst Scott Sprinzen. "But one thing to keep in mind, under accounting rules, you can't deliberately build in a downside cushion."

Barclays Capital chief executive Bob Diamond said there was no risk of further writedowns of Barclays' residential mortgage-backed CDOs, but declined to say if it would make additional writedowns from exposure in other parts of its business.

Banks can hedge, but not all techniques are successful. A recent estimate of the S&P 500 financial services sector showed a net drop in third-quarter profits of 33 percent.

Banks are generally not selling their distressed securities to cut losses, because they're betting that eventually, demand will return and the portfolios will rebound, which may lead to a windfall.
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Apartmentsba.com
Intermediate Member
Username: Saint

Post Number: 250
Registered: 5-2005


Posted on Monday, November 19, 2007 - 9:31 am:   Edit PostPrint Post

FYI... Mendoza like I said, i'm not bullish on the banking stocks. You mentioned you aren't buying for the long-term but for the short-term. As I mentioned, Citigroup WILL have billions of dollars in write downs in the 4th quarter due to their exposure to CDO's. Goldman Sachs just downgraded them to "sell". It's down 4% in pre-market activities. I think short-term you might get called out at $29 for a loss. Personally I'd like to pick some C down around $25. Good luck.
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WTMendoza.com
Member
Username: Welcometomendoza

Post Number: 59
Registered: 7-2007


Posted on Monday, November 19, 2007 - 9:53 am:   Edit PostPrint Post

Hi ABA - could be we shall see - I kinda doubt it though - the news has been out and the market has probably already dealt with it...now time for rookie shorts to get burned. Oops - this is not a stock board :-) (smiley)
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Apartmentsba.com
Advanced Member
Username: Saint

Post Number: 251
Registered: 5-2005


Posted on Monday, November 19, 2007 - 4:35 pm:   Edit PostPrint Post

What "news"... like I said before...NO ONE knows how to value the losses on this CDO mess. The news that came out already really can't value the losses for the future. Like I said..if you are buying for the LONG TERM you should be ok but today is proof it's not "rookie shorts" that are selling Citigroup. It was down 6% today alone so I'd say the only ones getting burned so far are the longs.

I agree...i won't post on C again..this isn't a stock board. Good luck.
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WTMendoza.com
Member
Username: Welcometomendoza

Post Number: 60
Registered: 7-2007


Posted on Monday, November 19, 2007 - 6:23 pm:   Edit PostPrint Post

ABA I also agree this is my 2nd to last post on C (stop engaging me:-) smiley). The "news" I mean is simply the whole topic of what's come public over the last 1 and 2 months of all this subprime and related chaos - as you know wall street knows about this stuff well in advance of most people, including me.
In fact, if you compare the chart to the public awareness of all of this, Deutsche Bank call a "sell" on Citibank sock on October 12th,...just as it was tipping over the edge from that 45 to 50 trade zone, based on their first admission of sub-prime involvement ($5b) .
I know enough about wall street to now know that the reasons they cited in their sell note were a cover for what was really steaming underneath (can you say $15b?) ...these reasons that only a certain layer of folks hooked into the groove knew about, including maybe yourself as you have previously posted understanding the implications of subprime issues on the stock market.
This is a mid-term trade, if you can define several months as a mid-term trade...and only partial allocation as there is no reason in the world why the stock market can't hyper deflate and turn C into a teenager...hence final allocation possibilities of getting more stock.
What's interesting is that now today Goldman Sachs calls a sell..this is short term momentum stuff that is wildly volatile, but yeah Citi can go much lower if they want it to. So spectator I am and to this and all of this market stuff...and as you know there is opportunity in every crisis...it will be interesting to see how far subprime problem affects joe and jane...in middle America and now apparently middle Europe (the swiss? wow).
One thing that disappoints me about one of Citibank’s latest press releases is their claim to worldwide mobility asset management, which even implies total compatibility in Argentina, which you and I know is not true. Cheers
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Apartmentsba.com
Advanced Member
Username: Saint

Post Number: 252
Registered: 5-2005


Posted on Monday, November 19, 2007 - 9:30 pm:   Edit PostPrint Post

I agree that most people couldn't see what the sub-prime mess would do. I first posted about it 2 years ago and then again posted on it back on March 2007 before the experts did if you read on this site you can clearly see it. I posted about it in a bit of detail back in March 2007 on this forum. For me it was really easy to see the problems that were about to occur and how the banks would tighten their standards which in turn would cause a ripple in the real estate market.

The thing is that Citigroup (and most of the banks for that matter) really don't know their exposure as I pointed out before. They can say estimated $15 Billion possible loss but the truth is that CDO's and SIV's are extremely complicated and it's hard to value the losses. The method many banks are estimating their potential losses is very loose in nature and many still assume a 'better/best case scenario' instead of a worse case scenario. Most are still valuing their portfolios too positively and not accounting for all their potential losses and exposure.

You ask how the average joe and jane in middle America will be affected? They are already affected by it. For those of you that follow my posts for the past several years, you'll see I've been pretty darn good at looking at the climate in the USA and Argentina and predicting patterns and capitalizing on it. In Argentina I correctly forecasted the tourism rate trends, the economy, unemployment rates, real estate market, the exchange rate. In the USA I called the sub-prime mess quite a bit ago. None of it is surprising to me.

I further predict you will see the average "John and Jane Doe" affected further. Already you are seeing the default rate on things like car loans and other credit card debt get worse. It's not just home loans that people are defaulting. The mess has a ripple affect that will spill over besides just real estate loans.

Most Americans have been using their properties as a virtual ATM card to take out equity. It's not just the poor or middle class that was doing it either. It was the lower class all the way up to very wealthy people that were doing it. Now these people can't do that. Those "virtual ATM withdrawals" using their supposed home equity was really spurring the economy and spending.... all that comes to a crashing halt now.

The big concern now as I've posted before is the US Dollar being so weak. Look at OPEC and the finance ministers. There is only so long they will put up with such a weak dollar. Over the weekend there were even talks by them of abandoning the dollar in the pricing of oil. The value of all their financial reserves is falling like a brick. Some of them have publicly called the dollar "worthless".


They will probably move to pricing oil against the Euro or a basket of currencies instead of the dollar. Things like that need to be looked at by investors. If things like this happen the dollar is going to weaken further.
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Apartmentsba.com
Advanced Member
Username: Saint

Post Number: 253
Registered: 5-2005


Posted on Monday, November 19, 2007 - 10:20 pm:   Edit PostPrint Post

Something else I think it's important to note since we are talking about banks is as if the CDO mess wasn't enough for their weak stock prices..... many of them broke the law. Read the U.S. Securities and Exchange Commission rules/laws in detail. Banks are supposed to notify shareholders of a material event within 4 days of learning about it. Come on! They knew for a while about these tremendous problems. I like a quote I read about it. "Either they didn't know which was a competence issue, or they did know and it's a criminal issue".


You should see a lot of class action lawsuits against banks coming on the horizon....
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WTMendoza.com
Member
Username: Welcometomendoza

Post Number: 61
Registered: 7-2007


Posted on Tuesday, November 20, 2007 - 5:29 am:   Edit PostPrint Post

Absolutley, in fact lawyers must be licking thier chops on the subprime mess.

Here is a lawsuit I like to see happening since I routinley hear so much abut getting screwed on ATM fees abroad, and have been there myself:

http://www.bloomberg.com/apps/news?pid=20601082&si d=aCE6OHttorWk&refer=canada
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Apartmentsba.com
Advanced Member
Username: Saint

Post Number: 254
Registered: 5-2005


Posted on Wednesday, November 21, 2007 - 10:08 am:   Edit PostPrint Post

"Also in focus was a warning from Treasury Secretary Hank Paulson that mortgage foreclosures will rise sharply next year. Paulson said the number of potential home-loan defaults "will be significantly bigger" in 2008 than this year. "


http://www.marketwatch.com/news/story/mortgage-rel ated-shares-again-lead-financial/story.aspx?guid=% 7BCA950461%2D243A%2D4827%2DB929%2D772D6108ACE3%7D& siteid=yhoof


Mortgage-related shares again lead retreat

By Greg Morcroft, MarketWatch
Nov 21, 2007

NEW YORK (MarketWatch) -- Mortgage-related shares pressured the broader financial sector again on Wednesday as concerns over falling home prices and lenders' ability to fund operations rattled investors before the Thanksgiving holiday.
Also in focus was a warning from Treasury Secretary Hank Paulson that mortgage foreclosures will rise sharply next year. Paulson said the number of potential home-loan defaults "will be significantly bigger" in 2008 than this year.

Paulson, concerned that millions of homeowners are not being helped quickly enough, is pressing the mortgage-service industry to help broad swaths of borrowers qualify for better loans instead of dealing with mortgage problems on a case-by-case basis, according to an interview in The Wall Street Journal.

That position is a change for Paulson, who has said before that the problem did not merit such a response.
Concerns focused on Countrywide Financial
Shares of Freddie Mac fell 6.5%, Fannie Mae dropped 4%, and Countrywide fell 6%. Over the first three trading days this week, Fannie and Freddie are off about 35% and Countrywide is off more than 20%.

Countrywide, which has struggled for funding to originate its mortgages, saw its shares fall Tuesday and in Wednesday pre-open trades on concerns one of the main buyers of its loans, Freddie Mac, will not be able to buy new loans because of its own capital needs.

That scare was prompted after Freddie Mac's shares sank as much as 35% on Tuesday, plunging as its third-quarter loss more than doubled and the company raised the possibility of cutting its dividend in half.

While the turmoil in the financial markets has caused some observers to suggest that the Fed may make an emergency rate cut, others, like MarketWatch's Chief Economist Irwin Kellner, suggest a rate cut would not help the real problem.

"Because short-term interest rates today are well above the 45-year lows plumbed from the middle of 2003 through mid-2004, those mortgages with adjustable rates have -- or will -- reset to much higher rates even if the Fed decides to lower rates by a quarter of a point or even more, Kellner wrote. "As a consequence, there will likely be more delinquencies and foreclosures, which, besides causing pain for those homeowners, will result in more homes on the market, thereby depressing their prices." .

In the broader financial sector, the Amex Securities Broker/Dealer Index and the KBW Bank Sector Index fell 1.6% and 1.5% respectively.

Among the financial stocks in the Dow Jones Industrial Average, American International Group
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Orlando Martinez
New member
Username: Bracsim

Post Number: 20
Registered: 9-2006
Posted on Wednesday, November 21, 2007 - 3:08 pm:   Edit PostPrint Post

Im still here in the USA and is true things dont look to good, we hope it will get better, but i can tell you something if the US economy goes down, the whole world goes down with it, there`s been good times and bad times for the US, I hope the bad times will go away for the better, and soon.
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Apartmentsba.com
Advanced Member
Username: Saint

Post Number: 257
Registered: 5-2005


Posted on Monday, November 26, 2007 - 3:35 pm:   Edit PostPrint Post

Orlando,

Absolutely you're correct that "things don't look good in the USA". Everyone hopes it will get better but most don't realize it can (and probably will) get much worse. Yes, there have been good times and bad times but look how much the US Government is spending . Do you know how much they have spent on the war in Iraq? We will see what happens if the USA goes into recession.

Absolutely as I mentioned before this CDO and SIV mess is not just happening in the USA. It is happening globally. There are going to be many people affected by this mess including pension funds, cities and municipalities, Universities and endowments that bought into this "garbage" . Not just in the USA either. All around the world.

Very few people stayed away from these CDO's and SIV's. Look at what HSBC declared today with their $35 BILLION SIV announcement today.

Yeah, like I said....i'm bearish on the banking stocks for the short-term. Look at most of the major banks today including Citigroup. (not to bring up that particular stock...there are LOTS of examples including Washington Mutual). Some of them went down another 5% today.

PS - Mendoza, do you still think you won't get called out on C at $29? Just curious?
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David
New member
Username: Dc2elbolson

Post Number: 1
Registered: 11-2007
Posted on Monday, November 26, 2007 - 7:55 pm:   Edit PostPrint Post

Hi Everyone,

I have a couple of questions about the Argentina peso (ARS) and USD. I am in the process of moving to Argentina and am earning in USD.

I think that it is safe to predict that the USD will continue to lose its value (compared to the Euro and other major currencies). Short of electing Ron Paul (who promises to cut the $1 trillion per year military/"empire-building" expenditures by literally bringing home all US troops, and balance the budget), the US will continue to create more USD from "thin air" to finance its deficit spending. (Election of Ron Paul is probably less than a 5% chance despite the enthusiasm of his supporters.)

The Argentina central bank is propping up the USD in terms of the ARS/USD exchange rate to around 3.15 (which it has been doing since 2002). I remember last year it was around 3.05 (so the ARS has actually depreciated artificially against the USD while the USD has really depreciated against all other major currencies). The central bank selling of ARS and buying of USD on the foreign exchange markets to maintain a lower ARS/higher USD (which is great for exports and tourism) is contributing to internal inflation in Argentina, which officially is around 8-9%, but in reality is around 20%?

Today, the US Dollar Index (USD vs. a basket of 6 major currencies) is at 75.

So, my question is this: at what point will Argentina allow the ARS to appreciate against the falling USD? When the USDI is at 70, 65, 60?

Also, when will the Argentineans start to realize that accepting USD for selling their properties is a losing proposition and switch to, say, the euro? I think that it's safe to say that as long as the ARS/USD exchange rate is around or above 3.0, Argentineans are not going to worry about this issue--would this be a fair statement?

Thanks!
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Apartmentsba.com
Advanced Member
Username: Saint

Post Number: 258
Registered: 5-2005


Posted on Tuesday, November 27, 2007 - 5:54 am:   Edit PostPrint Post

David,

I have been saying for years that the Dollar would weaken. Actually the good thing is Argentina is probably the only country in the world where the dollar is actually not much much weaker than last year. It's actually stronger as you noted.

The locals still value the greenback but something I noticed lately is that many people are buying euros. Also, something I have started seeing (which still isn't common yet but a few of the last deals I've seen have asked for it) is that some owners are selling on the condition that payment is in Euros fixed at the current rate of exchange on the day they accepted in writing.

I don't think property prices here will ever change to the Euro vs. the U$S dollar but it's clear to see at least some locals are asking for Euros or locking the rate in to the Euro exchange on the day they accept.

The dollar has held up pretty strong here so it's not a big factor here for the most part. If you are earning USD and not pesos you should be ok. Yes, inflation is a factor here but it's still extremely cheap compared to major world capital cities. I just spent 20+ days in Europe and it was painfully expensive. Simple meals were outrageous. Coming back to Buenos Aires the meals, taxis, etc. almost feel free compared to the prices I was paying in Euros.

You'll have it pretty good in Argentina if you are earning US$. Good luck.
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Benco
Junior Member
Username: Benco

Post Number: 26
Registered: 4-2007
Posted on Tuesday, November 27, 2007 - 9:46 am:   Edit PostPrint Post

David and ApBA,

you make some good points. However I would not say that it is safe to assume that the dollar will weaken further. The available information is priced in, so only surprises will move the dollar rate around - and there might be good or bad surprises. Clearly differences in interest rates lead to a predictable drift of exchange rates - due to carry trades and the no-arbitrage assumption. Since interest rates in Europe and the US are more or less in line there won't be huge predictable drifts of the dollar against the euro. At least that is what the market says. Look at the futures rates - you can lock in these rates today if you have a different opinion. But you will be betting against the market.

About Argentina, that is a different story. There is no credible index anymore, but inflation is widely believed to be around 20 percent per year. It is unlikely that the government will tighten monetary politics, so inflation will probably remain high or accelerate next year. At present the government is printing pesos like crazy and denies the existence of inflation. It is not clear when they start facing reality and raise interest rates. In fact they look down on such "neoliberal" concepts and prefer to freeze prices with enormous subsidies. As subsidies have increased by a factor of almost three in the last year, this system will break down at some point. The inflationary pressure together with an overheating economy is a dangerous mix, but it is not at all clear what will happen.

If you look at futures rates for the dollar in pesos, the market expects the rate to rise slowly to 3.30 pesos/dollar within the next year - so not much of a nominal change. In real terms however, taking into account the high inflation in Argentina, the peso will appreciate significantly and lose some of its competitiveness.

About real estate, I think it doesn't really matter what currency the prices are quoted in - the prices simply evolve according to supply and demand. I would say it doen't help nor does it hurt that prices are routinely quoted in dollars.

Having said all that, earning in US$ and living in Argentina is currently a favorable combination and will probably remain so for quite some time.

So welcome to Argentina, David.
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Dan Sandefur
New member
Username: Panamadan

Post Number: 13
Registered: 4-2007
Posted on Tuesday, November 27, 2007 - 11:30 am:   Edit PostPrint Post

The exchange rate between the USD and Argentine Peso has not changed much because it is pegged to the USD. If and when they decide to remove the pegging, the exchange rate will be allowed to change normally.
Most other countries who had their currencies pegged to the USD have removed the pegging, because of the falling USD dragging their currency down with it.

OPEC is even considering to accept Euros, not USD for their oil.
They have not actually done it yet, but it appears to be in the works. If it happens, look out below, for the USD! Iran is all for this, which is rumored to be one of the real reasons the US wants to attack it.

China has been dumping their almost 1 trillion worth of USD, a little every day, so as not to upset the market. They are also one of the countries who removed the peg from their Yuan to the USD.

I agree with David that Ron Paul is probably the only one who can stop the USD from falling. That is not very likely though.

This may be a bit off topic, but I think most/all of you will find it VERY interesting. It is about the Ron Paul coins being confiscated by the Federales in the US. It will also increase support for Ron Paul, and his chances for winning.

http://www.washingtonpost.com/wp-dyn/content/artic le/2007/11/16/AR2007111602267.html
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WTMendoza.com
Member
Username: Welcometomendoza

Post Number: 64
Registered: 7-2007


Posted on Tuesday, November 27, 2007 - 2:10 pm:   Edit PostPrint Post

ABA, now tsk tsk I thought we agreed this was not a stock board but you just keep posting:-) (smiley) . I never said I “would not be called out” on the $29 stop - in fact, just to let you know...these kind of stops exist to protect profits/losses, ... no one can be right all of the time.

As a few others pointed out today on this thread , the dollar does not hold it's own in Argentina, it is propped by the Argie government through massive buys each days - millions and millions of dollars are bought every day by the Argentine government to help keep it propped, so as to serve the Argentine interests of making it easier to export, and keeping the peso down to make sure of a steady inflow of tourism.

It has been overall a successful policy for several years but as history knows, it cannot go on forever. Look at the 90's when they help it 1 peso to 1 peso for 10 years...it was like a rubber band that stretched and stretched, until it popped. I hope they have a better exit plan this time.

Inflation is indeed running average 20% if you group it all together...some sectors lower some sectors much higher..but seems to average about 20% right now - the highest yearly rate since the crisis of 2001.

While getting on a USD income is great leverage, if someone wants to come and live here, I always recommend trying as hard as possible to leverage your income with maybe up to 50% pesos if possible through one’s business projects. The exchange rate could go either way, but if you are leveraged, you will ride it our just fine.
Most likely what will happen within the 12 to 24 months, in my opinion, is that the dollar stays at 3 - and the inflation just keeps going, making a peso income that much more comfortable in the future. This was not so possible during the 90’s because it would have made BA, one of the already most expensive cities in the world at that time, even that much more expensive.

I always say, don’t come live in Argentina just because it’s cheap, come because of the culture and lifestyle, and if you want to setup a business here (tough country to do so), make sure you pad your budgets for both business and personal. At the moment, it’s more economical to start a business here using dollars or Euros, then using typical pesos earned here . Window of Opportunity.

If you can indeed run a successful business here, you can do it almost anywhere in the world. Good luck.
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Tom
Advanced Member
Username: Diverdown48

Post Number: 467
Registered: 6-2006


Posted on Tuesday, November 27, 2007 - 7:19 pm:   Edit PostPrint Post

where is the exporting thread.

I want to sell something in Argentina that I can export to the US and sell.

for profit of course,
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Roberto
Board Administrator
Username: Admin

Post Number: 1386
Registered: 12-2004
Posted on Wednesday, November 28, 2007 - 3:45 pm:   Edit PostPrint Post

Tom, you mean this one?
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David
New member
Username: Dc2elbolson

Post Number: 3
Registered: 11-2007
Posted on Saturday, December 01, 2007 - 5:57 pm:   Edit PostPrint Post

Thanks, for all the thoughtful comments on the subject of the USD and ARS.

There are certainly a lot of dynamics that affect the USD (mainly USD/euro exchange rate) and the USD/ARS exchange rate.

I think that 2008 is going to be a very interesting year (possible Iran War, the viral campaign of the Ron Paul revolution, possible blow-up in the $500+ trillion USD derivatives "market", etc.).

Since this topic is about preparing for the next crisis, I think for Argentineans and all expats in Argentina that this issue of the USD/ARS is going to be very important.
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Benco
Junior Member
Username: Benco

Post Number: 27
Registered: 4-2007
Posted on Sunday, December 02, 2007 - 9:08 pm:   Edit PostPrint Post

For Argentina the next two years will probably also reveal whether the current economic growth is sustainable. It is clear that the continuous growth during the last 5 years was more than what cynics call a dead-cat bounce (everything bounces when it falls from high enough). But much depends on whether the economy can take a hit and then recover again, or whether it then immediately falls into a deep recession.

Recently some key appointments of the new government (Moreno, Jaime, DeVido) indicate what we can expect. It is really bad news that the government sticks to populist policies and polemic officials instead of adopting serious measures to stop inflation. So for sure we will see high inflation in the next few years, and at some point the economy will slow. And then we have a truly dangerous situation, where even a mild external shock can sink the ship.

However I would say a crisis similar to 2001 is unlikely because the absence of the convertibility law means the state can always devalue the peso and create inflation in order to avoid a default. But run-away inflation is no picnic either, and might destroy much of what has been rebuilt.
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Adam Walker
Member
Username: Adam_walker

Post Number: 54
Registered: 4-2007
Posted on Tuesday, December 04, 2007 - 12:34 pm:   Edit PostPrint Post

Is it just me, or is there a severe lack of "learning from you mistakes" here in this country? So are we thinking, wait a couple of years before investing in anything Argentine (in particular property) or is there no good/bad time, just jump in?

Being British, I am interested in seeing what happens in the UK over the next 2 years, a lot of people believe the labour party are just keeping us out of recession long enough to pass the conservatives power for 4 years of deep recession.
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Robbie
Junior Member
Username: Ganavan

Post Number: 30
Registered: 8-2006
Posted on Tuesday, December 04, 2007 - 1:25 pm:   Edit PostPrint Post

Adan,

I think you are right about your statement in your second paragraph. The UK population is being hoodwinked by the pied-piper that has been in charge for so long. Now that the foreign winds do not fill the sails, the ship will no doubt slow. That will be the time to hand over!

There are not right and wrong times to buy property here, I think. You just have to find the right opportunity to suit your search. If you are lucky you will find what you are looking for. The time of wholesale opportunities may be over, I think.
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Gloria Melgar Estevez
New member
Username: Glorita

Post Number: 1
Registered: 12-2007
Posted on Tuesday, December 04, 2007 - 4:45 pm:   Edit PostPrint Post

Hello everyone. I can't believe I found this sight!! I'm an Argentine living in the USA...I have pretty much been living here most of my life (since I was 5 years old...now 41)....so, you can say I very "Americanized". I have traveled many times to my country(and I can understand the reasons why so many Non-Argentines have chosen to move there). I myself want to "someday" also join all of you. But the time for me to make such a move is a long ways away because here in the states I have "economic certainty" and my husband and I live a comfortable life(despite the economic hardships that the US in now experiencing) and we are raising two kids who are yet very young. You may say, but many are moving to Argentina in my age bracket and also with their young children. For me the decision to wait until I'm older boils down to the economic uncertainty coupled with the corruption that has beset my country for decades. I like to refer to Argentina as a rollercoaster....some may think, that recession, inflation, etc. are cycles visited upon all nations. And, I say yes this is true...but in some countries this cyles take very deep dives and unfortunately Argentina is one such country. Let us not forget that Argentina had the biggest debt default of all times. Let us not forget also the "corralito" which cut access to one's own money....also devaluaing people's life savings. As an Argentine I have been able to see such disaster first hand and up close in family, friends. And if you go back to the 1980's, Argentina lived through hyperinflaiton where Argenitne's hyped up enourmously in a single day. Speeding up to the current year and the actual situation now.....something is bruing....perhaps it takes an acutal Argentine to read between the lines to see that things are not what they may seem. Inflation is now on the rise and yet the government denies it...they are actually holding off the actual figures. The Indec has been fudging the numbers.....here we go again. So, all this being said......please be careful, don't put your money in Argentine institutions. As for buying real estate in Argentina, I would not for the time being because prices are high and if quoted in US dollar, so they may quote in Euros9which will be worse yet. If things go overboard yet once again(As we ARgentines are used to) then will be a good time to buy as real estate may plumment.
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Arial
Intermediate Member
Username: Arial

Post Number: 113
Registered: 10-2006


Posted on Wednesday, December 05, 2007 - 5:40 am:   Edit PostPrint Post

Dear Gloria, thank you so much for joining our group and for your advice and insights. I am not sure if you're aware that many people in financial fields think that the US is facing a similar scenario. Or worse.

For information about how some gurus are seeing it, you can go to http://www.financialsense.com and listen to the weekly radio programs that are archived there. Also for this week http://radio.goldseek.com/GSRplayer11.17.07.php will give you an idea. Of course any thinking person who buys groceries, gasoline or real estate or pays rent in the US knows that the US is fudging the actual figures of inflation as well. One expert who tries to track the prices now that the M3 is no longer made public claims it is actually near double digit.

It has been so long ago that few people living in the US today have recollection of the depression in the 30s and so they think that "it can't happen here." I suspect that it was a US version of what you describe in Argentina though I was born too late also to have personal knowledge. But my mother and dad were in Montana when the crisis really hit. They had money in a Miami, Florida, bank but they could not get it--ever. They were never even able to get into their safe deposit box. They had to find jobs and it took a while to get money to get them back to Florida. My grandfather owned a barber shop in Miami and people who were still employed kept getting haircuts so all 3 of the kids, spouses and families moved into their little house and that is how they survived. People from that era came out of it so frightened that, many years later, my husband was surprised to find, in working on houses, the elderly people that still kept bags of flour stored in their attic just in case. They never got over the fear.

So it happens elsewhere--it just doesn't happen every ten years, as people in Argentina tell me it does there. But also the US has provided the world's reserve currency since then, which is a major reason that it has rocked on this long without another crisis.

For those of us already committed to Argentina, can Argentines give advice about who fared best? For those in it for the long haul instead of a vacation, is it possible that Buenos Aires wasn't the best area to be in in past crises? One Argentina woman who gave me similar warning (but not quite as detailed) as yours a few years ago told me to keep my money in a Swiss bank and hide gold in my mattress! I didn't take her very seriously at the time but now I am wondering. Well, not about the gold in the mattress but I think you will get her point.

Arial

(Message edited by admin on December 05, 2007)
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Gloria Melgar Estevez
New member
Username: Glorita

Post Number: 2
Registered: 12-2007
Posted on Wednesday, December 05, 2007 - 8:45 am:   Edit PostPrint Post

Dear Arial...hello and thank you so much for your response. I want to tell you that yes I am aware of the financial situation that the US is in and possibly heading for worse. I am a finance enthusiast....I love to read about economics(past and present). The reason I state that I too want to leave for Argentina is specifically because I think that if the US doesn't make some very serious and possibly heart wretching changes, it may be in a very serious economic situation...(long term recession, depression, stagflation). My situation at the moment is such that for now I cannot make a move to Argentina because I am is a good position here in the states and moving to Argentina would not change my life for the better...(economically speaking). It would benefit immensely emotionally because I adoreeeeeeee my country, my people, my culture(el mate, el asado.....even though I do those things here too)....but the peopleeeeeee....my family. I can tell you that my mother who is now 71 lives part time in Argentina...the city of Rosario....she has her home there and also her home here, plus she has "achieved the American dream".....she has the finances now and this has made it possible for her to live here there or whereever. For me that is not a possibility and I don't know if "the American dream" is in my realms of possibilities because of what you have talked about...in Argentina financial crisis come often and are very profound and here in the states the likes of such crisis has not be experienced in decades(and I never lived through one).....but I see things "brewing here" as I see things "brewing" in Argentina. But at the end of the day, you have to sit with your budget and see where your numbers will work best....and for now it is here....for "now". I don't want to discourage anyone about Argentina, I just want them to be careful and and plan things out. I think it is possible...for some people the time is now, for others it may me 5 years away, and yet for others 20....thanks, thanks and more thanks, for your reply ...you have no idea how gratifying it is to find this site and to meet people like yourself who love Argentina as much as I do.
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David
New member
Username: Dc2elbolson

Post Number: 4
Registered: 11-2007
Posted on Wednesday, December 05, 2007 - 9:18 am:   Edit PostPrint Post

Hi Arial and Gloria,

You gals bring up an interesting topic that pertains very much to this thread--preparing for the next crisis.

The question is "Which would be better place to be to weather the next incoming storm--Argentina or USA?"

But the first question to ask is "Is there going to be a big financial storm?"

I personally believe that the next financial storm is going to be a doozer.

The current sub-prime blowup is just the beginning, 2008 is when this financial ponzie scheme will really make its presence felt:

http://www.nytimes.com/2007/12/03/opinion/03krugman.html?ei=5087&em=&en=ac60abcdbd977d07&ex=1196917200&pagewanted=print

The real doosie lies in the $500+ trillion (yes that's TRILLION) USD market of financial derivatives that Warren Buffet has called "financial weapons of mass destruction".

http://the.ricethresher.org/opinion/2007/09/07/us_economic_armageddon

http://www.portfolio.com/news-markets/national-news/portfolio/2007/03/29/The-300-Trillion-Time-Bomb?print=true

And we haven't really seen the bombs go off in this market yet (except for Long Term Capital Management and a few others that are small potatoes when compared to these derivatives in the trillions of dollars.)

On the issue of why the US seems to be so "financially sound", having not had the types of financial rollercoaster rides that Argentina has experienced: the main reason is because the USD has been the reserve currency of the world. This mechanism allows the US to print its "monopoly money" and export it to the rest of the world for next to nothing. This ability--which only the US has in the world allows the US to "inflate" its money supply, i.e., print money out of thin air (small amount), or through credit expansion, i.e., electronic money creation through book-keeping means (huge amount)--has allowed the US to inflate its way through all the crisis so far--and the Fed will continue to do so until hyperinflation is the result. Think about the Dot.com, the real estate bubble, etc.

But this game is coming to a head as others countries with large holdings of US debt and USD (like China, Japan, Saudia Arabia, Russia, etc.) reduce their holdings of USD and US debt.

And my answer to my question would be Argentina, but not the big cities like Buenos Aires.

(Message edited by admin on December 05, 2007)
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Robbie
Junior Member
Username: Ganavan

Post Number: 31
Registered: 8-2006
Posted on Wednesday, December 05, 2007 - 9:21 am:   Edit PostPrint Post

Gloria and Arial:

I would tend to agree with Arial. Gloria, you are right about certainties in the US. However certainties are of today and based on yesterday, but certainties are such until they stop being certain! sorry for the "joke", but it is true. With hindsight one can be very clever, it is knowing the likely future that is important.

I lived in Argentina through the 70's, 80s and in Europe for the 90s till today when I am back in Argentina. I think the important thing is to separate the crisis that are created by ignorance, mismanagement and corruption of those at the helm, from those that arise from a general population that simply have "got it wrong". I think that in Argentina the general population, aside from its fierce individualism (which is true in the US as well) and lack of "community spirit" or "communal cohesion", which translates into poor accountability and punishment for politicians that go astray, have got it right. The "fundamentals" of the population and its economy are right. The important thing is for all matters public and political to become transparent and accountability introduced.
All this said, I love the country that works because its people -save the corrupt which exist everywhere- can survive with little outside laws. I am living in the "interior" now and are delighted to have people take my word that I will pay them for services provided or even goods. It is refreshing to deal with human beings...not disembodied systems, corporations or banks.

Regarding inflation, and in an oversimplified way, I ask the question: What if all the Dollars that are all over the world (or those in China alone) were to go back (in one way or another) to the US for good? The answer is that the US would sink with 10000% inflation or more! Is it perhaps a matter of time till this happens?
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Gloria Melgar Estevez
New member
Username: Glorita

Post Number: 3
Registered: 12-2007
Posted on Wednesday, December 05, 2007 - 10:12 am:   Edit PostPrint Post

Dear friends...hello to all of you and thanks for the feedback. I want to say that perhaps in my defense that I am holding steady because as humans we tend to often gravitate to what we know. And while I am an Argentine, I grew up in the states and have had a life with no financial disruptions. My parents came here and worked hard and achieved what so many have called the American dream. Well, the American dream is fastly slipping out of the American wish lists as it is increasingly becoming an impossibility. And all my life I have heard (as a child) how "bad" and "difficult" it was in Argentina...as I grew I was able to see some of these things for myself and make the comparisons. I believe that Arial mentioned that the US fudges also the inflation figures...and I have no doubt that it does. And David mentions the financial storms that may come here in the US referring to the credit crunch fiasco....I personally sat by all these years thinking what are these people doing????....how could people be getting homes that are now "inflated" and signing on for mortgages of $500,000 while making only $40,000.
So, to resume the US does have corruption, fudging of figures and uncertainty. But I am judging to what "extent" do these things exist and to what extent are they modifying my life. So you see for the time being I see Argentina to be more corrupt, and more uncertain. Of course that is for today...tomorrow we have to wait and see.
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WTMendoza.com
Member
Username: Welcometomendoza

Post Number: 73
Registered: 7-2007


Posted on Wednesday, December 05, 2007 - 11:23 am:   Edit PostPrint Post

remember if you are dollar based and thinking of coming to Argentina, there is a fair probability that the 3 to 1 exchange rate could ratchet down slowly to 2 to 1 over the next few years. Even if there was no submrime and derivative mess in the USA, this 2 to 1 could still happen also, so...pad those budgets and try to beef your incomes...and enjoy!
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Apartmentsba.com
Advanced Member
Username: Saint

Post Number: 259
Registered: 5-2005


Posted on Thursday, December 06, 2007 - 8:32 am:   Edit PostPrint Post

I've been out of the country the last week but catching up on the posts. For those of you that have followed my posts over the years you will see I've been pretty accurate at forecasting events in both the USA and Argentina.

I think everyone is making great points above. I will post a detailed post later this week when I have more time and catch up on my emails from work.

I think if you go back and read some of my old posts you will see pretty much what I have posted is slowing coming true in the USA. I posted that the sub-prime mess was going to happen and it did. I talked about the foreclosures that were coming and they did. I talked about the banks all having billions upon billions of dollars in losses due to SIV's and CDO's (and there will be lots more). I also talked about how the dollar would fall against the Euro which it has been doing as well.

I'm NOT saying there is going to be a doomsday catastrophe in the USA in the near future but as I posted before, you have to look at everything that is going on there. Many shut their eyes and refuse to see what's going on there--- just like they did in Argentina in earlier time periods.

For those of you that follow my posts you know that I have a true love for Argentina. It's a wonderful country with wonderful people but everyone is making excellent points here. I can tell you that all of you with dreams of coming back here... just make sure you have plenty of savings (dollars/euros/sterling) or you have a clear and sound plan to make money in Argentina. For as great as this country is, it's really really really difficult to make money in this country. I'm not saying it can't be done. It can be done but it's not easy. Most foreigners that I've seen that moved here have moved back as they can't make enough money to survive or save for their retirement/future. The actual cost of living is not that high compared to the USA but the chances of income earning potential in the USA/UK is incredibly high. I've always said before on my past posts, in the USA/UK any educated, intelligent, hardworking and motivated individual always can find a job and make money. In Argentina you can be a super genius, have multiple degrees, be fluent in several languages and that doesn't necessarily mean you will make much money. In fact, I know many people in that situation and they have good jobs but they aren't making lots of money. Keep things like this in mind. I equate it to going to some Caribbean paradise and falling in love with it. You move yourself and your family there and you tell yourself you will live off the land, you don't need much money, you can grow your own food or whatever. But then one day you decide to move back to the USA and then you find that although you could easily live in this island oasis you have no savings left to move back to the USA or care for your family or planned for medical emergencies, etc. Always keep things like this in the back of your mind.

So we can all talk about how affordable it is but it's not that affordable if you aren't making much money. So you need to keep this in mind. Unless you have plenty of retirement savings, pension, or living off interest from savings or have a job that you can definitely count on that you will earn good money I'd say think twice about moving to Argentina. Life is really great here if you have money but it can be miserable if you are giving up making income only to follow a "dream" to live here in Argentina. Just make sure that "dream" is well planned out and you chart out on paper all your definite income each month from work/pension/interest payments and then place all your monthly expenses and also include things like periodic trips to the USA (or your home country).

Also, chart out how much savings you have, your future income potential savings and then your age to see if it's wise to move to Argentina without having enough money. Make sure your budgets are accurate to reflect things like traveling around or trips, going out, food (groceries/restaurants), entertainment, emergencies, medical insurances/emergencies, caring for your family if you have family including future events like children's wedding, education, etc.

Cheers all.
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Gloria Melgar Estevez
New member
Username: Glorita

Post Number: 5
Registered: 12-2007
Posted on Thursday, December 06, 2007 - 9:50 am:   Edit PostPrint Post

Dear Saint. I have read your most current reply to this thread(actually I have read all your threads on this) and I thank your for your insight. I must say that you have definately been right on the money on your predictions. As for the forclosures going on here in the states, things are starting to come to a head...I believe that 2008 it will explode. Of course things here are going on "as if nothing"......many are in the dark...or thinking that the government somehow will get them out of this mess. I see the magnitude of this in my own neighborhood....while driving on my daily chores I have seen many houses for sale...many have been for sale for more then a year...I know because I jot down the dates when I see a home go up for sale and how long it is "still" on sale...I do this because I did not "jump on the adjustable rate bandwagon". I live in a starter home which I bought 15 years ago which I took out a 30 year mortgage.....I have it almost payed off because I allocated extra money with each payment to my principle. I as you, "knew" this was coming...and so I sat and waited(sitll waiting)...for prices to plummnet more....in the words of the newspaper The Miami Herald...I am a "vulture"....that is what honest, hard working, thrifty saver are referred to...while those that threw themselves into the wind to buy homes they knew they couldn't afford are cried over....(had to vent that out)....any how, I think that one should buy when as you say in one of your posts..."the sky is falling"......I have learned this from my parents and they made very very well for themselves. My plans are to someday live in Argentina...I can't say for sure full time because I have kids and don't know how life will play out...but I am saving (diversified in many investment vehicles)...but yes, I do wish to live in Argentina at least the way my mother does(six months out of the year)...she does so, because she can...she has two homes in Argentina...three here in the states and an apartment in Brazil which is rented year round to tourists...plus other monies.....I don't want to live wondering "how will I make it"...that is why I may have seem somewhat as a sour apple warning people about ARgentina....Argentina is a wonderfully beautiful country but as you have stated, making money in ARgentina is not easy and throw in the corruption, and the tendencies towards double digit inflation and you have a recipe for a very stressful life. So, again I say...I loveeeeeee Argentina and my plan is to someday live there at least part time.....I like you,say...have a plan...and not just that...have a realistic plan and also I would think you have a plan B and an exit plan if the need should arise.
My sincere regards to all, Gloria Melgar Estevez
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Arial
Intermediate Member
Username: Arial

Post Number: 114
Registered: 10-2006


Posted on Thursday, December 06, 2007 - 9:57 am:   Edit PostPrint Post

It is sad that such a wonderful country and people like Argentina has a government that interferes so much as to stifle business. I say that without solid evidence that that is the case, but when business is difficult it is pretty certain to be because of government interference and regulation. If the government will get out of the way, normally the economy in a country will boom. That, until recent years, has been the "secret" in the US--great entrepreneureal freedom with minimal government interference and regulation. (That is changing.)

I have read this thread piecemeal over the weeks, but I just reread most of it and reading it all at once is impressive. Good stuff here.

There is an interview of Doug Casey on www.minesite.com. You have to look for Doug in the list of interviews in the Webcast section. Doug is an international investor, some of it in real estate, that I have followed to some degree since the 70s. I have found him to be pretty much on target. I think he is living in BsAs now and he gives some pretty definite (and positive) details about Argentina economics.

This is definitely not an endorsement of what he says or his views in the interview or otherwise. But I would really like to hear a critique of his comments about Argentina from those that are interested and knowledgeable in this area. Arial
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AMARAGGI
New member
Username: Amar

Post Number: 5
Registered: 12-2006
Posted on Friday, December 07, 2007 - 11:45 am:   Edit PostPrint Post

Some on this forum are predicting a fall of the peso against the dol others predict the opposite. it is quite difficult to understand.
In the last La Nacion's supplement on properties they were saying that there were too many new buildings and that the demand was no more there or out of reach for locals. Is a fall of the real estate market in view?
Thanks for your advise. This forum is really very interesting and please excuse my English.
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Apartmentsba.com
Advanced Member
Username: Saint

Post Number: 260
Registered: 5-2005


Posted on Friday, December 07, 2007 - 1:14 pm:   Edit PostPrint Post

Gloria,

I agree with you that properties in the USA will continue to have problems well into 2008. There will be many more opportunities to be a "vulture". I TOTALLY agree with you that some people try to demonize intelligent INVESTORS (NOT Vultures) that understand what is going on in the USA and have for years. Many of us sold real estate in the USA when it was at all time highs and will buy when they are at extreme LOWS and then probably turn around and sell them again when they are in their HIGHS. That isn't a "vulture". That is called being a smart INVESTOR.

The funniest comment i always get is people constantly ask me if I have ESP or if I can see the future. I always laugh and tell them "I wish!". I can't but as I posted before, I've always been able to evaluate what is going on around me and take actions that capitalize on what is going on around me.

Look at what is going on with Bush trying to bail out for the most part irresponsible people that gambled or didn't understand what they were getting into. The latest attempt with the bail out won't actually help many Americans if you look at it closely in detail. Also, you must be a bit alarmed when the government with what they are doing goes against 200 years of contract law with this bail out.

So Gloria - good for you. It sounds like you have thought it out extremely well and most importantly you have charted out your plan on paper and you are taking the steps necessary to make your plan become a reality. That is what an intelligent investor does. They take YEARS to think things over and formulate a PLAN to get from Point A to Point B in their life. The most successful investors in the world are investors that can look at a given situation and intelligently forecast how things will play out based on the current event of things going on around them.

Remember knowledge is power. At the end of the day and when it comes down to it, you only have yourself to blame (or credit) for taking actions in your life. You can close your eyes and listen to everything the government or those supposedly "in the know" tell you. Or you can evaluate what is truly going on around you (and the world in general) and you can objectively see what is going on.

I've never been a doomsday kind of person. Things go up, things go down. That's life. Whether you are in Argentina, the USA, China, London or Moscow. Things run in cycles. The intelligent investor will find ways to capitalize even during the down cycles.

Good investing to all.
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Apartmentsba.com
Advanced Member
Username: Saint

Post Number: 262
Registered: 5-2005


Posted on Wednesday, December 12, 2007 - 2:12 pm:   Edit PostPrint Post

A pretty good article on the USA Economy


The Impending Destruction of the U.S. Economy, Part 1

By Morgan Housel December 11, 2007

http://www.fool.com/investing/general/2007/12/11/t he-impending-destruction-of-the-us-economy-part-1. aspx

We U.S. citizens enjoy a magnificent and prosperous economy the rest of the world can only envy. Employment is humming along, inflation is tame, and the lines inside Starbucks (Nasdaq: SBUX) everywhere remain annoyingly long. Despite a number of hiccups this year, the stock market is still just a rock's throw from another all-time high.

But we're coming up on a bend in the yellow brick road, and going 'round it could cause the party lights to go dark quickly. That could change everything about the way we and future Americans live. Sound scary? It is.
A nation built on debt?

Let's go back to the 1990s. It wasn't a bad time to be an American. Ace of Base was topping the charts, the economy was parading freely, and the stock market could make a Chihuahua look smart. With newfound wealth came newfound toys and spending habits, and a drive to leverage up to your eyeballs to fund the cars, boats, and multiple TVs for your second or third home. Since 1990, non-mortgage household debt has gone up more than threefold, outstripping economic growth and inflation.
But, heck, the amount of debt we had was not a problem! The economy kept buzzing at a pace that allowed consumers to fund their debt-laden habits. And with reasonable interest rates throughout the '90s, layering on consumption outside your earnings means wasn't that big a deal. The indulgences in spending kept going, and going ...

The music stopped. But the party's still kicking ...
It wasn't until 2000 when the Nasdaq parade came to an end that the party looked like it truly might be over. With trillions of dollars of wealth purged from consumers' wallets, the economy was startled into a justified panic.

Then as the dust around the tech bubble cleared, Sept. 11 knocked us off our feet. An uncertainty we as a nation had never experienced before loomed over our heads. Federal Reserve Chairman Alan Greenspan prescribed a quick and drastic resuscitation in the form of a massive cut in interest rates to help revive the economy. And it worked, perhaps too well.
Since 2001, the U.S. has had the benefit of laughably low interest rates. Investors, still shell-shocked from the stock market turmoil, began salivating over another asset class they could exploit with those low rates -- real estate.

Savvy businessmen finessed ways to market exotic mortgage products to consumers most of us wouldn't lend a cup of sugar. Thus the birth of the subprime-mortgage calamity that propelled companies such as Countrywide (NYSE: CFC) into the stratosphere and allowed homebuilders such as Beazer (NYSE: BZH) and D.R. Horton (NYSE: DHI) to crank out as many subdivisions as they could dream of.

I'll save you the ending of this real estate saga -- we know how much of a mess we're in now. And it's probably worse than any of us could have dreamed, with massive write-downs from respected financial institutions, such as Citigroup (NYSE: C) and Merrill Lynch (NYSE: MER).
What now? Many of us would like to believe Uncle Bernanke will bail us out by slashing interest rates and bringing back the good old days. Right?

Kind of -- and that's where the massive economic debacle begins, my friends. Those same spend-happy consumers raised in the go-go 1990s -- they're still alive and kicking, and you better believe they still love to spend.
Dollar, schmollar ... I'm gonna spend!

The massive account deficit we currently hold with the rest of the world totals some $800 billion per year. Where the heck is all that money coming from? From foreign investors in China, Japan, the Middle East, and nearly every other conceivable corner of the globe.

They have no problem lending us the difference, because while we as a country spend more than we make -- we're still incredibly wealthy and good on our word.
But like a massive Ponzi scheme, the fun will certainly end. In the past six years, the value of the dollar has taken a serious beating. The euro, worth $0.85 a few years ago, is now worth $1.47. Yikes. But because the average American shops mostly within the borders, this probably isn't too pressing an issue, and so the greenback's plummet doesn't show its full effects.
How about the foreign investors funding our perilous spending party? You'd better believe they're keeping a close eye on the dollar's precipitous plunge. As a foreign investor holding assets denominated in dollars, every drop in the dollar erodes the value their investments will be worth when they choose to convert them back to their native currency, whether yuan, yen, euros, or pounds.


How do we keep our foreign investors happy? With a rapidly depreciating currency, there is but one way to keep them enticed: higher interest rates. You heard it: higher interest rates. With the housing and credit markets swimming in turmoil, the idea of higher interest rates sends shivers down the backs of homeowners facing foreclosure, and rightly so.
I think you can see the predicament we face: One part of our economy demands lower interest rates to bail out the housing debacle, and foreign investors who finance our massive spending habits demand higher interest rates to forestall the dollar's demise.


My goodness, this is looking scary. What will happen next? More importantly, what's a Fool to do?

The Impending Destruction of the U.S. Economy: Part 2

http://www.fool.com/investing/dividends-income/200 7/12/12/the-impending-destruction-of-the-us-econom y-part-2.aspx
Morgan Housel

December 12, 2007

In part 1, we took a look at the causes of the current tug-of-war between forces that will fight over lower and higher interest rates in the coming days of our American economy.
To recap, here's our problem: Americans spend much, much more than they probably should and rely heavily on debt to fund their purchases. A huge amount of this debt is funded by foreign investors who enjoy the relative stability of American markets. As a result, we have an enormous account deficit -- nearly $800 billion per year.

With this massive account deficit comes a weakening dollar. With a weakening dollar, foreign investors will begin to demand higher interest rates to make their investment in the American economy worth their while. Sounds easy enough! But we have that pesky problem of our current real estate and credit disruptions that could place our economy in a tailspin and, hence, require lower interest rates to bail us out. Who is going to win this battle?

In this Fool's mind, it certainly isn't the American consumer. We won't stop our spend-happy ways any time soon, and foreigners will happily look elsewhere to put their money. Here's why.

Superpower America?

Don't kid yourself. U.S consumers will go out kicking and screaming before they agree to slash consumption of foreign goods by $800 billion per year; not to mention doing so might self-destruct the economy in the first place. We can rule that option out: Americans won't retreat from their debt-laden spending habits. But can we count on foreign investors to keep the party rolling? Don't count on that, either.

For decades, there haven't been many attractive foreign currencies for foreign investors to place their massive stockpiles in -- the U.S dollar still remains a default choice. But times are certainly changing. With the massive increase in globalization in the past decade, the United States has surrendered part of its economic moat to once economically non-threatening countries like China and India. The longer this trend continues, the less the dollar will serve as the currency of choice for global investors.

The more and more the dollar continues to plunge -- and with little in sight to show an end to its slide -- other currencies such as the Japanese Yen, the Chinese Yuan, and the euro are becoming increasingly attractive in lieu of the greenback. With interest rates being slashed in an attempt to prop up the sickness in the housing market, the dollar's dive should stay firmly on track for a while to come.

Cue Taps?

It's a scary scenario: a U.S. Economy staring a recession square in the face, credit markets all but frozen in place, real estate across the country sitting on a foreclosure time bomb, and a need for higher interest rates just to keep the foreign investors interested could spell trouble for this nation on a level we've never seen before. What's a Fool to do?
Before you begin constructing a fallout shelter in your backyard, you should know there are a few things you can do to prepare yourself for economic headwinds down the road. Some of the most basic investment principals you should be following already will become increasingly important should interest rates begin to rise in the future.

Avoid businesses that can't open their doors without debt
We've already seen some serious damage done to companies that even dabbled in credit markets in the past few years. Banking giants such as Citigroup (NYSE: C) and Washington Mutual (NYSE: WM) have been clobbered from real estate-related write-downs, and even companies that have nothing to do with real estate but rely on debt such as US Airways (NYSE: LCC) and Blackstone (NYSE: BX) are certainly feeling the pinch from a roiled debt market. Think it's bad now? You certainly don't want to be on the bad end of these companies if rates start going up.
Instead, pay special attention to companies such as Microsoft (Nasdaq: MSFT), Texas Instruments (NYSE: TXN), or K-Swiss (Nasdaq: KSWS) -- all companies that don't count on any long-term debt to fund their operations. In turbulent times, not having to be at the whim of debt to finance their day-to-day business gives these companies a serious leg up.

Give yourself a cushion

With interest rates in a precarious position and the economic future of the U.S in shaky hands, it's increasingly important that you don't fall into any interest rate holes. The solution to this problem sounds as easy as it comes, but seems to allude many:

• Stay out of debt

• Save your money


Both of these tasks require little more than some basic knowledge and a healthy dose of perseverance. The Motley Fool provides a highly recommended 60-second guide to getting out of debt, as well as some money-saving tips even the most frugal of us should catch up on.

I will survive

Betting against the United States economy long term hasn't ever panned out well for anyone, and it certainly may continue that way for some time. While the sky won't be falling to the ground anytime soon, as an investor, it's important to be cognizant of the big-scale issues our nation is facing and how they can have an effect on your money. Develop a sound game plan, stay disciplined, and be prepared for whatever gets thrown at you down the road. In these crazy days, it's the surest path to financial success.
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Apartmentsba.com
Advanced Member
Username: Saint

Post Number: 263
Registered: 5-2005


Posted on Wednesday, December 12, 2007 - 4:37 pm:   Edit PostPrint Post

Gee, HSBC and the IMF are coming to the conclusion that I posted about on the real estate market in the UK that I posted earlier this year.

That properties there are overvalued by up to 30% - 40%.

It's a pretty good article that I agree with. In fact, I've read surveys where it said that 6% - 8% of British homeowners use their credit cards to pay their mortgages. Not sure if it's true or not but that is VERY scarey.

I'll make another prediction for those of you that follow my predictions over the years. You will see more problems with credit card debt. It's estimated there is about $950 BILLION in credit card debt. Read most of the earnings reports from all these major banks and you see in addition to loan loss provisions from subprime they almost all mention that credit card delinquencies are becoming a problem as well.

American Express boosted their loss reserves by 44%. Capital One,Washington Mutual, Bank of America are all expecting 20% or higher hits from credit card losses from the short to medium term.

In describing the situation to analysts, CFO Gary Crittenden said CitiGroups credit card holders were beginning to increase the balance on their cards or take cash advances on those cards for the first time - behavior that, in his experience (which includes seven years as CFO of American Express), can translate into future trouble. Citi said the change in loan losses was "inherent in the portfolio but not yet visible in delinquencies." In fact, Citigroup has cited higher consumer credit costs and said it would set aside $2.24 billion in loan-loss reserves to cover future defaults.

Remember now with real estate in the tank and home owners that have little to no equity in their houses, they can't use their home as a virtual "ATM card" to take out cash. So where will they turn to fuel their spending? You guessed it... credit cards. And guess what? If people are having problems paying their mortgages you can sure bet they will walk away from their credit card bills. That's why these banks all are increasing their loss expectations. What is worse is that credit cards are unsecured so it's worse than these subprime problems.


Most people don't know how it all works but credit card debt is sliced up and sold off again in packages of securities similar to these subprime loans that are now becoming worthless. These securities will decline in value if consumers start to default on them and stop paying their credit card bills. This in turn will turn into more bank losses as well as portfolio losses with big institutions, pension funds, hedge funds, and even municipalities.

So, my next prediction is that in 1-2 years time you will start hearing about losses associated with this credit card debt that is packaged and resold. Hopefully I'm wrong on this but everything is pointing me to believe this will be the next big problem you will read about across the newswires in a few years time.




http://business.timesonline.co.uk/tol/business/mon ey/property_and_mortgages/article2963482.ece





‘Bubble to burst for 30% overvalued homes’

Gabriel Rozenberg: Economics Reporter

House prices in Britain are overvalued by about 30 per cent, the HSBC said yesterday, sounding the alarm that the property market could suffer a similar slump next year to that experienced in the US.

The alarming report from the bank’s chief UK economist, which gave warning that the coming property downturn would cause sterling to plummet and force the Bank of England to slash interest rates aggressively, came as official data revealed the fastest fall in London house prices for more than two years.

HSBC tried to model the fair value of housing based on expected future rental growth. Karen Ward, the report’s author, said: “There is around 30 per cent of the current house price level that cannot be explained.”

The findings echo those of the International Monetary Fund which last month calculated that homes in Britain were overpriced by up to 40 per cent.

The credit squeeze would now prove the trigger for Britain’s housing slowdown, HSBC argued. Higher mortgage costs would spark repossessions and make buy-to-let a poor investment. “A major source of demand in the past couple of years could then turn into a major source of supply,” the report said.

A slowdown in residential construction and consumer spending would then follow, causing growth to fall to its lowest level in a decade, the report said.

HSBC is now predicting that interest rates will fall far lower than the market expects, from 5.75 per cent at present to just 4.5 per cent by the start of 2009, while sterling is tipped to tumble against the dollar to below $1.80.

Ms Wardsaid that Britain’s spell of house price inflation, which had seen prices treble in the past ten years, had begun as a rational response to the improved economic climate following independence for the Bank of England.

“But as global investors and UK households shied away from corporate equities following the equity crash in 2001-02, they noted the rapid gains in UK property prices,” she said. “With the expectation that house prices would continue to rise rapidly, and a banking system awash with cash and willing to lend, the buy-to-let market boomed. That, in turn, led to expectations of further price gains. The bubble was born.”

Contrary to the view that supply shortages have forced up prices, Ms Ward argued that UK home starts had picked up since 2000 by the same amount as in the US, which is now grappling with a glut of properties and falling prices. Had there been a true supply shortage, rents would have been pushed up, but rental growth had in fact been mild, she added.

The grim report for homeowners was released as official figures showed that house prices in London dropped at their fastest pace in more than two years in October. The Land Registry, the most comprehensive source of house price data, said that property prices fell by 0.6 per cent in October in London, adding tofears of a housing slowdown in the year ahead.

While price rises in most other regions of England and Wales helped the overall average increase by 0.1 per cent, the sharp drop in London set warning bells ringing as the capital’s property market usually plots a course for the rest of the country. It was the first monthly fall since April 2006 and the sharpest such drop since August 2005, the figures revealed. Prices were up by 8.1 per cent over the year, the Land Registry said, the slowest rate of property inflation since December last year.

The authority’s data, while more comprehensive than other surveys, are also less timely as they refer to the price of properties at the point of completion.

Analysts’ attention will now be focused on tomorrow’s survey from Nationwide, of prices at the point of exchange in November. The report is expected to point to a sharp decline in the annual rate of house price inflation, to 8.5 per cent in November from 9.7 per cent the month before.
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Adam Walker
Member
Username: Adam_walker

Post Number: 57
Registered: 4-2007
Posted on Wednesday, December 12, 2007 - 5:49 pm:   Edit PostPrint Post

Wow Saint - DO you have ESP??? Could I look into your Crystal balls some time?

Grateful for the information - its pretty obvious the UK will have problems with credit cards (they give them to ANYONE - my 18 year old brother ran up 2k on one at uni - he had no job, but a student loan, an overdraft and an allowance from my parents, and still a bank gave him one! you think he paid it back?).

And the housing market HAS to drop soon too - it's been on a mental climb for so long, it can't hold like that...

I hope I have the chance to be a "vulture", because for 6 years since leaving uni I have not been able to get on the property ladder in London where I was living and working.
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Apartmentsba.com
Advanced Member
Username: Saint

Post Number: 264
Registered: 5-2005


Posted on Wednesday, December 12, 2007 - 10:08 pm:   Edit PostPrint Post

Hi Adam,

You're welcome. Yeah, it's not just the UK. In the USA they have been handing out credit to anyone with a pulse (kind of like the subprime loans only worse). I know some college students that have credit limits of up to $30,000 on just one credit card or even $70,000 + with several credit cards. These are mostly people like you say with no job, no verifiable income other than mommy and daddy's allowance. There mere fact that they are in University somehow makes banks thinks these are responsible people. Far from it. College students are some of the most irresponsible people. This is just one group of people I'm using as an example. There are lots others. What's worse is these banks keep raising the credit limits.

Here is some more news on loan loss provisions that these banks are all expecting and they KNOW are coming! Now, large bank CEO's are only NOW admitting what I've been saying for months. It's "unknowable" just how large their losses are with these CDO's and SIV's. Go back and read my posts and I've said many many times it's simple not for certain how large the losses are and the CEO's are finally admitting what I've been saying.


From Bloomberg (http://www.bloomberg.com/apps/news?pid=20601087&s id=abCBsTQpU9sw&refer=home) . “Bank of America Corp. CEO Kenneth Lewis said losses from the credit markets will be higher than the $3 billion estimated last month. The second-biggest bank by assets after Citigroup Inc. will set aside another $1.3 billion in the fourth quarter to cover losses, mostly at its home equity and credit card units, he said.”

“Lewis said writedowns for debt instruments known as collateralized debt obligations, or CDOs, are ‘unknowable.’”

“Lewis said fourth-quarter earnings will be ‘quite disappointing'’ and credit markets ‘will probably remain challenging into next year.’ The ’subprime crisis has created considerable dislocations in the capital markets’ that probably will stretch into 2008, Lewis said.”

“‘We expect charge-offs to increase next year, particularly on the consumer side,’ Lewis said in response to a question.”

“Wachovia Corp., the fourth-biggest U.S. bank, may double its provision for loan losses in the final quarter and said it can’t predict when credit markets will return to normal.”

(http://www.bloomberg.com/apps/news?pid=20601087&s id=aGxKCGwppG_8&refer=home) “Wachovia will set aside $1 billion to cover bad loans, an increase from the previous estimate of $500 million to $600 million, the company said today in a regulatory filing.”

“Writedowns in October and November tied to securities backed by subprime mortgages and collateralized debt obligations already equal the $1.34 billion pretax loss reported for the entire quarter ended Sept. 30, it said.”

“‘None of us know what inning we are in,’ CEO Kennedy Thompson told investors.”


Also, here is another article where the CEO's of the large mortgage companies and lenders are saying it will get worse before it gets better. The key in investing is to see these kind of signs and take action before or right when the writing is on the wall instead of waiting until it's too late like so many.


http://www.washingtonpost.com/wp-dyn/content/article/2007/12/11/AR2007121102218.html?hpid=topnews

“The chief executives for two of the nation’s dominant mortgage-finance companies traveled to Wall Street yesterday. Richard F. Syron, Freddie Mac CEO and Fannie Mae CEO, Daniel H. Mudd, forecast continued declines in home prices. Syron predicted home prices would ultimately bottom out at an average of 10 percent below their peaks, and Mudd predicted average peak-to-trough declines of 10 to 12 percent nationally.”

“But Syron outdid Mudd in expressing remorse for past business decisions and in describing the trouble that may lie ahead. If home prices decline by 30 percent, as one noted economist has said could happen, ‘We’re all going long apples and boxes to sell them in,’ Syron said, invoking an image from the Great Depression.”

“Syron traced the trouble in the mortgage business to a housing bubble and accepted some responsibility. Fannie Mae and Freddie Mac contributed to the problem by spreading the message that everybody should own a house, he said. In fact, many people who should not have owned houses bought them, he said.”

“One questioner accused Syron of making a strategic error in failing to adjust to clear signs of looming trouble as early as 2005. Syron agreed that Freddie Mac should have tightened its lending standards sooner. Although Freddie Mac was an early bear about the real estate market, he said, it did not foresee the severity of the problem.”

The Associated Press. “The chief executive of Freddie Mac estimated Tuesday the mortgage finance company will lose an additional $5.5 billion to $7.5 billion over the next few years as the housing crisis worsens and home-loan defaults rise.”

“‘I honestly think it’s going to get tougher before it gets better,’ Syron said.”
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WTMendoza.com
Member
Username: Welcometomendoza

Post Number: 79
Registered: 7-2007


Posted on Monday, December 17, 2007 - 4:06 pm:   Edit PostPrint Post

Saint/ABA,

I was curious what your comments would be on this article today from the Clarin newspaper in BA? thanks

La crisis inmobiliaria no cede y puede golpear a la Argentina
Sube el costo de financiamiento y bajaría la demanda mundial de commodities.

La Reserva Federal -el Banco Central estadounidense- bajó la tasa de interés por tercera vez desde que comenzó la crisis inmobiliaria. Y dejó abierta las puertas para nuevos retoques durante 2008. Pero no pudo impedir las drásticas caídas en la mayoría de las Bolsas del mundo.

Lo que pasó fue que Wall Street esperaba una reducción mayor, para aliviar la situación de insolvencia de los deudores, reducir las cuantiosas pérdidas bancarias y evitar que la economía entrara en recesión.

Pero no está probado que eso fuese el resultado, ya que hasta ahora ni la devaluación del dólar ni la enorme inyección de liquidez que la Reserva Federal ha provisto a la banca han logrado mitigar el problema.

Por el contrario, los bancos le adeudan a la Reserva Federal enormes sumas de dólares sin que haya garantías de que puedan devolver esos préstamos. A eso se agrega que varios bancos europeos debieron contabilizar importantísimas pérdidas, porque estaban apalancados en el mercado inmobiliario norteamericano y en la irresponsable especulación implícita en ese sistema.

La estampida y la corrida inmobiliaria de hace unos meses había empujado a la Reserva Federal, para evitar un colapso, a colocar centenares de miles de millones de dólares en el sistema financiero que sirvieron para tapar baches y sortear rápidas quiebras.

La principal economía del mundo se debate ahora entre la crisis inmobiliaria, la insolvencia bancaria y la inflación. Y la Reserva Federal quiere hacer un delicado equilibrio entre esas variables, porque el temor es que un recorte más pronunciado de la tasa de interés le dé mayor impulso a la suba de los precios.

Pese a todo, entre la población, el miedo a perder la casa pesa más que la inflación. Los bancos están sentados sobre una cartera crediticia insolvente. Por su lado, la Reserva Federal actúa al tanteo, en una especie de prueba y error, porque no acierta a lidiar con todos los problemas simultáneamente : crisis inmobiliaria, crediticia, bancaria, inflación y atisbos de recesión. El sector inmobiliario, con la caída de los precios y las ventas, le está marcando el camino al resto de la economía.

Nuevamente, la suerte de economías como la de Argentina va a depender de lo que suceda o deje de suceder en los países centrales. Hoy, por los altos precios internacionales, parecería que la región latinoamericana está inmune a lo que pasa en los países desarrollados. La realidad puede ser muy contrastante. El tiempo negro inmobiliario paralizó la industria de la construcción en los Estados Unidos, tiró abajo los valores de los inmuebles y dinamitó la expectativa sobre la cintura de los bancos ante la adversidad.

Habrá que tener cuidado, poner mucha atención en cada movimiento y detalle, porque una recesión en esas naciones podría desalentar la demanda mundial, poniendo un freno a los precios internacionales que son propicios a la Argentina.

Aún así, hay ya en proceso un severo crecimiento del costo del financiamiento. Argentina es una nación deudora y necesita refinanciar parte de su deuda, en condiciones en que los mercados internacionales sólo ofrecen plata a cambio de altos e inalcanzables rendimientos.

En el imaginario colectivo ha quedado la falsa imagen de que el pago de los compromisos con el Fondo Monetario, por 10.000 millones de dólares, concluyó con el problema histórico de la deuda externa, cuando en realidad se ha mantenido en niveles inquietantes. Muchos funcionarios oficiales no se preocuparon por aclarar que los pagos de la deuda continuaban y podrían ponernos, tal vez, en aprietos.

Por todo esto, la Argentina debería ser muy cautelosa con saldar la deuda de 6.000 millones de dólares con el Club de París y con hacer una nueva oferta a los bonistas que no ingresaron al canje gubernamental de la deuda. Tienen, para demandar, cerca de los 24.000 millones de dólares. En estos días, lo más caro es conseguir la liquidez suficiente para cubrir los actuales y los futuros movimientos del país.


Fuente: Clarín.
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Apartmentsba.com
Advanced Member
Username: Saint

Post Number: 266
Registered: 5-2005


Posted on Monday, December 17, 2007 - 5:20 pm:   Edit PostPrint Post

Mendoza,

I think any one that has been following my posts for the past few years already knows my opinion on the Clarin article. I've posted in methodical detail for years and especially with my clients that have retained my services they understand why I predicted what I predicted and why it has come true both in the USA and in Argentina.

Read the article and much of what they cited in it I've mentioned over the years. I still say things in the USA will get worse before they get better. I'm certainly not calling for some armageddon there. I'm just saying the average person doesn't truly understand what is going on in the USA. Even with all these credit problems and sub-prime issues the typical American still doesn't get it.

Could the contagion spread to other areas of the world? You bet it could. However, I think you have to really look in detail and analyze the situation. There are other parts of the world that are going to go through similar things the USA is going through in their real estate markets. Read my old posts both here and in the Argentina Real Estate sections. I've posted in the past year about how prices would go down in the USA and then I said UK and Spain. That is turning out to be correct. I believe you will see a severe correction in pricing in Spain and the UK and Ireland and several other places where credit was cheap, banks lent out to too many people they shouldn't and people were over leveraged. People that should have been renters that bought instead.

Now in those areas much like the USA, the worldwide credit and finance market is going to get much tighter and the criteria for lending will get much more difficult which will in turn prevent people from getting future loans. Also, in many areas the people buying were not buying to live in the house. It was a pure speculation as they planned to "flip" these properties. Worse yet, these people aren't making any cash flow or renting these properties out that could pay the mortgages or expenses each month. What will happen to these properties? They will have to come back on the market and most of these people have no equity in these properties. All these properties coming back on the market should depress property prices. Remember this is NOT the case in Argentina because almost everyone buying here paid with cash. They do NOT buy a property until they have the cash saved up to purchase it.

It doesn't matter what interest rates are like.... they paid 100% cash! And almost every one that purchases real estate in a city like Buenos Aires either bought to live in it or they are renting their properties out so they have no expense each month and in fact they generate good cash flow from their properties. Remember they paid 100% cash, they get a lease (short or long-term lease) so if they do a long-term lease they have no condo fees, no monthly expenses and they get a good income. If they are doing short-term rentals they will EASILY get enough income to pay all taxes and monthly fees and still have cash flow each month. This is MUCH different than most speculators (gamblers) in real estate around the world in many areas.


As I've posted numerous times, Argentina to a large extent is insulated from this "toxic waste" situation like in the USA and what the UK will go through. Why? Because the real estate market is fueled here by CASH and almost everyone buying here (locals and foreigners) are doing it with 100% cash over the table. It doesn't matter what the interest rates are like because they are paying cash for their properties.

Before, I've posted on this forum that I'm very selective with whom I take on as a client. I've especially been more selective in the past year or so when I saw the sub-prime mess coming in the USA. Some people questioned my decision not to take on a paying client or help them buy unless they had 100% of the cash to purchase here without having to take on financing.


NOW, people understand why I did this. I only wanted to deal with people that had the cash to purchase real estate internationally. I've mentioned this many many times.
NOT everyone is a good candidate to purchase real estate in Argentina. In fact, most people aren't in a good position to buy real estate in Argentina when you have to pay 100% cash for the property with no leverage.

I've turned down several "investors" over the years that wanted to hire me to buy. I would have gotten paid no matter what as I charge on the front end to assist an investor but I didn't want a situation like what many Americans are going through now. Simply people that should have NEVER purchased real estate or couldn't afford to purchase in the first place.

The USA government can try all these worthless bail out programs but for the most part they will be worthless. Why? Because in the end, someone that bought a $300,000 house that can only afford a $100,000 house at the end of the day still can't afford the $300,000 house.

I only deal with clients that have the cash to purchase, make an excellent salary or have cash flow coming in or have plenty of cash to purchase. I don't want to deal with people that get nervous and have to sell with any hiccup or problem with interest rates, etc. That has proven to be one of my best moves. Of course, you have some people that have run into problems with the USA real estate market being so horrible and it's those people that are having to sell but most of my clients could care less what is going around the world with interest rates. They paid cash for their properties here just like the local Argentines.

As I posted before, I've actually seen the interest of serious foreigners that want to purchase real estate in Argentina increase. I'm getting more requests now then I got last year about buying here. In fact I routinely turn away business and in fact I will stop taking on clients early next year. With the meltdown of the real estate markets in the USA and problems most likely that will occur in the UK and Spain and other areas, people are looking for other areas. Properties here in Buenos Aires for a world capital city are stil cheap. And something better is that the cash flow from them is extremely good. These days most apartments that I own are worth more than the average house in the USA and something more interesting is the expenses on them (water, electricity, gas, telephone, insurance) are a TINY fraction of what they are in the USA yet the rental yield is higher here than the same property in the USA.

The other thing I keep stressing and I have for years is that look at the other investment opportunities in Argentina. After the crash the locals simply do NOT trust the banking system here and with good reason. They don't even want to keep their money in a bank account. They don't even trust safety deposit boxes in the banks! Consider before 9/11 Argentines could easily go to the USA without a visa and they could open up bank accounts in the USA fairly easily. These days they can't. There are not so many things besides real estate for locals to invest their money in here. This also makes real estate an attractive investment here as opposed to other types of investments or even parking your money in a bank account. "Bricks" here are the safest play.

Many people just don't get this. So you take all these different factors and you see why real estate keeps moving up here. Now, I wasn't born here in Argentina and I'm sure other locals know their country better than I do but tell me what other safe investments there are in Argentina that the locals feel safe investing in?

I'm certainly not saying real estate here will keep going up forever but I do think until you can show me something better for the locals to invest in then I would argue with you that real estate won't be an attractive play here. It's still locals that are fueling the real estate boom here. Yes, more and more foreigners are coming and for good reason. But let me ask you this. Assume that the locals all wanted to sell their properties. What else are they going to invest in? Where are they going to place all that cash? Think about those types of things. Most locals sell their properties to buy other properties. That's how it is here.

The problems in the USA are justified and necessary and it will get worse before it gets better.

Remember some of these excellent quotes from one of the greatest investment minds of all times - Warren Buffett.

"Be fearful when others are greedy and be greedy only when others are fearful"

"Only buy something that you'd be perfectly happy to hold if the market shut down for 10 years"

"Wide diversification is only required when investors do not understand what they are doing"

"Our favourite holding period is forever"

Good investing to all.
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Apartmentsba.com
Advanced Member
Username: Saint

Post Number: 267
Registered: 5-2005


Posted on Monday, December 17, 2007 - 8:23 pm:   Edit PostPrint Post

Here is a just one of the hundreds of articles every day that describe the problems that are going on with the USA real estate problem. Read about all these people that made bad decisions to buy, couldn't afford to buy in the first place, bought and refinanced and squandered the money.




Corona lawyer Nathan Fransen says he has nearly 100 clients trying to avoid foreclosure but none appear eligible for the rescue package. "The government has misread California. Most foreclosures here are on loans that haven't adjusted, meaning that people can't afford what they have now," says Mr. Fransen. He lives in a gated community where he says dozens of million-dollar homes face foreclosure. "The plan won't help much here, and the problem is going to get worse."


http://online.wsj.com/article/SB119785633408932917 .html

So, let me dissect the situation below: (See my comments with -------)


The Oropezas arrived at Calle Canon Road in 2004. Corona appealed to them because of its quality of life and regional cachet. "It was labeled as the new Orange County," Mrs. Oropeza says. Public records show they paid $557,000 for a four-bedroom house and took out a $500,000 mortgage. Her husband is an area manager for an auto-parts retailer and she is a purchasing manager for a firm that sells dietary supplements.


------ So they basically bought a $500,000+ house and only were required to put down a deposit of $7,000. -------


As property values skyrocketed, they refinanced three times, most recently in late 2006, for $835,000, Mr. Oropeza says.

----- Ok...so they basically got "free money". They purchased for $500,000 yet they refinanced and took out hundreds of thousands of dollars in loans on their house ------

The couple say they used some of the money they pulled out of the house for home improvement, such as a backyard waterfall. But Mr. Oropeza says the bulk was used to pay off credit-card arrears. "We were in a vicious cycle of refinancing our home to get out of debt," he says. "We banked on selling the house, but that's where we failed."

---- Ok...so basically they blew all the cash they got from the refinance on mostly junk and credit card debt. Forget the fact these type of people should have NEVER bought in the first place and could NOT afford it but they basically get hundreds of thousands of dollars from the banks to refinance and they spend it all on junk and "debt" -------



The couple listed the house several times, even before the final refinancing, which raised their monthly payments to about $6,300. Earlier this year, they were asking $839,000 for the house. But it just sat. Elsie Cambone, the Coldwell Banker agent who had the listing, says prospective buyers were discouraged by the vacant home next door.


-- Ok so they were dreaming if they thought they could have sold it for the artificially high price and they didn't sell when they probably should have but keep in mind it doesn't matter as they still got hundreds of thousands of dollars with the refinance ------

Meanwhile, Mr. Oropeza expected to be transferred to Texas, so the couple began house hunting there in 2006. In June, they bought a 3,600-square-foot home for $283,000 in the Houston suburb of Katy, Mrs. Oropeza says. "It was easy. We had good credit. The deal was done in seven days."


----- Ok...so not only could they not afford their first house in California but now they buy another house for another $283,000 all on credit and the deal was done in "7 days". ----


In the run-up to their move, she says, the couple lived off credit cards to "make sure we had cash for the house payments" in Corona. They packed up in June, and then took their 9-year-old son and 2-year-old daughter on a long-planned Caribbean vacation. They returned to Calle Canon Road, "got in our cars and drove to Texas," Mrs. Oropeza says.

--- Ok...so basically they spent all their money, they are living off credit cards to make their house payments. So, they are in debt and living off credit cards yet they STILL decide to take a vacation (nevermind they can't afford it and probably financed the entire thing on their credit cards) ----

Neighbors Ms. Lefranc and Mr. Saffold are dismayed over the Oropezas' departure and note that shortly before leaving, the couple bought a new Lexus. "I think they took money out of their house and split," Ms. Lefranc says.


--- Ok...so not only are they living off credit cards, paying for 2 houses they couldn't afford and taking vacations on their credit cards but they are also buying new cards (undoubedly on credit!!!) ----


Mrs. Oropeza says that she and her husband recently bought a Lexus and a Chevrolet Suburban with no money down. She denies that the family intended to abandon the house. The choice was straightforward, she says: "It was easier to keep the house in Texas than the one in California."

--- Ok..take all of the above and not only did they buy 2 houses they can't afford (all on loans), taking vacations (with credit cards) but now they bought 2 cars (all on credit with no money down).


So this in a nutshell explains why banks are taking massive hits. The scarey thing is these kind of stories are NOT rare. Those of you not living in the USA, this is a good example printed in the Wall Street Journal of an "American family's story".

Notice they have no shame and don't hesitate participating in the story. Why? Because nothing they did was illegal. This shows why there are so many problems and more problems to come. As I mentioned before, the next headlines you will read about are the credit card default rates.

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Benco
Junior Member
Username: Benco

Post Number: 29
Registered: 4-2007
Posted on Monday, December 17, 2007 - 8:47 pm:   Edit PostPrint Post

ApBA, I agree with what you say about the real estate market in Argentina - the fact that people pay with cash on the table with almost no mortgages involved certainly reduces the risk of a dramatic downturn in the market. Without leverage everything is less risky.

Despite all the daily bad news of the credit crisis, we should acknowledge that generally a functioning credit system is a wonderful thing. And Argentina's economy would benefit immensely from better availability of credit lines, but well, the banks simply have no money to lend out. Elsewhere in the world, talented and hard-working people with great business ideas will get their chance and obtain a bank credit, but here this is not the case.

Mendoza, I think the article is right to point out two ways of how Argentina could be affected by the international credit crisis: a recession followed by lower demand for its exports, and higher international interest rates. In contrast to the real estate market, Argentina's public finances are very vulnerable when it comes to a rise in interest rates. The correction in 2002 led to a primary surplus, but still the state is highly indebted. And already now the government is not willing to fight inflation with higher national interest rates, since it could hardly afford the cost of refinancing its debt at higher rates.
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Apartmentsba.com
Advanced Member
Username: Saint

Post Number: 268
Registered: 5-2005


Posted on Monday, December 17, 2007 - 8:52 pm:   Edit PostPrint Post

Benco,

Absolutely I'm NOT arguing with you that things would improve with credit and financing. The world over has benefitted from responsible lending to those that can afford to pay back loans. I totally agree that a stable credit system is necessary and really what separates a first world country from a country like Argentina. For as much as locals would like to consider themselves "worldly" or "First World"... Argentina is NOT a first world country.

The market is getting a bit better with SOME lending. Recently several business associates and some of my lawyers have purchased with financing and loans. The terms weren't great but they didn't have 100% so definitely this should help and I believe ANY lending will drive up the demand which should keep prices steadily going up as well. Take all of what I posted before and add in to the mix the possibility of increased lending. This is why mostly I'm buying smaller 1 bedroom apartments vs. huge 3-4 bedroom apartments. If financing/lending creeps into the Argentina real estate market the properties with the biggest demand and capital appreciation should be smaller apartments in good areas.

Definitely Argentina has problems and definitely public finances are vulnerable. This is why I don't invest in anything but mostly real estate in Argentina (or things related to tourism like one of my business plans now is to build up a state of the art Radio Taxi business with English speaking dispatchers aimed at tourists).. Because definitely there could well be more problems for Argentina and I truly believe that unstability makes real estate even more stable and valuable and predictable.

Best to all
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Gloria Melgar Estevez
New member
Username: Glorita

Post Number: 6
Registered: 12-2007
Posted on Tuesday, December 18, 2007 - 10:35 am:   Edit PostPrint Post

I can attest to what Apartmentsba is saying about the "Argentine way"...people do invest in "Bricks"....can you blame them?...and they pay in "cash"....my mother in-law sold a home and took home $80,000(US dollars).....scary, I know!!...anyhow soon after she found a new house and bought it "cash"....she actually traveled via bus to the escribanas office where the transaction took place. I think my heart skipped a few beats when she related all this to me...but this is the way it is...distrust is a a deep seated characteristic in the Argentine and how could it not be. If you are not familiar with the past 30 or so years of Argentina, google it....and you will be amazed. I remember when I was around 14 years old going to Argentina on my school break and going with my grandmother from store to store trying to find the best prices and coming back an hour or so later to one of the stores to buy and seeing that the prices of things had changed(not just changed....doubled in price). Boy do I have recollections.
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Gloria Melgar Estevez
New member
Username: Glorita

Post Number: 7
Registered: 12-2007
Posted on Tuesday, December 18, 2007 - 11:21 am:   Edit PostPrint Post

Benco, I agree with you that a functioning credit system is a wonderful thing. But, for today we have to agree that in the US we are no longer dealing with such a credit system. Actually for the past few years the US has been in dysfunctional mode as to its credit practices. The old system of lending to those that could document their work/salary histories and other assests, together with worthy credit histories, and a substantial "required" down payment was abandoned in lieu of loans with no downpayment, work history or credit rating and as the icing on the cake(an interest rate of 1% due to reset in 3-5 years...ARM). Now these people that gave the loans and those that took the loans...these "fools" want a bailout. So, we have this tug-of-war.....the Fed trying to do the impossible.....lower rates to contain the credit opened and afloat and at the same time watching the dollar lose its value and inflation creeping up(diminishing disposable income)....well, Americans have yet to get their long oustrich heads out....their home equity ATMs has been strangled dried and has come to a halt...but there is still the credit cards. REcently I read an article that dealt with the amount of credit that is still existent in credit cards that have been opened in the past 5 to 10 years. WE are ladies and gentlemen at a crossroads.....I sit here like a little ant building up my cash flow and paying off my little house(almost payed for)....watching and waiting(I'm in vulture mode....lol)....the pot is getting hotter by the day. What will happen?...For a tightwad like myself, I can say these are HAPPY DAYS!
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Gloria Melgar Estevez
New member
Username: Glorita

Post Number: 8
Registered: 12-2007
Posted on Tuesday, December 18, 2007 - 11:28 am:   Edit PostPrint Post

Oh, forgive my discourtesy of not wishing all happy holidays in either of my last two posts....so to allllllll in this wonderful, insightful and entertaining forum.............

**HAPPY HOLIDAYS**
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Apartmentsba.com
Advanced Member
Username: Saint

Post Number: 269
Registered: 5-2005


Posted on Tuesday, December 18, 2007 - 11:28 am:   Edit PostPrint Post

Gloria,

Yes, you better than anyone can understand what the typical Argentine has gone through over the years. They do NOT trust banks nor the government nor really anyone except close friends or family for the most part. And for good reason.

Gloria's mother-in-law situation is the NORM here NOT the exception. I remember shortly after I moved to Argentina 4 years ago I remember hearing a story from my best friend who is a local. He recalled how when he was only 18 he was purchasing a vehicle for his father and it was a large purchase. Something like u$s 50,000. And he was only 18 and his father told him to go pay it. This was in another town. So my friend said he said to his father, are you going to set up a car for me with a private driver? And his father looked at him like he was crazy. His response? "Take the bus!"

Very few people have the luxury of being in a property closing here. I'm in closings every single week. Many times several times per week. It's really surreal in some of these closings as you see 3 or 4 people there and they are stuffing bills in their socks and money belts, etc. More times than not they have a security guard but many people don't even trust money transfer security firms here.

So, I repeat what I wrote above. What else do the locals have to invest in? Most of them are NOT invested in the local stock market and even opening a bank account in nearby Uruguay isn't as easy as it used to be. "Bricks" will always be the safest investment for locals. And consider that many people around the country even though they don't live in Buenos Aires are buying real estate here because it's considered the best and safest and easiest to rent out.


A few short stories below I'm reminded about it from another experience yesterday. Most people don't realize but my firm and I are mostly actually buying the properties for our investors/clients. They give us a power of attorney and we get their tax ID number to purchase, set up their bank account and are closing for them. They placed a lot of faith in us. Most of these properties we are also renovating and furnishing them.

People think it will be easy here but it's not. It can take up to 3 months just to get furniture. Everything takes FOREVER!

1) I had a client a few years ago that we helped purchase a property. The closing was problematic but we successfully closed. The client was an American businessman that had been coming to Buenos Aires for years. He spoke Spanish fluently. He had many local friends here in Buenos Aires. He decided not to retain me to help him do the renovations which was totally fine as we don't really make money when it's all said and done on it. He decided to use a good friend of a good friend.

His property was a big renovation and here typically you pay an architect 50% to start and staggered payments until it's done and a final payment at the end. I never saw this guy for several months and one day about 7 months after we closed for him I saw Mark on the street. I could see he was trying to avoid me but we were on the same sidewalk. I said, "Hi Mark long time. How's your renovation going?". He was really hesitant and looked embarrased. Finally he tells me that the architect he chose cheated him, took his 50% (which was about u$s 45,000) and ran off to Spain and never finished the project. (Remember this was a friend of a friend).

2) Another client from Germany - Martin did hire us to help him but he decided not to follow our advice and ordered furniture from some store we had no relationship with. I told him we don't like working with people we don't have a known positive experience with. He ignored our advice. Furniture usually takes no more than 3 months to make. Meanwhile 7 months later and the furniture still isn't here. They won't refund the money he paid. This is a big store with a storefront in Palermo Soho.

3) Another client Peter and his wife retained me to help them. Their first property I told them to stay away from as it was a shady deal. I told them they would never be able to buy it. The lawyer told them the same as me that it might be possible but it would take months and months to sort out the paperwork on it. Meanwhile about 6 months later with no hope to purchase it they finally take my advise to walk away. They find another property and purchase it and we close for them.

It needed renovations and his wife is from South America and obviously speaks perfect Spanish and she even lived in Argentina many years some time ago. She said she was more than capable of handling the renovation. She had many "friends" here in Argentina. Well, yesterday I went to meet her at her apartment and literally when I walked in she was crying very hard and telling me what a nightmare it was and the architects cheated her and they made many mistakes, etc.


For as much as I love Argentina and the locals as I've mentioned many times before, it's a nightmare doing business here. It's hard to trust people. Now, I don't have issues or problems for the most part as I mostly work with banks and private money exchange firms I have a long-term mutually beneficial relationship with. I also have architects, builders and other contractors I can trust. But still, just dealing with other people here is tough as many are out to cheat you any way they can.

So, when it's all said and done the lesson here is for as beautiful of a country this is and many people here are wonderful doing business here or conducting financial transaction is complex and full of risks. This is why people want to keep their money in a safe investment like a piece of land or an apartment.

Happy Holidays to all.

PS Gloria - I agree with you about the situation in the USA as you know from my posts. Stay in "vulture mode" and keep your savings up. There is going to be a time soon when everything will be "on sale" including real estate prices continuing to get cheaper, stocks and mutual funds all lower and other things on sale. As I posted before. Keep your "rainy day funds" up so you can go on a spending spree when everything is on sale. Best to you.
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Gloria Melgar Estevez
New member
Username: Glorita

Post Number: 9
Registered: 12-2007
Posted on Tuesday, December 18, 2007 - 12:00 pm:   Edit PostPrint Post

What Apartmentsba is saying is 100% correct...I guess he has lived in Argentina long enough to get a flavor of how things run in there. My mother-in-laws situation is the NORM! I want to add another story relating to the trust issue...which in Argentina is "trust alomost no one". Many years ago my mother-in-law was renovating her home and the arquitect which came recommended stole a box of jewelry with which she tells me had jewelry worth ($50,000 US dollars)....I'm talking some 25 years ago(before she was my mother-in-law)...that was alottttttt of money back then in Argentina. My husband's family was a family that was well off. They owned a restaurant/bar in the city of Rosario called the (Sunderland Bar). Today this restaurant(no longer in existent) is a considered a historical part of the city of Rosario...resently a documentary shown on tv about the history of the restaurant....a cousin of my husband sent him a cd with the documentary and also a small ceramic figuirine of the bar that is now being sold. You'd think that they should be "rich"....but no..they lived comfortably and when my father-in-law and his brother(they were co-owners) became sick, they sold. You see, making it in Argentina is hard...it doesn't matter how hard working and honest you are(as my in-laws)....or how educated you are(many professionals drive taxis).....making in Argentina is nearly impossible. Could this change?....I don't know....the Argentine in me says "NO"...but the American in me is hopeful.
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Roberto
Board Administrator
Username: Admin

Post Number: 1408
Registered: 12-2004
Posted on Tuesday, December 18, 2007 - 3:11 pm:   Edit PostPrint Post

I was giving them a little time. Really didn't want to interfere with a fateful happy reunion. Perhaps others were as amused as I was but for the sake of everyone I should move all these posts to a more *private* area with less traffic, an alernative to Michael's deletion suggestion... or if everybody agrees, delete them.

The 'marketplace' section used to be called 'miscellaneous' and was set up for threads with less focused subjects for members to 'foo' freely (watercooler time). I will move stuff there first.

Glad the forum helped in finding each other again.

For Gloria and Tony only

(Message edited by admin on December 18, 2007)
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Benco
Junior Member
Username: Benco

Post Number: 30
Registered: 4-2007
Posted on Tuesday, December 18, 2007 - 3:29 pm:   Edit PostPrint Post

ApBA,

thank you for sharing these short stories - they are a quite frightening and for sure you would have many more similar stories to tell. Since nobody can do business without trusting other people, the sad truth is that all this mistrust and cheating really hurts the economy. And the excessive due diligence that is apparently necessary requires a lot of time and money which could be spent on better causes.

In practice the only way out is to establish long-term business relationships, where everybody realizes that in the long run this is much more profitable than the short term gain of cheating each other. Personally I do not care much about friends of friends of friends, although the locals are quite fond of this game. I think you either know someone well or you don´t, there is not much in between. And often I prefer to shop around and talk to as many people as possible, rather than trusting in an unreliable personal recommendation.

Let me share two facts and give this thread some more positive momentum for Christmas time...

Recently I had to decide on the phone lines for my office. Well, you still can´t choose between Telefonica and Telecom, but here in the microcentro there is I-Plan as an alternative. I chose Telefonica and on the same day of my order I received two confirmation calls from the technical staff, and three days later they had installed the phone lines. The next day everything was working. I was impressed, and so where my friends who told me that in the past people sometimes had to wait for a year or more.

Also I have bought my furniture from a shop without any previous personal contacts, and they were very professional and friendly. They said it would take about 25 days, and after 20 days they delivered everything and I am pleased with the results.

Well, maybe I was lucky and at some point I will have to take a hit. And definitely, when it comes to large investments and buying properties, the trial-and-error method is not an option. When there is no room for mistakes one simply has to pay the premium for good advice and professional service.

Happy holidays to all!
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movingtoargentina.typepad.com
Intermediate Member
Username: Sapphos

Post Number: 111
Registered: 2-2006
Posted on Tuesday, December 18, 2007 - 4:20 pm:   Edit PostPrint Post

I have had my share of dealing with unscrupulous people as well, but then again they exist everywhere don't they. The kicker of this one though is this person is married to an expat and as we became friends and then somewhat business partners, told me over and over how she hated the fact that foreigners were always screwed over by Argentines and then whoops heheh she did it to me. Oh well, live and learn.

I will say the most amazing service I got in Argentina was from our health insurance rep. We became friends with her during our pregnancy and she never let us down. She was almost a surrogate mother during my pregnancy and is still close to us now. I refer everyone who's looking for insurance to her because she just has shown me time and time again that she cares about people rather than just a buck.

Laura
Ebook Moving to and Living in Buenos Aires, Argentina
http://movingtoargentina.typepad.com
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Apartmentsba.com
Advanced Member
Username: Saint

Post Number: 271
Registered: 5-2005


Posted on Tuesday, December 18, 2007 - 4:46 pm:   Edit PostPrint Post

Benco,

I could literally write a book (and I just might do that here next year as I've been contacted by Hollywood to write a screen play based on what experiences the past several years...i probably will write a book here in the next year or so and then a screen play for a movie so stay tuned).

I have a LOT of similar stories. Yes, it's VERY sad that there is so much mistrust but when you have such a history in Argentina of other people cheating others including the government and banks it's wise to err on the side of being careful and suspect until the other party has a long-term track record of being trustworthy.

Yes, the great thing is there ARE some people here that sees the value in long-term mutually beneficial relationships. Most people in Argentina are very "short-sighted" only thinking about today or tomorrow. I agree with you Benco. I'm not fond of "friends of friends" either. To me, prove yourself and if you are trustworthy I'll give you a lot of business. Almost every business relationship in Argentina I told the other party that I'm not in it for a quick buck. I'd like to do business with them for many many years and have a mutually beneficial relationship and they see I mean that. There are some realtors in town I have purchased millions upon millions of dollars in properties. There are some developers that I have learned to trust where I agree to buy up a good majority of the building. Some banks we are moving millions of dollars each month through.

Here in Argentina it's best to have some experience with a person or firm before trusting them completely. The good thing is once you build up good relationships you can typically count on that person as they see it is better and they can make more money having a good relationship with you and they know they can trust you as well.

Yes, there are unscrupulous people all over the world including the USA but I can tell you in business you don't deal with it on a daily basis like in Argentina. In Argentina it's almost a way of life. In the USA I could do a multi-million dollar deal with a large corporation that I had a good relationship with on a handshake. Here in Argentina you would NEVER see something like that. Business flows VERY smoothly for the most part in the USA and UK.

Benco - you got lucky with the phone. I had a not so fortunate experience when I leased my office several years ago. I ordered some phone lines with Telecom and it took about 5 months! Then I also ordered with I-Plan and they were much quicker so we have about 20 lines with I-Plan and some lines with Telecom as well as they finally installed the line.

MovingtoArgentina - I also have had excellent experiences with the health insurance industry here in Argentina. If you have a good plan it's MUCH better than the USA. And I know a thing or two about this as I was formally a healthcare executive before.

Case in point, earlier this year I had severe migraine headaches. I mean really bad. Finally I decided to see a doctor and one phone call and I was seeing the top neurologist in Buenos Aires. That doctor had me in to do an MRI within 24 hours of my visit to him. So literally within 72 hours of calling and making the appointment I had a visit with a top physician and an expensive MRI.

In the USA you would never get such quick service. Also, my out of pocket expense? $0. The insurance covered it completely. If you have a good OSDE or similar insurance plan the service is amazing. Consider that females on a good OSDE plan after being covered for 1 year can have a free elective surgery like breast implants. Imagine that....health care coverage that pays for a boob job. Pretty amazing. (some things in this country DO work... :-) )

Also, another story about health care coverage.... With my employees I offer to pay for private medical insurance. I don't have to but I do. I typically require them to work a few months first. One time we had an employee that had an appendix burst. She had to go to the hospital in an ambulance from our office. She was not yet covered on the more extensive plan that we buy. When we explained this to our representative, she got the situation covered and they paid for everything even though it was after the fact that we signed up. Good luck hearing for something like this in the USA where healthcare companies try to weasel out of paying any expense!

So, some things do work here in Argentina. My experience with healthcare coverage if you have a good plan is very good and worth every penny.

Cheers all.
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WTMendoza.com
Member
Username: Welcometomendoza

Post Number: 80
Registered: 7-2007


Posted on Tuesday, December 18, 2007 - 8:34 pm:   Edit PostPrint Post

Laura - that is so classic and true - and yeah Saint while this place has the air of deceipt, through stories and true history that abounds, let's face it, this country is paradise if you get hooked into the right grooves. And Saint, let's not exagerate, you know that doing business in US and USA has it's many a pitfall too if you hook up with the wrong folks..lol...thanks for the all the case-in-points - always good stuff
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Benco
Junior Member
Username: Benco

Post Number: 31
Registered: 4-2007
Posted on Wednesday, December 19, 2007 - 2:01 pm:   Edit PostPrint Post

While an economic crisis seems far away at the moment, I think there is a good chance that right now we are heading into a severe political crisis caused by the Antonini case. And rarely has the world seen a political leader who makes such a huge political mistake on her third day in office. It is not my intension to start a political discussion - one can have different opinions about the Bush administration, the Kirchners and Hugo Chavez. And also I have no idea if the allegations in the Antonini case are true or not.

My point is that Cristina should have acted in a very different way, by not saying much and assuring that Argentina closely watches the case and that it will cooperate in finding out what has happened. And the government could have expressed its anger and doubts in an internationally acceptable way.

But no - the government started wild allegations of a conspiracy and accused the US administration of a politically motivated attack. And Cristina jumped into an ever closer embrace with Hugo Chavez and showed sympathy for some of his views about the USA.

My opinion is that an experienced politician would never have done this, since it is very dangerous to act so aggressively in a situation where nobody knows what evidence will show up in the course of the legal investigation. This case will drag on for months and it is likely that in the end the government might have to turn around 180 degrees and admit that some things went wrong in its relations with Venezuela. Just imagine how embarassing this will be after acting in the way she is doing right now. The big question to me is then whether De Vido will have to go or not.

I am not a citizen of the states and so my view is definitely not distorted by patriotic feelings. But I am reading with disgust what top officials (like Alberto Fernandez) are saying about the US, and Democrats and Republicans alike in the US congress will feel the same. Of course there are always political pressures in such a sensitive case and there are not only angelitos in the Bush administration. But Argentina´s allegations are so exaggerated and absurd that a psycological analysis seems appropriate. The result of such an analysis would then show a vastly inflated sense of the importance of Argentina´s role in US foreign politics, and also the projection of its own deficiencies like the absence of strong and independent institutions on the USA. Would anyone really put more trust in the independence of the Argentinean legal system than in the American one?

Let´s wait and see what comes out of this case, and hope that Cristina will learn how to act with statesmanship and not cause more harm to the international reputation of her country.
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Apartmentsba.com
Advanced Member
Username: Saint

Post Number: 272
Registered: 5-2005


Posted on Wednesday, December 19, 2007 - 6:54 pm:   Edit PostPrint Post

Benco,

My take on it is I don't think it's as big of a deal as you think it is. Yes, I think Christina made a rookie mistake but in the grand scheme of things I don't really think many locals care too much about this situation. I don't think Argentina's relationship with the USA ever was anything to write home about in the first place.

Argentina has never really been good with foreign politics. But when it comes down to it, both Argentines and Americans alike take a situation like this and they don't seem to be too bothered by it because we all know there is corruption here in Argentina. There are pay offs all the time and I don't think anyone is really surprised if the allegations turn out to be true. I think the reality of the locals (which I agree with) is the $800,000 is just a few hundred thousand of the actual millions of dollars in situations like this and the locals realize this. You only know about this situation because they happened to spot it but everyone that lives here knows there are many, many millions of dollars in other situations that you never read about because the money is undetected.

Take the situation with the Argentine Economy Minister, Felisa Miceli with the cash found in her bathroom. The locals really aren't surprised by something like this. Why? Because they know their country and they realize that bribes, pay offs and shady things like this go on with politics here. In fact, something I was a bit surprised by is many, many locals I talked to after the story broke out the first question that comes to their mind isn't "what was she doing with this money" or "how did she get it". They say, "she was stupid to say the money was hers". They say, "if she was smart she would have said "I have NO idea what this money is from and I will do everything I can to find out".


THAT is the mentality here. It's almost as they expect that politicians are doing shady things like this here. So, in the grand scheme of things I think this will probably blow over.

Definitely I think she could have taken a better stance or been smarter with her comments but such is life in Argentina. However, I don't think it will be do more damage to the "reputation of Argentina". Really Argentina's reputation in the international community isn't the best to begin with and with issues like the Paris Club debt (u$s 6.3 BILLION) and disputes with the bondholders I think THAT is a far greater black eye to the "reputation of Argentina" with the international community. If Argentina wants to drastically improve their "reputation" with the international community get this Paris Club debt paid off because without it they won't get a huge expanded flow of investments to Argentina. And it's this huge flow of investments from the international community that will really turn things around here.

JMHO.
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WTMendoza.com
Member
Username: Welcometomendoza

Post Number: 81
Registered: 7-2007


Posted on Wednesday, December 19, 2007 - 7:22 pm:   Edit PostPrint Post

ApartmentsBA, agreed, after all, a mysterious suitcase full of cash and finding cash in the bathroom provide enough bang-for-your-buck gossip, that it is almost laughable compared to the bigger topics like Paris Club,and the lingering cautios attitude by the world afer the 2001 crash and 2005 pathetic payout to creditors.

Often times over the years here in Argenina, I get engaged into corruption topic dialoge, and it seems to be a uiversal conclusion here that the Americans just frankly do a better job of keeping their corruption it under wraps...with often dire and controversial results when the caca does hit the fan, like Enron..and all the way down to finding the frozen dollars in the freezer of a new orleans politician.

Argentina, and some other countires in Latina America and the world, have already experienced and/or are experiencing what life would be like in the USA if indeed the USA economy goes to hell. Corruption abounding that much more, struggling families, swapping of goods, enahnced deceipt among the population, etc, etc...

The population here is only 40 million or so - and the majority of what foriengers don't see when they arrive to notheren BA suburbs and zones, or the upscale communities of Barriloche, Cordoba, Mendoza, Salta, etc..., is that these folks are just making it ok or barely making it..or worse...

I still find it fascinating the on-the-surface (at least that!) respect between individuals and how that theme is knit into society here. What a refreshing factor.

By the way, I was told today that the IPV is handing out 30 year fixed rate to lower-to-middle class Argentines for housing. This is a first from my 25 year observations with this country. A good sign actually - what do you think ApartmensBA?
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Apartmentsba.com
Advanced Member
Username: Saint

Post Number: 273
Registered: 5-2005


Posted on Thursday, December 20, 2007 - 10:44 am:   Edit PostPrint Post

Regarding the situation with the "suitcase scandal" I think opposition leader Elisa Carrio says it best --- "The USA is not responsible for the crimes of corruption committed by the Venezuelan and Argentine governments". Most REASONABLE people feel the same way so this thing will blow over. I wouldn't worry about it. Like I said, Argentina's "reputation" is pretty bad already around the world and they have bigger issues to worry about than this scandal.

Mendoza - I haven't heard they actually started granting 30 year fixed rates. I know they were trying but I'm not actually sure they started. Really these IPV's (Institutos Provinciales de Vividenas)are typically VERY inefficient and unorganized (like many things in the government here) so I wouldn't hold my breath on any really organized scheme.

You can read a very detailed report about it here - http://www.ifc.org/ifcext/economics.nsf/Attachment sByTitle/Argentina_housing/$FILE/Argentina+Housing ++November7.pdf

(I've noticed many times I post a link and this website changes it so if you can't open this link go to Google and type in "review of argentina's housing sector" and it should pull up a report by the World Bank. You can download it to your desktop in PDF format. It's very long at over 100 pages.


I do think it's positive that some credit and financing is coming into the market but I think it will take a few years for it to become more widestream. Also, still in the most desirable and most expensive areas like the Capital I still believe that it will mainly be cash purchases for a while. The prices of property in the most desirable areas here is expensive for local standards because the locals don't make much money so they will never truly be able to have a mortgage system like the USA/UK or first world country. Also, the systematic distrust with the govenment and banks also plays a toll on all of this. I do see credit improving here however and it's my belief this will spur demand which will keep prices steadily climbing in good areas like Recoleta and Palermo and Barrio Norte. The land and properties outside the Capital (Provincia) are relatively VERY cheap and in pesos so you can't really compare it to the Capital as it's a whole different world.

I am confident the lending institutions will never be handing out money to anyone with a heartbeat like they did in the USA and they are doing in the UK and much of Europe.
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Apartmentsba.com
Advanced Member
Username: Saint

Post Number: 274
Registered: 5-2005


Posted on Thursday, December 20, 2007 - 11:14 am:   Edit PostPrint Post

Actually I think this news release comes at a good time as there is a possibility that more banks in the USA will go belly up in the future.

A world of advice to everyone. Do NOT keep more than u$s 100,000 in ANY of your bank accounts and make sure that your bank is FDIC insured. Don't think your bank will never go under. One of the banks they talk about in the article, Netbank did go under and It was one of the many banks I was with. I know some people that had more than $100,000 in their accounts and most likely they will never see that again.



http://money.cnn.com/news/newsfeeds/articles/apwir e/8788261332d807da4b34fa8e9bb12bdd.htm

FDIC Proposes New Bank Failure Rules
FDIC Proposes New Rules to Calculate Depositor Insurance Eligibility in Major Bank Failure
December 20, 2007: 10:53 AM EST


NEW YORK (Associated Press) - The Federal Deposit Insurance Corp. on Wednesday said it proposed new rules to help determine which bank depositors are eligible for FDIC insurance for up to $100,000 per person in the event of a large bank failure.

The FDIC's proposed rules would apply to the 159 institutions with at either $2 billion or more in U.S. deposits, more than 250,000 deposit accounts, or total assets of more than $20 billion. In the event of a bank failure, they would have to provide data on accounts in a standardized format for the agency to determine whether insurance applies.

Since many bank customers could have multiple accounts with slightly different spellings of their names _ and not all bank accounts are linked to social security numbers _ eligibility is often difficult to determine, FDIC spokesman David Barr said in an e-mail message.

The FDIC said it has been working on the change since 2005, before the start of the recent banking industry turmoil. The need for a formalized set of procedures was prompted by the consolidation of banks into larger national players, some with more than $1 trillion in assets, Barr said.

Bank of America Corp. JPMorgan Chase & Co., Citigroup Inc., Wachovia Corp. and Wells Fargo & Co. are the largest U.S. banks by assets, according to FDIC statistics.

In September, NetBank Inc., an online bank with $2.5 billion in assets, was shut down by the federal Office of Thrift Supervision in the largest savings and loan failure since the end of the industry's crisis more than 14 years ago. The FDIC was appointed as a receiver for the Alpharetta, Ga.-based company

The largest U.S. bank failure was the collapse of Continental Illinois National Bank in 1984. It had $33.6 billion in assets.
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Roberto
Board Administrator
Username: Admin

Post Number: 1410
Registered: 12-2004
Posted on Thursday, December 20, 2007 - 3:02 pm:   Edit PostPrint Post

@ Benco

> Let´s wait and see what comes out of this case, and hope that Cristina will learn how to act with statesmanship and not cause more harm to the international reputation of her country.

Never forget their montoneros background!
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Benco
Junior Member
Username: Benco

Post Number: 32
Registered: 4-2007
Posted on Thursday, December 20, 2007 - 4:20 pm:   Edit PostPrint Post

Roberto, I hope they don´t start kidnapping business people to collect taxes...

Mendoza and ApBA, I can see your points. It is true that people here are quite used to corruption scandals and talk about them with a shrug and a smile. But most do not approve corruption and many are quite fed up with this. For example Micelli was ousted because her scandal was such bad news for the official election campaign.

And I would add that if Venezuela has systematically sponsored Cristina´s campaign then this is not just another small case of corruption.

It all depends on the hard evidence that emerges during the next months. It would surprise me if the American prosecutors had started a case that would break down anytime soon. And I assume that what really drives the Argentine officials mad is that they have no control whatsoever over the course of the investigation.

What is sad is that everybody was hoping that Cristina would improve international relations, and now things went completely wrong.
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Apartmentsba.com
Advanced Member
Username: Saint

Post Number: 275
Registered: 5-2005


Posted on Thursday, December 20, 2007 - 4:34 pm:   Edit PostPrint Post

Benco,

I DO agree with you it's a public relations nightmare but I don't think it is as big of a disaster as your initial post suggested but I agree with you the locals don't like corruption but I don't see it systematically improving anytime soon (unfortunately).

Micelli was only ousted because it was right before the elections and yes they wanted her gone.

Yes, I agree with you that I had hopes as well as others that Cristina would improve international relations including with the USA but she blew that and off to a bad start.

As far as the tax issue.....they are already off to the races increasing taxes. For those that have high incomes and assets here the taxes went up big time. Also for foreigners here the asset tax jumped from 0.75% to 1.25% which is a healthy increase as well. Also, I just noticed the ABL bills just went up about 200% as well. Granted they haven't gone up in about 14 years so I'm not complaining but make no mistake..... Tax intake is drastically improving.
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Gloria Melgar Estevez
New member
Username: Glorita

Post Number: 16
Registered: 12-2007
Posted on Thursday, December 20, 2007 - 4:53 pm:   Edit PostPrint Post

Apartmentba...I once read also that an FDIC bank is not required to give you your money immediately. What do you know about this? I worry about this because I help my mother with her accounts and she has her money distributed between 3 banks but in one she currently has over $100,000. We are waiting for a CD from this bank to come due this coming February and at such time she will move it.
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Apartmentsba.com
Advanced Member
Username: Saint

Post Number: 276
Registered: 5-2005


Posted on Thursday, December 20, 2007 - 5:21 pm:   Edit PostPrint Post

Gloria,

From everything I know about the FDIC I believe that is correct. It certainly does NOT have to be immediate. I don't think they have any time frame specific to how long it can take. I think if it was a big bank that went under (which I don't think is too likely in the immediate future but could happen some day if foreign countries get out of dollars and stop funding our debt). It could be a real nightmare situation in the future.

Again, I'm NOT saying this is going to happen so no one should panic. Honestly I don't know how long it would take for them to get the money back to each person but I would imagine it's not immediate. Maybe it could take a few weeks. The great unknown is the USA hasn't had any big disasters in a long long time so I think no one really knows how chaotic it could get.

You can go to the FDIC's website at http://www.fdic.gov/ but I doubt it will spell out any maximum time frame to get your funds. I could be wrong but I doubt it.

But take my advice. Everyone thinks "it will never happen... my bank will not go under". Well, banks DO go under. I gave NetBank as one example. Actually they were a very good bank and really perfected the online bank (no bricks) model and if they didn't get into the sub-prime mess I think they would have been ok. But they did and they went under. I always felt comfortable with them as I've been with them for many many years. I easily had over $100,000 with them but once I saw they were struggling I got my balance below $100,000 with them and it's fortunate that I did.

I always felt comfortable with them as they were FDIC insured and once I got my balance under $100,000 I knew I would be protected but I have to admit that day that I logged onto my online account and it had a BIG warning that the government shut them down that was a HUGE wake up call to me. Fortunately ING Bank bought them as the FDIC negotiated it pretty quickly so I could access my funds almost immediately but I would imagine in a situation when they can't sell the banks assets it would take time for the FDIC to dispurse the funds up to $100,000. I think we are in "unchartered waters" so to speak with the bank problems and the possibility if more banks go under.

The problem now is that MANY banks are weak and not really in a good position to buy other banks. Banks are conserving their cash right now. Look at all my predictions I made over the past several months. Look at what I said about banks that will write down BILLIONS of dollars in the forth quarter. I was right! Look at some of the banks and financial institutions like Morgan Stanley with their announcement of the u$s 9.4 BILLION write down!!! There will be more losses announced in 2008 as well. As I posted long ago..these banks still don't know their true exposure to the CDO's and SIV's. Many are STILL valuing their losses too positively. Trust me on this. I own an investment company and I crunch numbers ALL day, EVERY day and the last time I checked I'm pretty good at my job. I saw this coming a mile away. I have done pretty well shorting the banking stocks, financial company stocks and mortgage lenders the past few months. For me this was VERY easy to see starting in March as you can read from what I post on this and other boards.

So getting back to your question. I think in a big financial meltdown that is systematic, I believe that it will take time to sort out. I do believe the FDIC will honor it's u$s 100,000 per bank account pledge but I do think it might take a while if there is some large bank that fails to get your assets.

Again, please don't confuse my post. I don't think any really large banks will go under but I think you have to read the writing on the wall. I do see the chance for some smaller and regional banks to go under or consolidate. There are probably some opportunities for bigger banks to gobble up smaller banks at a VERY good price. The problem I see is that bigger banks are really strugging now and probably will be in 2008 as well. The fact that many of them are cutting their divident programs is a clear sign of just how desperate they are. Look at Washington Mutual (WM).

Look at the fact that countries like Middle Eastern Countries and countries like China are bailing out USA huge banks and institutions with BILLIONS of dollars worth of investments. Countries like China are laughing at the USA behind it's back. The reality is China can really control the destiny of the USA's economy since there is so much debt from the USA.

Most Americans don't realize what is going on but many are starting to get the picture. Look at banks like Citibank that really desperately need cash and are getting billions of dollars in injections from Middle Eastern countries. Look at companies like Morgan Stanley that just got a much needed u$s 5 BILLION injection from CHINA. Morgan Stanley is one of the USA's oldest and most respected investment firms and now it's 10% owned by CHINA.

America is slowly being bought up by foreigners including from a large part wealthy Middle East countries and also China. China Investment Corporation has hundreds of BILLIONS of dollars and they will go on a spending spree in 2008 buying up many USA companies, real estate and other institutions.

The average American doesn't understand what is going on and sadly doesn't care. I don't want to sound like an alarmist but as I pointed out before...unless the USA doesn't turn things around maybe the best move for those young people in the USA that can elect to take a foreign language in school it shouldn't be Spanish or French. Maybe it should be Chinese.....


Also, something you might find interesting...

"Considering that the FDIC insures 8,615 U.S. banks, three failures in one year may not seem too daunting. However, in light of the subprime mortgage financial crisis and subsequent credit crunch, bank failure is a very real possibility, particularly for banks engaging in risky lending practices.

Most, but not all, banks are insured by the FDIC. Investors can easily look up a bank’s status via the FDIC’s online Bank Find option. Also bear in mind that the fact that a bank is FDIC insured doesn’t necessarily mean that every account they offer is covered.

In order for investors to ensure maximum insurance coverage for their money, it would also be wise to keep deposits in any one institution below $100,000. Even if investors have multiple accounts below $100,000 with the same bank, their coverage will not increase unless the accounts are in separate account categories (e.g. single, joint, etc). Retirement investment accounts are typically covered up to $250,000, according to the FDIC.

If for any reason investors have to keep more than $100,000 with a single institution, they should be sure to select a large and stable bank in order to minimize risk. Try to avoid banks that originated, or invested in, a large number of subprime loans.

Uncertain investors may be enlightened by a look at the bank’s stock price. The banks hit hardest were those heavily involved with subprime loans. Remember, too, that banks paying higher-than-average interest rates on their deposit accounts may be at greater risk of failure. "


http://www.nuwireinvestor.com/articles/netbank-failure-hurts-high-balance-accounts-51303.aspx


"The bankruptcy placed about $109 million in 1,500 accounts in uninsured money deposited in accounts at the bank in jeopardy. The FDIC made half of that available immediately to bank customers, said David Barr, an FDIC spokesman.

"So that leaves $50.5 million left. How much of that will be recouped, it's too early to say," he said.

These customers have access to their deposits up to the insured limit, but they will become creditors of the receivorship for the amount of their uninsured funds"


http://www.northfulton.com/1editorialbody.lasso?-token.folder=2007-11-01&-token.story=166766.112113&-token.subpub=


http://www.fdic.gov/bank/individual/failed/NetBank.html

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Gloria Melgar Estevez
New member
Username: Glorita

Post Number: 17
Registered: 12-2007
Posted on Thursday, December 20, 2007 - 5:40 pm:   Edit PostPrint Post

The Antonini case really doesn't suprise me in the least. It is to be expected of a country who rates 106 in the 2007 Transperancy International Corruption Index. Argentina rates at a 2.9 . Rating ranges from 0 to 10. 180 countries are rated out of a possible 193. A score of 5.0 is the number Transperancy International considers the borderline figure distinguishing countries that do and do not have a "serious" corruption problem. Venezuela, by the way, rates 167th with a rating of 2.0. The US rates 20(with a rating of 7.2). Meditate on these numbers and you will most likely come to the conclusion that the guilty parties here are the Argentine/Venezuela governments.
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Apartmentsba.com
Advanced Member
Username: Saint

Post Number: 277
Registered: 5-2005


Posted on Thursday, December 20, 2007 - 5:50 pm:   Edit PostPrint Post

Yes, I've been pointing out the Transparency International Corruption Survey since 2002. In fact, I was one of the first people that has continually pointed out that survey and have on my website since 2002.

Consider that Argentina ranks as more corrupt than Algeria, Sri Lanka, Armenia, Tanzania, Gabon, Serbia, Suriname, Ghana, Namibia!

So, again, I repeat what I said... this entire situation shouldn't be that surprising to anyone and I think it's VERY clear that most people know what happened. This shouldn't cause any more harm to international reputation. As if being ranked more corrupt than many countries in Africa wasn't bad enough....

http://www.transparency.org/policy_research/survey s_indices/cpi/2007

Now, I love Argentina as much as I love the United States but I will always tell it like it is. Both countries have it's own set of problems...
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Gloria Melgar Estevez
New member
Username: Glorita

Post Number: 18
Registered: 12-2007
Posted on Thursday, December 20, 2007 - 5:52 pm:   Edit PostPrint Post

APBA..thanks for your response. I do agree that banks(all banks) may be vulnerable. I remember waking up one day in the past few months and turning on CNN and seeing a line of people at Northern Rock in England....I found it strange...people lining up to get their savings out. So, I immediately got online and started reading up on what was going on. I'm just wondering now, is there any bank that did not get into thsuprime loans?
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Apartmentsba.com
Advanced Member
Username: Saint

Post Number: 278
Registered: 5-2005


Posted on Thursday, December 20, 2007 - 6:02 pm:   Edit PostPrint Post

You are welcome Gloria. All banks are vulnerable to some extent but stick with the biggest banks as they will be better protected. Yes, I posted on Northern Rock right as it was happening on this website.

VERY few banks did not get into this sub-prime or CDO or SIV mess. The thing is the amount of pressure to keep the earnings up vs. your competitors is so extremely high. Intense pressure so one bank does it and they all fall in line and do more high risk investments that usually push up their yields. It's good when you are right but when you are wrong it's very risky as you can see now.

The next problem you will see is that even banks that hedged their "bets" and had a bad portfolio but insured it with various insurance companies had a limited loss but what will happen is these insurance companies or bond insurance companies and other companies that basically "insured" the losses of this Sub-prime mess will start to go bankrupt as well. I don't see any way around this unless the banks/institutions start bailing out these companies as well. It's my belief that these companies going under will also cause these banks that hedged their bets to eventually declare more losses as well.

There are lots of small bond insurer's like ACA Capital, Inc. (google it) that insured against this and now Standard & Poor is declaring and rating them as "junk status" What does this mean? It means the protection it provides against many of these banks/institutions default (like Merrill Lynch as one example) is "JUNK"!

Keep in mind banks have only reported about u$s 105 BILLION in write-downs this year. Some banks and experts are projecting the write downs could really be as high as u$s 400 BILLION. That is what Deutsche Bank just estimated this week. It's pretty obvious to anyone (except those in extreme denial) that more losses are expected. So assume that Deutsche Bank is off and it's ONLY HALF of what they estimate or $200 BILLION. That means the losses to come are still EQUAL of what they have already declared this year. So the banks/institutions/companies that have already gotten hit hard could get hit harder. Personally, I believe it's probably higher but that is how I gauge things....

So, you see Gloria even banks/institutions/companies that thought they were "insured" against this toxic mess will find out that these bond insurance companies will also go bankrupt. And guess what? That will cause them to declare yet more losses.

This is all pretty technical and a bit difficult for the average person to understand but for those in the financial, banking or insurance industry they can explain what this means.



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David
New member
Username: Dc2elbolson

Post Number: 5
Registered: 11-2007
Posted on Friday, December 21, 2007 - 1:31 am:   Edit PostPrint Post

I know that this may sound a bit off topic, but hear me out.

Maybe preparing for the next major crisis in Argentina (or anywhere else in the world) means getting Dr. Ron Paul elected as the next President of the United States. I know I have said that his chances are about 5%, but then Tea Party '07 happened last Sunday where his supporters (some 58,000 donors) gave his campaign over $6 million dollars (USD)--the largest single day fundraiser in US history (and the Ron Paul Campaign had nothing to do with it--it was all done independently by his supporters)!

So, now I am giving him a 25% chance!

Seriously, if Dr. Paul gets the Republican nomination and then the Presidency, he will begin to solve a lot of these economic problems that are discussed here on this thread. Problems like the debasing of the USD, inflation tax created by the FED, etc.

Imagine an America that does not step on other countries or interfere in their internal affairs (in the name of "national security")--an America that only wants to trade and talk with other nations! What a novel idea?!?

Check this out!

http://www.youtube.com/watch?v=59WxCwMK57o

http://www.npr.org/blogs/bryantpark/2007/12/who_ar e_ron_pauls_supporters.html

http://www.ronpaul2008.com/

http://www.ronpaulforpresident2008.com/news/

http://www.dailypaul.com/
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Gloria Melgar Estevez
New member
Username: Glorita

Post Number: 19
Registered: 12-2007
Posted on Friday, December 21, 2007 - 9:28 am:   Edit PostPrint Post

Hello David....now this is a big can of worms you are opening..I can't say too much about Ron Paul as I'm minimally up on his ideas....one I do know is his calling for the abolishment of the Federal Reserve. I saw him on the Jim Cramer show, which shocked me....did you see it?...I think Jim Cramer is a loud mouth who only cares for those of his kind....he and all of his friends went out stomping like a two year old because Bernanke didn't reduce the rate "sufficiently" enough.....to their liking. Cutting rates when inflation is at our door is not prudent...the dollar is loosing its value(status)...we risk China and others switching to the Euro. I would like to hear Ron Paul talk more on these issues...for that matter all of the candidates....Hillary Clinton now is running an ad in Iowa to show her "ability to be nice"....she truly dissapoints me lately...this is no time to be nice...we have tons of problems and many sharks at our door coupled with an American mind set that fails(by choice or by ignorance) to see the reality of how things are.....The candidate that will get my vote is the one that addresses the American current mind set(I like to call it the "I want it all, and I want it now") mind set. This "greedy" mind set is at the core of the stock market bubble and now the housing bubble. And by the way this is an important issue that plays in to the Argentine forum because many Americans come here to learn about starting a business in Argentina, or vacationing there, or retiring in Argentina...and a weak dollar makes all of these three things more difficult and soon maybe even impossible.
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David
New member
Username: Dc2elbolson

Post Number: 6
Registered: 11-2007
Posted on Friday, December 21, 2007 - 10:51 am:   Edit PostPrint Post

Hi Gloria,

I think that if you go to his main campaign website, www.ronpaaul2008.com, and study up on his stand on the various issues (which he has been consistent on for over 30 years--which other candidate, left or right, has been consistent for over 30 years?) that you will find him to be the "perfect" candidate. And read the comments of his supporters on that NPR link:

http://www.npr.org/blogs/bryantpark/2007/12/who_ar e_ron_pauls_supporters.html

Dr. Ron Paul is the only candidate who understands and have spoken on this serious issue of the debasement of the US Dollar by the FED, and he is the only candidate who provides a sound solution to this problem.

And you are correct that this US election is important to those of us who are affected by this singular issue and other issues.

Here is a quick summary of Dr. Ron Paul's record:

* He has never voted to raise taxes (Never ever in his 20 year Congressional career!)
* He has never voted for an unbalanced budget.
* He has never voted for a federal restriction on gun ownership.
* He has never voted to raise congressional pay.
* He has never taken a government paid junket.
* He has never voted to increase the power of the executive branch.
* He voted against the Patriot Act.
* He votes against regulating the Internet.
* He voted against the Iraq war.
* He voted against NAFTA and CAFTA.
* He votes against the United Nations.
* He votes against the welfare state.
* He votes against reinstating a military draft.
* He votes for conservative principles.
* He votes to cut government spending.
* He votes to lower healthcare costs.
* He votes to end the war on drugs.
* He votes to preserve civil liberties.
* He votes to secure our borders with real immigration reform.
* He votes to eliminate tax funded abortions & to overturn Roe v Wade.
* He votes to protect religious freedom.
* He does not participate in the lucrative congressional pension program.
* He returns a portion of his annual congressional office budget to the U.S. treasury every year!
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WTMendoza.com
Member
Username: Welcometomendoza

Post Number: 82
Registered: 7-2007


Posted on Friday, December 21, 2007 - 11:14 am:   Edit PostPrint Post

I hope I don't get slammed for posting this but I also hope we don't have to endure another 11 months of Ron Paul (or hyping any other candidates) on this thread. Sometimes I like the way the UK , Argentina , and most other countires do it - they only allow campaigning for a month or so before elections - lol. (which is probably the wrong other extreme, but anyway)
Happy Holidays and 2008 to ALL!
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Apartmentsba.com
Advanced Member
Username: Saint

Post Number: 279
Registered: 5-2005


Posted on Friday, December 21, 2007 - 12:07 pm:   Edit PostPrint Post

I agree with Mendoza. This thread should NOT be cluttered or used to promote your favorite candidate. There are some VERY good posts here and posting to push a candidate really degrades this thread. There are other websites or blogs to promote your favorite candidate.

Roberto - can you start an Off-topic Political Thread. I won't post here anymore if this turns into "your favorite candidate" thread. I could have VERY easily started my own website or blog but I haven't as I respect the integrity of the board but I think most would agree that this isn't a political candidate thread and I suspect if it turns into one most of the popular posters will drift away.
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Roberto
Board Administrator
Username: Admin

Post Number: 1416
Registered: 12-2004
Posted on Friday, December 21, 2007 - 2:25 pm:   Edit PostPrint Post

My forum friends... I actually got quite a bit of complaints about this. It seems a universal feeling, so following Michael's suggestions I started -for lack of a better title- US elections and possible impact on argentine politics. We should strive to give an *argentine* tone to any threads discussed in this message board.

Please keep this thread as clean as possible. Here, we are discussing potential economic problems in Argentina that may affect us down the road. The main goal of this discussion is to prevent being blindsided. And although international politics do bear some influence on how countries prosper or not I would ask all of you to refer to the other thread IF your comments are more on the political side of the spectrum (elections, wars, etc.).
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Apartmentsba.com
Advanced Member
Username: Saint

Post Number: 280
Registered: 5-2005


Posted on Friday, December 21, 2007 - 5:26 pm:   Edit PostPrint Post

Roberto,

Maybe another good topic could be "World Wide Economic Trends". I think many people (me included) have posted alot of information on the USA economy in this section as there is no formal section so maybe another section to post things outside of Argentina that include economic trends including real estate, stock market, exchange rate, etc.

Just a thought. Ok...I'm off to Brazil for 10 days. Happy holidays all.

Mike

(Message edited by admin on December 21, 2007)
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Roberto
Board Administrator
Username: Admin

Post Number: 1420
Registered: 12-2004
Posted on Friday, December 21, 2007 - 6:26 pm:   Edit PostPrint Post

Feel free to make the first post :-)

Have a great vacation/holidays, Mike.
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WTMendoza.com
Member
Username: Welcometomendoza

Post Number: 89
Registered: 7-2007


Posted on Thursday, December 27, 2007 - 1:44 pm:   Edit PostPrint Post

Here is a great cross-over for this thread - for those who don't get the emails but navegate the threads. Don't miss this piece of juicy info to help prepare for the next potential crisis here in Argentina:

http://www.travelsur.net/cgi-bin/discus/show.cgi?t pc=20&post=6863#POST6863
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Betty
New member
Username: Bjh

Post Number: 2
Registered: 5-2007
Posted on Thursday, December 27, 2007 - 6:37 pm:   Edit PostPrint Post

After reading much of what is written here, I would strongly agree with most of the posts. It is quite obvious that in a fiat money system governments will always look to devalue their currency. History has proved this time and time again. I have yet to see anything posted about the most important hedge we have in protecting our money, and that is the ownership of gold. My question is: Can you buy and own gold in Argentina? If so, how and where would one purchase gold.

Over the last 6 or 7 years gold has been probably the best and safest investment one could have made, and that trend, because of the very things talked about on this forum, should do nothing but continue as time goes by.

Thank you for any insight to this question which you might give us.
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WTMendoza.com
Member
Username: Welcometomendoza

Post Number: 92
Registered: 7-2007


Posted on Thursday, December 27, 2007 - 8:55 pm:   Edit PostPrint Post

Hi Betty, my take on gold is yeah it's had a great run and will probably run some more, spiking some more up and up, but my gosh everybody says to buy it. Everybody.

If the dollar reverses course in key world markets in 2008, which is possible but unlikley at first glance, couldn't gold level out in the 700's throughout 2008, or even fall to the 600's?

But everybody says it is going to 1000 bucks and beyoned in 2008 ...everybody.

Maybe I just don't get it, but being that currencies are so token by nature these days, I just can't see a rock price sustaining so strongly. Any similiar thoughts or do I just have this one completly wrong?
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Apartmentsba.com
Advanced Member
Username: Saint

Post Number: 291
Registered: 5-2005


Posted on Friday, January 04, 2008 - 10:58 am:   Edit PostPrint Post

I think you could have it wrong Mendoza. Gold has been a solid investment for me over the years as well as everyone else as well and I think we could see some more upward growth in prices. Keep in mind inflation adjusted gold was over $2,000 before. I'm not adding to my positions at these prices but I'm not planning to sell any time soon. I believe prices can spike higher.

The USA is ALREADY in a recession. The thing about recessions are you can never know exactly when you are going through one until many months after you start one. It's my belief that the USA has already started it's recession. I think it could get much worse.
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WTMendoza.com
Member
Username: Welcometomendoza

Post Number: 94
Registered: 7-2007


Posted on Friday, January 04, 2008 - 11:41 am:   Edit PostPrint Post

I agree the USA is already in recession - in fact it's easier to idenify this time I think..with high oil/gas price, consumer shopping off , the starbucks factor, weak job growth, housing market, etc - it's seems pretty clear to me...

Since recessions are a normal cyclical part of any county's economy, at first glance it sholuld be no big deal..just another tick....but given the magnitude of all these things happening at once and how profound some of them are , and how consumer driven the USA economy is, I fear a hard recession this time....let's hope they pull their way out of it.

What is the formula you are using for inflation adjusted gold? - there seems to be so many theories out there on this?

By the way good call on C. I'm done. cheers.
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Apartmentsba.com
Advanced Member
Username: Saint

Post Number: 295
Registered: 5-2005


Posted on Friday, January 04, 2008 - 11:09 pm:   Edit PostPrint Post

Recessions aren't always easy to spot. Like I mentioned, typically it takes months and months of time before the "experts" can determine when it started but after analyzing a LOT of numbers and information I will agree with many experts including some that have a good track record.

I agree the recession could become more severe and take longer to turn around. There has been sort of a "perfect storm" scenario that I called quite a while ago for those that follow my posts.

As far as gold is concerned, as I mentioned, I'm not necessarily adding on to my current portfolio but again, I think it still has room to go up. Why? Nothing much has changed (nor will I think will change much in the near future). The "worthless dollar" and very low interest rates - which helped gold prices go up in the past year - show no signs that that will slow down. (quite the reverse actually).

As I posted before, until the US Government takes steps to correct things which include stop spending money it doesn't have, getting it's budgets in order, and trade deficits things should continue on their downward spiral rotation. ( consider the fact that the USA has flushed down the toilet u$s 1.5 TRILLION in Iraq and Afghanistan alone.... and counting).

The Federal Reserve keeps lowering interest rates which makes non-interest generating assets like gold become more and more attractive. Add in to the mix that inflation is also creaping in and it adds to the mix.

The USA is a consumer based society. Americans spend, spend spend money they don't really have (the USA government was a bad influence on most Americans). The vast majority of GDP comes from consumer spending. What's going to happen in 2007 (it actually already started) is that consumers are going to get more cut off from credit to keep spending more money.

Case in point. Americans have taken out an estimated u$s 5 TRILLION out of real estate from 2001 to 2005. These are people that can't do this anymore as many people don't have equity in their homes anymore and even the ones that did, the banks aren't so eager to loan out money any more.

Also, factor in that even if consumers could get more money (credit cards, etc) they are feeling really shaky about things because their houses are all worth less, their stock market portfolios are starting to hit the toilet and their net worth is becoming less and less.

Really if you look at the puny single digit returns of the Dow Jones stock exchange last year that pretty much tells the story. A puny 6.43% gain in 2007 and half of that is already gone in the first few days of 2008. You take these kind of forces going on now and the average "Joe consumer" won't be spending as much.

The average American finally figured out that maybe things aren't good. Maybe there are problems. Maybe things aren't "contained" as the government keeps telling them things are. Things certainly are NOT "Contained". As I posted earlier in this thread.... "governments lie". They always have and always will. It's up to YOU to figure out what is going on in your 'backyard' (USA) and around the world.

As far as the formula for inflation adjusted gold prices. Just google.com "inflation adjusted price of Gold" and you will find anything you would want to know. The fact remains that gold prices after you adjust the inflation prices are still very low compared to the high. I'm certainly not saying it to go to $2,000 but I think until I see signs that there is anything to bring gold prices back down to earth I'm not bearish on them.

Thanks for the Kudos on Citigroup. I think if you read my posts from above on what I posted you are now learning what I posted. I knew you would get called out on it (I'm sorry to see that happened) but you can't "fight the tape". Until the banks all get EVERYTHING out on the table and all their books cleaned they won't turn around. As I mentioned, if you are buying for the long-term you are probably ok but you said short term. Actually you said "mid term" but mid-term to me is YEARS and not months. Short-term there was nothing that indicated to me based on my extensive research that going bullish on banking stocks when you purchased was smart.

You mentioned your "investor friend" that told you it would be good. The plain truth is that most "investment advisors" are very bad. There are a few that have a long-term track record of making good predictions on the record and consistently outperform their peers. Most of the "experts" keep in mind have taken a bath in the financial sector and they keep trying to "catch a falling knife". Just when you think it won't stop going down it keeps falling week after week. For me, shorting the financials was the easiest money I ever made as I was 100% certain this was going to happen as you can read about since March when I placed all the pieces together on how bad it was going to be.

I certainly don't advise shorting at these levels. I already covered my short position but there are some pretty intelligent professional investors like Jim Rogers (George Soros's former investment partner) are still short on Citigroup as well as other banks, lending institutions, homebuilders and he just increased short positions on investment banks in the past few weeks. These are NOT good nor bullish signs.

Now those of you that follow my posts know that I have been advising more of a "global approach" to investing for quite a few years now. I did it myself and preached it to my investors and now people are seeing that the advice was sound and made sense. Now, I'm getting large companies that want me to do speeches at seminars and speak about this and my thoughts on globalization.

As a proud American, I'm sad to see the problems in the USA (and the problems that are going to happen in the future --- Yes, they are coming). However, I have seen this coming and I see it coming. It's best to take action instead of blindly just closing your eyes and pretending that everything will be ok.

We live in a time when the USA is NOT the center of the world, the huge financial super power that it once was. It still is a very important country but it's becoming more evident that the BRIC countries (Brazil, Russia, India and China) are up and coming countries to look out for. Look at most of those areas and many others around the world. Even though the USA went through a very lacklaster to bad 2007 many of those countries hade record breaking or stellar years.

I have been consulting and advising large S&P companies to get out of the mentality of concentrating too much on the USA because that is NOT where the money is at. There are tremendous amounts of expansion potentional all over the world and especially in the BRIC countries. There will be new markets that were never there before and they have the potential to make large profits there instead of the USA.

Look at last year's numbers. An estimated 44% of the Standard & Poors companies' revenues came from overseas, up from 32% in 2001. S&P expects that to rise to at least 50% in 2008 so they are starting to read the writing on the wall. The companies that invested overseas do much better than those that don't.

Good fortunes to all.
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Arial
Intermediate Member
Username: Arial

Post Number: 119
Registered: 10-2006


Posted on Sunday, January 06, 2008 - 7:35 am:   Edit PostPrint Post

I am back trying to catch up on this interesting thread. Wanted to comment on Gloria's shock that Dr. Ron Paul would abolish the FED.

Gloria, would you also be shocked that President John Kennedy felt the same and had, in fact, signed an order to take the power to control the currency away from the FED (the bankers) and return it to the US Treasury? Thus, in effect, abolishing the FED? If you doubt this, you can research it on the web and even read the order for yourself.

He was murdered 5 months later.

Try to get the book The Creature from Jekyl Island and read it.
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Gloria Melgar Estevez
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Username: Glorita

Post Number: 24
Registered: 12-2007
Posted on Sunday, January 06, 2008 - 12:12 pm:   Edit PostPrint Post

Thanks Arial...I will try to secure this book on e-bay. This is a very interesting topic of which I have very minimal knowledge on. Funny thing, that this web site is starting to become a History/Economic course for me...I'm loving it! Should you have any other intersting books that may serve me,let me know. Thanks again!
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Dan Sandefur
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Username: Panamadan

Post Number: 14
Registered: 4-2007
Posted on Monday, January 07, 2008 - 10:38 am:   Edit PostPrint Post

Arial,
It is nice to see other folks who are aware of those things about the "fed". That is a great book too, and I have other material on that subject as well.
It should be required reading in any economics or history course, but it is obvious why it isn't.
If everyone knew what the "fed" really is, and its history, things would be much better now, than they are.

I also agree with Gloria, that this thread has become sort of a History/Economics course. That is not bad, since that is the best way to understand crises, and how to deal with them.
Speaking of crises, it is very interesting that the start of 2008 for the US markets was the worst start in 25 years, and gold and oil both hit record highs in the 1st trading week. Especially, since January is historically a good month. Not this year.
I also noticed that most of the International funds sold off badly last week. Even the BRIC funds, and China in particular. The writing is indeed on the wall.
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Dan Sandefur
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Username: Panamadan

Post Number: 15
Registered: 4-2007
Posted on Monday, January 07, 2008 - 11:21 am:   Edit PostPrint Post

For those of you who are familiar with the politics in Argentina, I heard that the last administration was friendly with Venezuela, and you know who, in particular.
Is that true, and if so, is that expected to continue?
What kind of relationship and/or arrangement was there, if any?
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Gloria Melgar Estevez
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Username: Glorita

Post Number: 25
Registered: 12-2007
Posted on Monday, January 07, 2008 - 11:25 am:   Edit PostPrint Post

Hi Dan. I want to mention something about Gold...I bought some gold in 2004 in response to the thinking that the real estate market was going to crash. I remember watching the pundits on tv back then saying that there was not going to be a real estate bubble because people buy homes to live in them long term and they went on to say that if anything we would see regional bubbles. I took the opposite opinion(with my limited economics knowledge) that they were wrong. Firstly,alot of people were buying "second homes", and many more were buying homes at prices they couldn't afford(the only reason they did get into them is because of the lax loan practices that today we are crying about). Anyhow, I bought gold thinking that "sooner or later" this was going to explode. So, now Gold is at $800....I recall I bought around $500.....I remember my brother laughing at me......I must say that I did question my rational. But I have since learned that you need to buy when a "Few people" are saying to buy anything. I think a few posts up Mendoza states that "EVERYONE" is saying to buy gold. I don't know if I'm right or not but when I see the word "EVERYONE", you may be too late or close to the peak.
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Dan Sandefur
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Username: Panamadan

Post Number: 16
Registered: 4-2007
Posted on Monday, January 07, 2008 - 2:51 pm:   Edit PostPrint Post

Gloria,
That is generally true, that when "everyone" is saying to buy something, it is probably time to sell it, and vice versa too.
As Warren Buffet said, "Be greedy only when others are fearful, and be fearful only when others are greedy".
However, I do not think this applies to gold right now, or anything else that is not near its peak. I think gold and most other metals and commodities are far from their peaks now, but I may be wrong. Agricultural commodities, oil, uranium and precious metals in particular. I think platinum hit a new record high last week too, and soy beans and corn hit new highs in December. A pattern is definitely emerging.
BTW, I first bought most of it around $600, and then more around $800. It is still around $860 today, and I still think it will break $1000 this year or next.
If and when it does, I will still get a nice return even from what I bought at $800.
In 2007 alone, it returned around 30%. Not too shabby. Much better than the general stock market.
I do agree that it is getting too expensive for many people to continue buying. That is why I will buy futures options from now on instead. They have much less cash outlay than buying the actual commodity, so you get much more bang for your buck (ROI).
If prices go down, you can still profit by shorting it with puts and/or spreads. That way you can also hedge your commodity holdings with futures options. Just in case they do go down, which I think is unlikely this year.
Since the USD and gold have always moved in reverse to each other, you will know when gold is near a peak. When the USD suddenly reverses its fall, and starts to go up. With another big "fed" rate cut expected later this month, it won't be any time soon.
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Apartmentsba.com
Advanced Member
Username: Saint

Post Number: 303
Registered: 5-2005


Posted on Thursday, January 10, 2008 - 9:47 pm:   Edit PostPrint Post

Yeah, I bought Gold as well when I left the USA and moved to Argentina. That was back in 2004 just like Gloria. I also saw the real estate situation there where they were handing money out like candy on Halloween to anyone that would knock on your door! I think we all know how that turned out.

That was also the time I started buying up real estate in Buenos Aires. At the time many people in the USA and UK thought I was nuts. Everyone said I was crazy.

I wouldn't base your investment strategy based on what "everyone" is saying or doing. Go into each investment objectively and see the reasons for investing in any given investment. Also, look at your time horizon for the investment.

Just go back on this message board in 3 years or less and you can see some of us that posted various stategies on various investments and it's not coincidence that they are coming out a certain way. Not to point out individual stocks but even take the example from the board that was mentioned. You can see thought processes of timing of when to be bearish and when to be bullish and the reasons why.

"Investing" is not difficult. These days they call "investing" buying any stock, buying any mutual fund, any piece of real estate or any other object. That isn't difficult. The difficult thing in true investing is looking at the reasons why you should buy or why you should short (or go negative) on an industry or company or country or currency. Those that can do it accurately over any reasonable period of time can accumulate untold fortunes.

EVERY single "investor" should download a compound interest spreadsheet and look how fast money doubles if you are making good returns every year over periods of time. The best advice I got when I graduated college was to put together a compound interest spreadsheet and stick with it. If you have a situation graduating from college and saving $20,000 and earning 12% a year and only adding $20,000 each year you can become a millionaire fairly quickly while you are still young (mid 30's). Then consider if you can get higher returns per year or if you can sock away more than $20,000 a year.

Many people are making very good money or executives or consultants, doctors but they blow all their money because they think it will always be easy to make. One thing I really learned is the older you get the more difficult it becomes to make money so make as much as you can as fast as you can over time. Then get that money working for you in a good investment.

Too many people are looking for a get rich quick type scheme and really there are no true get rich overnight type investments. It's slow and steady that will make you a millionaire (or billionaire).
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WTMendoza.com
Member
Username: Welcometomendoza

Post Number: 97
Registered: 7-2007


Posted on Friday, January 11, 2008 - 1:57 pm:   Edit PostPrint Post

these are some good points and I will add and clarify that the bigges reason why "everybody" says to do something is the lack of understanding of that "something" by most of "everybody".

Somebody else recently posted that when "everybody" includes your hairdresser, the newspaper guy, the janitor, etc...that's when to really look out (of course I mean no-disrepstec to those trades).

Every investor should have a exit plan on any given investment whether it's a few months, a year, 10 years, or 30 years, or price points, because without even a provisional exit plan it becomes more difficult.

I know countless folks who bought at pretty good price points during the Internet bubble in and around 2000 and rode the stocks all the way up, and then past down below their entry price - they did not could lock in a 100% gift horse if their life depended on it. Fear and greed are such strong emotions that most of us can't properly deal with them properly, hence why it is also so important to work with a financial advisor if you find a good one.
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Apartmentsba.com
Advanced Member
Username: Saint

Post Number: 304
Registered: 5-2005


Posted on Friday, January 11, 2008 - 4:42 pm:   Edit PostPrint Post

I hate to say I told you so but read what I posted on December 12, 2007 about American Express and their clients that would default on their accounts and also what I posted about a slowdown in consumer spending.

Like I posted before, RESEARCH, RESEARCH, RESEARCH and watch the trends so you can see what will happen AHEAD of time. Cheers all.

PS - Look what I sold about gold prices that were going to hit u$s 900 this month. (Worldwide Economic Trends section). I didn't expect it to almost hit it a day after I wrote that!

Also, I agree with Mendoza that one can never go broke taking profits off the table but still never sell a good investment if it's making solid returns and you see nothing negative with the investment. Only sell it if you can buy something else and get better returns. That's my philosophy and it's worked out pretty well over the years.





http://www.reuters.com/articlePrint?articleId=CAN1 132051920080111


US STOCKS-Wall St indexes drop as US consumers cinch belts

Fri Jan 11, 2008 4:29pm EST


By Jennifer Coogan

NEW YORK, Jan 11 (Reuters) - U.S. stocks fell sharply on Friday, capping a third consecutive weekly decline, on a warning by American Express Co of mounting credit-card defaults and a slowdown in consumer spending.

Worries about consumer belt-tightening hit stocks from across the board -- from fast-food chain McDonald's Corp to Tiffany & Co. The luxury jeweler cut its profit forecast on weak consumer spending.

Evidence that individuals reined in their usual holiday spending last year came from SpendingPulse, a private retail data service, which said spending, excluding sales of gasoline and autos, fell 0.7 percent in December.

"Consumers were not expected to spend much and they spent even less than that," said Fred Dickson, director of retail research at D.A. Davidson & Co in Lake Oswego. "The markets right now are very much in recession mentality."

The Dow Jones industrial average .DJI ended down 246.79 points, or 1.92 percent, at 12,606.30. The Standard & Poor's 500 Index .SPX fell 19.31 points, or 1.36 percent, to 1,401.02. The Nasdaq Composite Index .IXIC dropped 48.58 points, or 1.95 percent, at 2,439.94.

The S&P 500's year-to-date decline of 4.59 percent makes it the fourth-worst start to any year in the history of the benchmark, according to Howard Silverblatt, senior index analyst at Standard & Poor's in New York.

For the week, the Dow shed 1.5 percent, the S&P lost 0.8 percent and the Nasdaq declined 2.6 percent.

American Express shares dropped more than 10 percent to $44 after the credit card company gave a profit warning. It was the steepest plunge in the company's shares since the first day the stock markets reopened following the Sept. 11, 2001 attacks.

Shares of McDonald's skidded 6.6 percent to $54.32. Tiffany stock shed 11.2 percent to $35.80.

Also on Friday, Bank of America Corp said it would buy battered mortgage lender Countrywide Financial Corp for $4 billion in stock in a transaction that could help avert one of the biggest collapses from the U.S. housing crisis.

Before the deal was announced, Bank of America had a roughly $1.3 billion paper loss on the $2 billion it had already injected into Countrywide.

Moody's Investors Service said it may cut Bank of America's credit rating. Shares of Countrywide slid 18.3 percent to $6.33. Bank of America set the takeover terms at a discount to Countrywide's share price at Thursday's close. Bank of America's shares fell 2 percent to $38.50.

Elsewhere in the financial sector, AllianceBernstein Holding LP shares dropped nearly 10 percent to $69.70 after the money manager said it sees lower 2007 earnings per shares, partly due to lower hedge fund fees.
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AMARAGGI
New member
Username: Amar

Post Number: 6
Registered: 12-2006
Posted on Friday, January 11, 2008 - 4:58 pm:   Edit PostPrint Post

I wonder if this starting recession in the US will affect tourism and spending in Argentina and consequently hurt the real estate growth here?
Is there any chance that the peso appreciates against the dollar making things even more difficult for US travellers?
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Roberto
Board Administrator
Username: Admin

Post Number: 1445
Registered: 12-2004
Posted on Friday, January 11, 2008 - 8:55 pm:   Edit PostPrint Post

I might be able to answer the first part (tourism)... Argentina has enormous inflows of foreigners ex-US. If the recession is contained only to the US tourism in Argentina should not be affected. I believe the same may apply to real estate. If the slow down spreads significantly Argentina might get hurt on other fronts (agricultural exports, etc).
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WTMendoza.com
Member
Username: Welcometomendoza

Post Number: 98
Registered: 7-2007


Posted on Saturday, January 12, 2008 - 5:43 am:   Edit PostPrint Post

2 years ago I predicted that either:

1) The peso would appreciate against the dollar, caused by the stop or slowdown of the central bank aggressively buying (now they call it absorbing) millions of dollars every day to keep the dollar strong
2) The central bank would keep the dollar where it's at (roughly 3 to 1), but that inflation would kick in hard enough to create a real effect where the dollar has less purchasing power.

So far the latter has played out and real inflation has ranged from 10 to over 20% percent in some industries and products here, and the peso has shed about 2.6% of it’s value in 2007, primarily due to the third/fourth quarter manipulated move by th Argentine government of the dollar from about 3.06 to about 3.15

Unless Argentina can kick this multi-generational inflationary drug, the real purchasing power of a dollar here will continue to diminish until the next “adjustment” . Not to mention what next the central bank has up their sleeve. Some good news is that Argentine central bank reserves are very high now, mostly because of all the dollars they are buying. Will they put it to good use?

Nobody here wants to go though another meltdown like has historically happened in 2001 (very dramatic), late 80's, early 80's etc...but everybody who is old enough to remember the earlier crises seem to now expect it at some point. Talk about self-fulfilling prophecies.

The good news is that the dynamic of the economy here and many countries in the world are more organized than days of yore, and hopefully governments are learning from prior experience and new knowledge and understanding.

A great book I recommend is

"And the Money Kept Rolling In (and Out): Wall Street, the IMF, and the Bankrupting of Argentina"
by Paul Blustein

This book was written a few years ago after the 2001 crash, and if all true, provides incredible and absurd insight into how things went down. Hopefully some key people learnt from this.

I would be willing to bet that here in 2008, the central bank will “adjust” their daily manipulation of the dollar-peso exchange rate , probably nudging the dollar upwards to range in the 3.50 level against the peso, so as to at least try to keep stimulation of tourism and exports, while keeping up with inflation.

On the other hand, several Argentines have told me they fear some kind of economic event after March which could impact the average Joe here.

The utility companies have also announced plans for gradual rises of current artificially low rates here in 2008 – so that will come into play also.

As I always recommend, if you are on a USA Dollar, Canadian dollar, Sterling, or Euro budget, just pad your budgets by at least 20% or more, and you should be fine.
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Apartmentsba.com
Advanced Member
Username: Saint

Post Number: 306
Registered: 5-2005


Posted on Saturday, January 12, 2008 - 9:19 am:   Edit PostPrint Post

Well, 6 years ago back in 2002 I predicted that:

1) Tourism would explode here and we would have year over year increases for at least 5 years.

2) The exchange rate would fluctuate in a trading range from 2.75 - 3.25 with the US $.

3) Real estate prices would drastically increase driven by the local market and foreigers discovering Argentina.

4) The economy would significantly improve.

5) Unemployment rates would drastically go down.

6) The export market here would skyrocket.


ALL of these things came true. Any reasonable person knows these aren't "lucky guesses". Many experts were making opposite claims when I made these predictions. It's easy to play Monday morning quarterback now but I made these predictions at a difficult time for Argentina.


Honestly, for me the next 5 years are much tougher to call and predict. Argentina has a good history of shooting themselves in the foot over prolonged periods of time. Still, as a serious investor I don't invest in things in Argentina that have big amounts of risk. I get many, many, many business plans each month from people that want me to finance their projects. Most of them are bad and the ones that look promising I usually take a pass on as well. Why? Because it doesn't make sense to invest in something risky in Argentina. Making in an investment in Argentina is NOT the same as making an investment in the USA or UK or other 1st world country.

This is the reason why even today I mostly only invest in real estate here in Argentina. I'm buying more today (for both myself and my clients) then I ever bought years ago. I wouldn't be continuing to buy real estate if I didn't think the potential would be good with both cash flow via rentals and future capital appreciation potential. I think NO ONE should have to be talked into buying real estate here in Argentina (or South America). As I said before, it's NOT for everyone and as I mentioned before, most people probably are NOT good candidates to buy in Argentina with the 100% cash system. The investment is for serious investors that have the cash without having to take on ANY credit or financing back home to purchase here. It's NOT for short-term investors. Real estate investment in South America I recommend for investors that have a middle to long-term range investment horizon. And my idea of middle to long-term horizon is 3-5 years or more for "long-term" investment. I'm NOT saying you can't make money investing short-term here but you have to factor in all the fees associated with buying and selling including realtors fees, legal fees and closing costs, stamp taxes, transfer taxes when selling, money transfer fees, etc.

There are so many plans for things like restaurants, stores, and other things that I really don't like. The safest play investment I believe in Argentina is real estate and I think any local would agree with this statement. I also like the combined play of real estate and tourism so things like hotels I also like.

Mendoza - I've been recommeding that book for years to people to read. It's a good glimpse of what went on.

The recession that is going on in the USA I don't believe will have any serious effect on Argentina real estate because the locals (as I mentioned many times) are still driving the market. And the truth is that there is even more foreign interest in real estate in Argentina now vs. several years ago. Argentina is now on the radar of many foreigners where as before it wasn't. Now you get magazines and travel publications naming Argentina one of the best places to visit in the world.

Then factor in the fact that during recessions people look for more "value" type destinations and forget about Europe. With the weak dollar tourists tend to go to places that are more value oriented and few places around the world can match Argentina for "value for the money" so keep this in mind as well. They will NOT be going to Europe.

I strongly also believe with Roberto and the comments he correctly made. The USA might be in the start of a recession but you sure wouldn't know it by the # of tourists in town. The city is packed with Americans but they are also packed with British, Europeans, Australians, and now I'm seeing more tourists start coming from Asia. Traditionally there has been no real tourism market to Argentina from Asia but this will slowly change.

One thing I've noticed over the years is many more tourists from Brazil are coming to Argentina as their currency is strong and has the possibility to get even stronger. Argentina is VERY cheap for them to visit. Go to the south in Bariloche during peak season and you hear more Portuguese than Spanish or English.

Also, with the strong Canadian Loonie many more Canadians are coming to Buenos Aires and Argentina as well. As I posted before, the strength and the importance of the USA really around the world has really diminished over the years. The developing nations will have a lot more importance as a whole than the USA I believe and other institutions like the World Bank are also citing these types of things.

The amount of weath that will be created in the BRIC countries and developing nations around the world will be astonishing so look out for those trends over the next few decades.

Lots of things here need to change for Argentina if they really want to improve for long-term beneficial gains/changes. They make a lot of mistakes thinking short-term what might be good for the country but neglect to think further out what would be beneficial for Argentina. IMHO, that is why they experience problems every 10 years or so.
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Roberto
Board Administrator
Username: Admin

Post Number: 1448
Registered: 12-2004
Posted on Monday, January 14, 2008 - 3:17 am:   Edit PostPrint Post

> Some good news is that Argentine central bank reserves are very high now, mostly because of all the dollars they are buying. Will they put it to good use?

There were very high bank reserves during the 90's too, while the government was selling out anything they could. That didn't prevent the gigantic problems at the end of that decade. As I see it, the only real figures that count are the investment dollars. I haven't checked lately but I seriously doubt there has been any change in the investment outlook during the last few years of prosperity. In other words, has Argentina set a solid ground for future growth or at a minimum keep pace with the other emerging markets? Probably not. And just like sharks, if you do not grow (swim) you go down. Two things can happen: either inflation gets out of control (economic entities raise prices as oppose to increase production) or the capacity completely breaks down... as you can see in the daily news.

Sharing one last thought here... has anyone thought how much money someone could be making by playing argentine bank deposits at 8% or 9% a year (if not more when playing local bonds) all the while us dollars are kept steady at the current exchange? The day/week before the party is over *that* someone will be making huge amounts... in dollar terms.
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Arial
Intermediate Member
Username: Arial

Post Number: 123
Registered: 10-2006


Posted on Tuesday, January 15, 2008 - 2:35 am:   Edit PostPrint Post

Roberto, you raise some interesting subjects.

First you said the Argentina banks are flush with reserves because of all the dollars they are buying and that is good. Why are they buying dollars when they are falling faster than any other currency that I know of unless it is Zimbabwe! Is that good?

Also, if there is little investment in the country it is usually because of government interference, i.e., taxing, regulations, and controls on business. Those things stifle growth and cause companies not to want to risk investment. If a country wants investment it is necessary to get government pretty much out of the mix except to the extent of their responsibility to create a safe business climate by protecting private property rights, enforcing contracts, controlling crime, etc.
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WTMendoza.com
Member
Username: Welcometomendoza

Post Number: 100
Registered: 7-2007


Posted on Tuesday, January 15, 2008 - 12:32 pm:   Edit PostPrint Post

Roberto and Arial, agreed, resereve were high last time around late 90's - that I book I mentioned will help understand where alot of that money went. That's a good question about the 8 and 9% deposits - I hope someone sounds in on that.

ApartmentsBA - with all due respect, except for the trading range (2.75 - 3.25) those were some fairly easy predictions to make, and many on the ground or familiar with Argentina were making those predicitons with ease as maany property prices got overnight 50% to 75% haircuts (not to mention the painful "gotta sell" mood of some owners who eventually needed some money to crawl out of their holes) , and overnight exporters got 3 times as much money for their exports as they did the the day before the crash, and as one of the most expensive tourist destinations in the world, suddenly became one of the cheapest. Add in the Internet factor just really taking off at that time and it's like a huge viral marketing affect. I remember popping in to BA and also into an important provincial town along route 7 at the end of 2002 , and could just literally feel the commercial actvity buzz going on around me like crazy. I mentioned this to the very jaded and stilll-pissed off locals, who dismissed it as an aberration. The media did a fantastic job of scaring the living daylights out of the rest of the world with frantic scenes of bank window smashing and people running for the airports. So indeed it does take brave souls to start investing right there and then, heck ABA I don't blame you for waiting 1.5 years after the crash before even to start buying property, it takes a strong gut and a lot of due diligence which you and some others had. But it is true - everyone I know that was down here fishing for properties in 02 and 03, are kicking themselves now for not buying more, etc...now it seems prices are kind of back close where they were just before the crash..as a rough average...what do you think?

On a separate , but thread-related note, here is an interesting article today:
Emerging-Market Bonds Fall After U.S. Retail Sales Decline

By Lester Pimentel

Jan. 15 (Bloomberg) -- Emerging-market bonds fell, sending yield spreads to their widest since November, after a U.S. report showing retail sales unexpectedly dropped in December added to concern that the world's biggest economy is faltering.

The spread, or extra yield, investors demand to own emerging-market bonds over Treasuries widened 7 basis points to 2.64 percentage points at 10:26 a.m. in New York, according to JPMorgan Chase & Co.'s EMBI Plus index. The yield gap, which has swelled 25 basis points this year, is the widest since Nov. 27.

Debt spreads for Venezuela and Argentina, among the highest- yielding countries in emerging markets, swelled more than 10 basis points as investors shunned all but the safest securities. The U.S. retail sales report heightened speculation that a slump in the world's biggest economy will erode demand for exports from developing nations, curbing growth.

``The report keeps the focus clearly on the deteriorating state of the U.S. economy,'' said Nick Chamie, head of emerging markets at RBC Capital Markets in Toronto. ``There will be a material spillover into emerging-market growth.''

The yield on Venezuela's 9 1/4 percent bonds maturing in 2027 jumped 14 basis points, the most since Dec. 19, to 8.95 percent, according to JPMorgan. The bond's price fell 1.34 cents on the dollar to 102.75. The average spread on the oil-exporting country's dollar debt rose 19 basis points, or 0.19 percentage point, to 4.97 percentage points.

The yield on Argentina's benchmark 8.28 percent bonds due in 2033 climbed 9 basis points to 8.69 percent, according to JPMorgan. The security's price declined 0.90 cent to 95.50, the lowest since Jan. 9. Argentine dollar bonds yield 4.29 percentage points more than U.S. Treasuries, up 13 basis points from yesterday.

Citigroup's Record Loss

Purchases at U.S. retailers fell 0.4 percent last month, the Commerce Department said. The median forecast of 74 economists surveyed by Bloomberg News was for sales to be unchanged.

The U.S. may already have entered a recession, or will do so shortly, former Federal Reserve chairman Alan Greenspan told the Wall Street Journal in an interview published today. The U.S. is the biggest buyer of developing nations' exports.

Demand for higher-yielding, emerging-markets also weakened after Citigroup Inc. posted the biggest loss in the U.S. bank's 196-year history as surging defaults on home loans forced it to write down the value of subprime mortgage investments by $18 billion.

The risk of owning Venezuelan bonds climbed today, according to Bloomberg data. Five-year credit-default swaps based on the country's debt rose 10 basis points, the most since Jan. 4, to 457 basis points. That means it costs $457,000 to protect $10 million of the country's debt from default.

To contact the reporter on this story: Lester Pimentel in New York at lpimentel1@bloomberg.net
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WTMendoza.com
Intermediate Member
Username: Welcometomendoza

Post Number: 101
Registered: 7-2007


Posted on Tuesday, January 15, 2008 - 12:46 pm:   Edit PostPrint Post

It's interesting the first lady didn't make one speech during her campaign for president - she often sounds like just a mad mom.
She has quite a battle ahead, i wish her the best...

Argentina cuts local energy supply, bans exports

Eric Watkins
Senior Correspondent

LOS ANGELES, Jan. 14 -- Argentina's President Cristina Fernandez de Kirchner has blamed global warming for current energy cuts and export controls her government is imposing following a heat wave last week.

"These major changes in temperature haven't come out of nowhere, they have a direct link to the environment" said Fernandez, whose husband, former President Nestor Kirchner, has been blamed by critics for his failure to address the problem of supply.

During his time in office, Kirchner repeatedly criticized oil and gas companies such as Repsol-YFP SA and Petroleo Brasileiro SA (Petrobras) for not investing enough, while the companies called for the government to raise domestic prices in order to create a better climate for investment.

President Fernandez said there were more that 50,000 simultaneous power cuts on Jan. 8 after demand peaked. She said electricity supply had been disrupted to almost 6% of the grid as a result of the high temperatures, with some 1.2 million people affected—some 300,000 in Buenos Aires alone.

To reverse the situation, GE Energy in December said it would supply 20 natural gas-fueled Jenbacher generator sets for a new 30 Mw power plant being built to support the regional grid as well as oil and gas field production requirements in southwestern Argentina as the country seeks to overcome its energy shortages.

full story:
http://www.pennenergy.com/display_article/316899/7 /PRARC/none/GenIn/1/Argentina-cuts-local-energy-su pply,-bans-exports/
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Apartmentsba.com
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Username: Saint

Post Number: 316
Registered: 5-2005


Posted on Tuesday, January 15, 2008 - 2:28 pm:   Edit PostPrint Post

With all due respect, it's VERY easy to play "Monday morning quarterback" now but I disagree with you that those were "easy predictions" and there are millions of people that would agree with me. When I started investing in Argentina there was a LOT of uncertainly and people were nervous and certainly there were a LOT of people that had no clue how the economy would turn out, real estate values certainly there were many more people that said they would stay flat or possibly go down, no one had a clue of the exchange rate. Most people I talked to back then had to clue what the tourism potential would be. In fact, a lot of people laughed at me (including many locals that lived here all their lives) when I told them how tourism would jump up millions of tourists per year. I find it pretty comical that you say those were some easy predictions. There are a lot of people that would disagree with you.

When I started moving money in here in 2003 people were very nervous and it's the exact opposite of how you are trying to make it appear. Like I said, today I see a lot of people playing Monday morning quarterback.
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WTMendoza.com
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Username: Welcometomendoza

Post Number: 102
Registered: 7-2007


Posted on Tuesday, January 15, 2008 - 4:41 pm:   Edit PostPrint Post

ApartmentsBA , I don’t want to get into a pee contest with you, especially in light of your impressive and obviously dedicated run here in Argentina since 2003/4.

Your posts here are appreciated by me and surely by many others also.
Your experiences that you post here and on your website are very valuable.

Monday morning quarterbacks on this Argentina nowadays are not even out of bed yet. That will probably be at the “end” of the next “cycle” ..hopefully we don’t get there.

I think you will agree with me that investing in Argentina in 2008 is a little more concerning than in 2003 when brains won over fear, like in your case, and many others who were following the news and the trends and the articles from 2003 by Forbes, Latin Finance, and the Wall Street reports and other publications and word-of-mouth that the “smart money” was following. The big 2003 news about Argentina was that it was a great investment for bargain hunters, etc, etc…always with the age-old caveat here in Argentina that if the locals don’t reinvest into the infrastructure, that they are going to end up in chaos one day again.

If you find it comical that I say that they were fairly easy predictions in 2003, then I find it comical that you claim to single-handedly had made all those predictions and that all the other smart money had no clue and were just buying blindly.

What does indeed make the difference between an investor and somebody that invests and executes (like you have), obviously impacts the return and the perception.. Nice Job.

Again, I say all this with true due respect, cheers.
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Apartmentsba.com
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Username: Saint

Post Number: 319
Registered: 5-2005


Posted on Wednesday, January 16, 2008 - 9:01 pm:   Edit PostPrint Post

As I predicted, credit card debt would increase. Go back and read my posts on this matter. I'm glad to read of banks now saying things like "2008 will be challenging" instead of things like "our exposure is limited or things are contained". The credit loan losses should drastically increase in 2008 as the banks are now at least accounting for. Personally I think they are being conservative with their estimates but I guess they can always set aside for more losses in the future.




JP Morgan warns of credit card woe as it loses $1.3bn

Published: 17 January 2008


JP Morgan Chase, one of the biggest high street banks in the US, warned yesterday that over-stretched borrowers are struggling not just with their mortgages but also now with credit card bills and car loans.

The company sharply increased its reserves to cover the cost of bad loans, and Jamie Dimon, the chief executive, said that 2008 was going to be an extremely challenging year for the retail banking industry.

His comments came as JP Morgan revealed that the investment banking side of the business had been less severely affected by the collapse of the mortgage derivatives market than many of its peers. Where long-time rival Citigroup had admitted losses of $18.1bn (£9.2bn) a day earlier, JP Morgan said it would be writing down the value of its mortgage-backed assets by $1.3bn. That was less than many analysts had forecast, and gave the lie to the rumours of big losses that had pushed JP Morgan shares down.

Yesterday, they snapped back, up more than 7 per cent by lunchtime, and restored some confidence to the broader US stock market.

Overall, JP Morgan posted a profit of $2.97bn for the final three months of 2007, down 34 per cent on the year before. Mr Dimon said the diversified nature of the group had helped keep the decline to a minimum, since profits in the asset management business and continued modest growth in the Chase retail bank helped offset the 88 per cent fall in investment banking profits.

The company said it would set aside an additional $2.54bn to cover loan losses, more than double the figure for the fourth quarter of 2006 and also up sharply from the $1.79bn in the previous three months.

Mr Dimon said that increasing numbers of US borrowers were getting into arrears, particularly in areas of the country where declining house prices have thrown people's personal finances into difficulty.

"On all consumer credit – auto loans, home loans, sub-prime mortgages, credit cards – where home prices are down, delinquencies and charge-offs are up," Mr Dimon said. "We remain extremely cautious as we enter 2008. If the economy weakens substantially from here it will negatively affect business volumes."

Analysts warned that investors needed to move beyond relief that the investment banking business stayed in the black in the fourth quarter. "JP Morgan is exiting one set of problems and writedowns in one part of the company but now must face more significant issues in the other half," Deutsche Bank analyst Mike Mayo told clients.

Wells Fargo, the sixth-largest bank in the US, also reported financial results yesterday, and set aside $1.4bn in extra cash to cover bad debts. "We expect the environment to remain challenging in 2008, particularly in the consumer sector," said John Stumpf, its chief executive.
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Gloria Melgar Estevez
Junior Member
Username: Glorita

Post Number: 29
Registered: 12-2007
Posted on Thursday, January 17, 2008 - 9:58 am:   Edit PostPrint Post

Fed ready to cut rates...Jan29....could be sooner as they are talking about an "emergency rate cut". Will a rate cut make a difference?...and if so, will it be significant enough to overcome the problem?
Also, President Bush wants to give a "stimulus package"...I read something about $600....now, really!!....what can $600. accomplish. For a person seeing his mortgage double or triple, what good is $600.


Will a US recession have ripple affects on other world economies?...especifically real estate...can we see real estate in Europe plunge now too?....

The stock market has been a fast moving scary rollercoaster lately!.....I have sat steady for years and years never touching my mutual funds....diligently putting in an equal amount every month....must say however I'm getting nervous about it. I have however told myself that no matter what happens, I will keep the same plan...so far it has worked out....

I'm now waiting for some rock bottom prices so I can get into some more real estate here....will be paying as they do in Argentina...CASH. My mom is also going sitting with CASH ready to add to her real estate portfolio. I think that alot of us cash hoarders will be coming out of the woodwork, when the s**t hits the roof.
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Apartmentsba.com
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Username: Saint

Post Number: 322
Registered: 5-2005


Posted on Thursday, January 17, 2008 - 4:57 pm:   Edit PostPrint Post

Of course the government will cut interest rates. That much is obvious from everything going on. I've posted about this in detail for the past year of the bad situation the USA has put themselves in.

Exactly as you mentioned Gloria! What good will $600 due? Not much except families will go out and spend that money. Which will be good for the economy but nothing significant. It's getting to be a pretty bad scenario and many people are realizing now (although the government is not admitting it) that we are in a recession here. It's certainly NOT a desperation situation here but it's never a good sign when the USA's biggest banks are pleading with foreign governments to help bail them out. I posted before that what happened with the situation in the UK with Northern Rock and people waiting in line to withdraw funds could happen in the USA someday. I'm sure people laugh when they read something like that.

I think these same people were laughing at me a few years ago when I said the housing market would fall due to all these silly liar loans. As I mentioned before, people laugh at what they don't understand.

Certainly the US recession will have an effect on other world economies. That is a given. But as I posted before, the developing countries are more significant to the worldwide growth and they are growing 3 times faster than the USA. Don't discount the developing countries and their role on the world economy. But yes, people will feel it in other parts of the world.

As far as real estate prices. I've been saying for 2 years now that prices in the USA were going to do what they are doing now. I posted last year that prices in the UK would fall. Which is happening now. The UK is just as bad as the USA handing out all this "free money" to people that shouldn't be getting them or can't afford them. Expect to see problems in the UK as i mentioned before.

Real estate prices in other parts of Europe have already started to fall. I travel all over the world each year and I evaluate investment opportunities. I spend over 100 days per year in hotels traveling the globe. Look at what is happening in Spain with prices falling. Look at Ireland and other places where financing was too easy.

I think in many areas in Europe property prices will shift downward over the next few years. I'm not saying everywhere but in areas where they made credit and financing too easy. This has consequences.

Real estate isn't always a good investment for everyone. Remember I've always maintained and stress to my clients as well. Real estate is a LONG TERM investment. It's not for everyone. As I always mention. Don't just buy real estate to buy real estate because you think it's cheap. Have a game plan. Look at the expenses, look at the cash flow, look at the taxes, look at the possible appreciation potential. Real estate is a VERY serious investment.

As I mentioned, when I buy real estate I keep all these things in mind. I look for cash flow positive opportunities. I do look at capital appreciation potential as well but I want the property to easily pay for all the ongoing expenses including condo fees, utilities, insurance, property taxes, management fees, etc.

The sad and scarey thing is that in many places in the USA and especially Europe in many of the countries I visited over the years including in Australia. It's just about impossible on many properties to be cash flow positive when you factor in utilities, property taxes, expenses, condo fees, insurance, etc. Impossible in many areas.

So in real estate I look to be cash flow positive. Certainly real estate is NOT a get rich quick overnight type scheme and it should NOT be looked upon as such. But you know what? It's slow, steady appreciation and cash flow that can make you a millionaire. You don't have to make mind boggling returns. So my advice no matter where you are buying real estate is to look at all these things. I own real estate in several countries now. I always keep all of these things in mind. Also, consider capital gains taxes when you sell. Look how the laws are structured with capital gains taxes. I like countries that have 0% capital gains taxes or very low capital gains and other taxes when you sell. Keep this in mind. Maybe you never plan to sell the real estate but from my experience no matter what you might have planned in the past that can change so keep this in mind.

In this type of scenario I prefer to invest in real estate in areas that have good cash flow potential that will pay for all ongoing monthly/yearly expenses and will still generate cash flow all the while having good capital appreciation potential. I look for areas with low monthly expenses, low utility bills, low insurance and preferably no capital gains taxes when you sell. I also look at exchange rate plays that help the investment. What do I mean by this? For example, areas where you pay your expenses in a local currency yet you can charge another currency for rentals.

Case in point... Argentina. ALL your expenses are in pesos yet the rental income is in dollars. So you have that arbitrage helping you. Consider that the utilities are all subsidized so they are EXTREMELY cheap. The government doesn't allow the utility to raise prices (or severely limits them). So electricity bills are something like u$s 15 per month for a 1 bedroom apartment. Water bills are something like $5 a month. Gas is dirt cheap at around $5 a month or less. Condo expenses are set and in pesos and don't typically go up too much.

In this situation, you are playing on the situation and benefiting from it as your income is in dollars yet your expenses are in pesos.

People can try to argue that "inflation" is a factor. But you know what? Really for people that own or an investor here it's not really a factor. Why? Because your main set monthly expenses like condo fees (which typically is your biggest expense), utilities are all fixed. Even if the utility rates went up 100% (which they never would), it doesn't really affect your bottom line because a gas bill that goes from $3 to $6 a month isn't anything. Water from $5 to $10 if it went up 100% (which it won't) doesn't affect your bottom line much. Most of the set monthly expenses are all fixed so there are no big surprises TYPICALLY. Of course this could change if the exchange rate were to drastically change but I don't see that happening. You have the ideal situation here where the government is actively supporting the US dollar and buying dollars anytime the peso gets too strong. This might not be good for the locals but if you own the real estate it's something that you should note.

Please don't take this post for a reason why you should invest in Argentina because that is NOT the point of it. I'm merely using an example of what to look for and the factors in international real estate if you aren't buying to live in it.

The first few weeks has proven how volatile the stock markets all around the world are. In this kind of scenario I'd rather own 3 things: (1) Cash ; (2) real estate that is all paid off with no mortgages that spins off good cash flow each month; (3) commodoties like Gold (as I've mentioned before on this forum).

Now I've heard people for the past year argue with me saying that the USA dollar is too low or gold is too high but I ask them to give me a few reasons why? I mean good reasons and you know what? Most of them can't give me good credible answers. (Kind of like the scores of people that have tried arguing with me since 2005 saying real estate prices in Buenos Aires were high and wouldn't go up anymore.... I asked them for reasons why and their only response was that it already rose drastically which isn't a good argument and history has proven they were clearly wrong. Granted it won't go up forever but so far they were wrong in 2003, 2004, 2005, 2006, 2007) They only say that it's had a big climb. Well that isn't a good answer. Ask them for justifications and their rationale why they believe it's a bad investment.

I hope this helps. Best.
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WTMendoza.com
Intermediate Member
Username: Welcometomendoza

Post Number: 107
Registered: 7-2007


Posted on Monday, January 21, 2008 - 11:51 am:   Edit PostPrint Post

here are some interesting clips from the last several days on "Preparing for the next crisis"

source: http://www.bloomberg.com/apps/news?pid=newsarchive &sid=apPFunTx7CcY

Argentina Has First Monthly Budget Deficit Since 2004 (Update1)

By Bill Faries and Mirta Fernandez

Jan. 16 (Bloomberg) -- Argentina reported a monthly budget deficit excluding interest payments for the first time in three years on higher social security spending and subsidized loans for small businesses.

The primary budget deficit was 1.2 billion pesos ($380 million) in December, down from a surplus of 1.9 billion pesos in November, the economy ministry said today in a statement in Buenos Aires. Argentina reported a surplus of 25.7 billion pesos for 2007, about 3.2 percent of gross domestic product.

``A surplus of more than 3 percent is unprecedented in Argentina's history,'' Treasury Secretary Juan Carlos Pezoa told reporters at the ministry. ``We're convinced that in 2008 we're going to have the surplus necessary to sustain growth.''

Argentine President Cristina Fernandez de Kirchner has said that maintaining a budget surplus and a cheap peso helped Argentina recover from a financial crisis in late 2001, when South America's second-largest economy defaulted on about $95 billion of bonds.

Deputy budget secretary Raul Rigo attributed the December deficit in part to higher social security spending as more citizens switch to government plans from the private sector and on programs to benefit small and medium-sized companies.

To contact the reporters on this story: Bill Faries in Buenos Aires at wfaries@bloomberg.net

Last Updated: January 16, 2008 18:34 EST


source: http://news.xinhuanet.com/english/2008-01/19/conte nt_7450937.htm


Argentina announces new measures to stabilize economy

BUENOS AIRES, Jan. 18 (Xinhua) -- The Argentine government Friday announced a series of new measures to stabilize its economy and financial markets in the event of a reemergence of the 2001-02financial crisis.

President Christina Fernandez Friday held an emergency meeting to discuss the possible influence of the recent global financial market turbulence on the Argentine economy.

During the meeting, Argentine economy officials widely agreed that the country's economy is experiencing healthy development and is able to withstand potential financial risks.

Nevertheless, the government announced several precautionary measures in the face of the risks, such as maintaining the exchange rate stable between the Argentine peso and the U.S. dollar, carrying out necessary market intervention, encouraging exports with more restrictions on imports to guarantee a trade surplus, as well as continuing the increase of foreign exchange reserve to deal with any possible foreign capital flight.

The Argentine central bank has a foreign exchange reserve of 47billion U.S. dollars, a record high in recent years.

The president stressed that Argentina, faced with the turbulence, rising inflation and a lack of investment in the international market, should be well prepared to prevent the re-emergence of the 2001-02 financial crisis that almost caused the economy to collapse.

Argentina was severely hit by an economic crisis in 2001, with a dramatic depreciation of the currency and a large amount of foreign capital withdrawal. Since the government shifted its economic policy in 2003, the economy has achieved a sustained and healthy five-year growth.


Editor: Wang Hongjiang
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Apartmentsba.com
Advanced Member
Username: Saint

Post Number: 339
Registered: 5-2005


Posted on Wednesday, January 23, 2008 - 7:49 am:   Edit PostPrint Post

A good way of "preparing for the next crises in Argentina" is by NOT keeping large amounts of cash in your home! Lately in the paper there are headlines of people getting robbed of LOTS of money.

You see the locals here detest the banks and simply don't trust them. Most of them don't even trust bank safe security boxes. So what do they do? They keep cash in their house!

The other day, Victor Daniel Nazar was robbed by 4 armed robbers of 3 MILLION pesos (CASH) and valuable jewelry from his house. Everyone was held at gunpoint while they robbed him.

These people that keep large amounts of cash in their homes are insane. This shows you the rationale why most locals prefer real estate over anything else. No one can steal your real estate at gunpoint.

Morale of the story = Don't keep millions of pesos in your house.
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WTMendoza.com
Intermediate Member
Username: Welcometomendoza

Post Number: 110
Registered: 7-2007


Posted on Wednesday, January 23, 2008 - 11:18 am:   Edit PostPrint Post

The USD got a strong whooping yesterday on international markets after the .75 interest rate cut, but just continues to inch-up against the peso - amazing to see the manipulation in play in BA. By the way, not only will that rate cut reduce the number of people that will foreclose (although there will be alot that do this year), it should be good for Argentina also.

An excellent resource for a good way to keep on top of business and econmic themes here in Argentina is to subscribe to Argentina's most important business newspaper Ambito Financiero based out of Buenos Aires. It has always had a strong reputuation for being the best for business and economic themes.

They now offer it in English, kinda funny English at times, but for sure acceptable.

The site is at:
http://www.ambitoweb.com/diario/portada/index_ingl es.htm
cheers
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Roberto
Board Administrator
Username: Admin

Post Number: 1462
Registered: 12-2004
Posted on Wednesday, January 23, 2008 - 11:26 am:   Edit PostPrint Post

The guy of the usd 1 mill. had a big mouth too, for sure. How the thieves knew about it? Whether in a bank, under the mattress or abroad also remember that 'en boca cerrada no entran moscas' :-)

I like ambito, good to know they have an online english version. Thanks.
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WTMendoza.com
Intermediate Member
Username: Welcometomendoza

Post Number: 125
Registered: 7-2007


Posted on Wednesday, January 30, 2008 - 2:52 pm:   Edit PostPrint Post

I don't know about the vacation rental market in BA at the moment, but for anyone thinking about purchasing an apartment for rental in Mar del plata or nearby, they should be aware of this article in the paper today. Perhaps it is nothing, or it is something, but it is what it is, many could say it is attributed to the bad weather there recenttly, but the article also points out that the greed factor may be getting out of control on the asking prices for rentals also. Anyway, for what it is worth:

Por la poca demanda bajan 30% alquileres en la costa
Confirmó el presidente del EMTUR que las cámaras inmobiliarias de la zona se comprometen a reducir las tarifas. Regirá desde febrero.

El presidente del Ente Municipal de Turismo de Mar del Plata (EMTUR), Pablo Fernández, confirmó ayer que las cámaras inmobiliarias y hoteleras de la zona de la costa se comprometieron a reducir 30% sus tarifas durante febrero y hasta 50% en marzo.

La medida fue adoptada luego de que enero cerrara con un balance negativo en materia de ventas y alquileres, muy por debajo del récord esperado.

Si bien Fernández advirtió que de las 390 mil plazas hoteleras de Mar del Plata «la mayoría subió entre 15 y 20 por ciento los precios, que no es poco», también reconoció que «hubo quienes han subido por arriba de eso y se vieron perjudicados por la falta de clientes».

No obstante, alertó que «la consecuencia no es solamente para quienes tienen la unidad de vivienda ni el restorán, sino que también golpea a todo el resto de la ciudad, que se resiente con la merma del turismo».

Ante esta situación, el EMTUR decidió convocar «a hoteleros y propietarios a hacer una promoción para febrero y marzo, con el compromiso de seleccionar las mejores ofertas para promocionarlas dentro del Ente de Turismo».


Anuncio

Al respecto, confirmó que «el Colegio de Martilleros ya informó que aplicará para febrero un descuento de entre 30 y 40 por ciento y para marzo uno mayor».

La medida fue dispuesta para acompañar el pedido del gobernador bonaerense, Daniel Scioli «e ir más allá con esta propuesta de promoción especial».

Es que los precios de los alquileres, comidas y entretenimientos, que crecieron un promedio de 30 por ciento en enero de 2008 respecto del mismo mes del año anterior, impidieron que se registrara una nueva temporada récord, como estaba previsto.

Además, los altos precios en la costa expulsaron a los turistas a otros centros del interior del país e incluso de Brasil y Uruguay.

Según indicó Fernández, durante enero «la cantidad de turistas no se ha visto reducida en gran escala, sólo 3,5 por ciento, pero sí fue menor el consumo y esto tiene que ver con los precios».

En tanto, en el Partido de la Costa viven 90.000 personas que también se ven fuertemente afectadas durante la temporada de verano y las vacaciones de invierno, cuando la llegada de turistas impulsa los precios en los comercios.

Este partido está integrado por San Clemente, Costa Chica, Las Toninas, Santa Teresita, Mar del Tuyú, Costa del Este, Aguas Verdes, La Lucila del Mar, Costa Azul, San Bernardo, Mar de Ajó, Nueva Atlantis, Pinar del Sol y Costa Esmeralda.


Fuente: Ambitoweb.
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Apartmentsba.com
Advanced Member
Username: Saint

Post Number: 405
Registered: 5-2005


Posted on Friday, February 29, 2008 - 6:38 pm:   Edit PostPrint Post

Interesting going back over the past here and seeing everything that is playing out around the world. The banks are continuing to sink and daily you read about multi- BILLION dollar losses (and that trend doesn't seem to be slowing down), Oil is at record highs, gold is at highs and will hit $1,000 soon. Real estate market in the USA has deteriorated even further as some of us have predicted. The dollar is at all time lows against the Euro, the credit market is a mess.

Stock market is falling hundreds of points per day. I guess now would be as good a time as any to try to survive the next crises.

Cheers all.
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Apartmentsba.com
Advanced Member
Username: Saint

Post Number: 425
Registered: 5-2005


Posted on Saturday, March 08, 2008 - 7:53 am:   Edit PostPrint Post

Hey Robbie,

Looks like our calls for the falling greenback were spot on target!

Your call of a " Disney style ride in the world of the falling greenback" was accurate.

I still have 20% of my savings that I converted 2 years ago in Euros. I still haven't converted over. Unfortunately it seems the US government isn't doing anything to slow down the Euro from getting stronger and the ECB has kept their % rates steady as they are doing the proper thing to keep inflation in check.

It will be interesting to see how this plays out. Cheers.
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WTMendoza.com
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Post Number: 193
Registered: 7-2007


Posted on Friday, March 21, 2008 - 9:16 am:   Edit PostPrint Post

I just wonder how long this can go on......

http://www.bloomberg.com/apps/news?pid=20601086&si d=aKkOI04_C30Y&refer=latin_america
Argentina to Sell Pesos to Keep Currency From Gaining

March 13 (Bloomberg) -- Argentina will sell $4 billion worth of pesos in currency markets this year and buy U.S. dollars in a bid to prevent an appreciation of the country's currency, Economy Minister Martin Lousteau said today.
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Apartmentsba.com
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Post Number: 452
Registered: 5-2005


Posted on Friday, March 21, 2008 - 9:52 am:   Edit PostPrint Post

Actually this is the right thing to do. The weak peso is keeping exports strong and it's increasing the tourism levels and bringing in billions of dollars into Argentina. This is the right move to be making, IMHO.

And now using existing savings instead of just printing money shouldn't put too much of a strain on inflation. Things have DRASTICALLY improved the past 6 years.
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WTMendoza.com
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Post Number: 195
Registered: 7-2007


Posted on Friday, March 21, 2008 - 10:23 am:   Edit PostPrint Post

My question is...if in the 90's they held the dollar and peso 1 to 1, and we all know how that ended (actually to the benefit of dollar holders) ..then how long can they hold it 3 to 1 here in the 2000's...before some kind of correctional event happens...if even this kind of logic can be applied...
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Benco
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Post Number: 46
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Posted on Friday, March 21, 2008 - 3:41 pm:   Edit PostPrint Post

WTMendoza, in my view a big difference is that in the 90s the peg to the dollar was very rigid and imposed by law, so the end of the convertibility regime led to enormous legal disruptions. The situation right now is quite different, and letting the dollar appreciate to 4 to 1 or so would not be such a big technical problem.

ApBA, you are right to mention inflation in this context. It is not sufficient to look at the nominal exchange rate only, since inflation per year is about 20 percentage points higher in Argentina than in the USA. A tourist from the USA who returns to Argentina every year sees prices up 25 percent each time, while his own salary is maybe 5 percent higher. In real terms the peso has lost its competitive advantage against the dollar some time ago.

Unfortunately the government sticks to its economic policies which are extremely pro-cyclical. Yes, things have improved a lot, as many external factors have been favorable. But despite its growing dollar reserves, Argentina is absolutely not prepared for the difficult times to come.

Here is a recent article comparing Brazil and Argentina (the illustration sums it up nicely):
http://www.economist.com/world/la/displaystory.cfm ?story_id=10880587
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WTMendoza.com
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Post Number: 196
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Posted on Friday, March 21, 2008 - 5:12 pm:   Edit PostPrint Post

Benco, how different is it? The government creates the sensation that they buy dollars every day at a strong enough momentum to keep the dollar at 3.14 to 1 or so.....the media and the government say that if they stop buying dollars, the peso will appreciate to perhaps 2.20 to 1 , which I have a feeling would be quite disruptive. So in theory it would be pretty hard for the dollar to go to 4 to 1, if the above is true.

On the other hand, I have seen days here where reportedly the government has bought very few dollars or no dollars, and the exchange rate didn't blink.

That leads me to believe that "they" "have this thing so rigged" it's not even funny...they are probably scared to nudge it either way because of the potential ripple effects. So they keep it where it is, thus creating a "rigid peg"...which could lead to disaster (just like at the end of the last cycle, but hopefully not so bad) if they don't move it either way pretty soon.

What do you think?
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Roberto
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Posted on Saturday, March 22, 2008 - 2:46 am:   Edit PostPrint Post

Thank you for the article, Benco. So spot on. Brazil and Argentina are two worlds apart to the extent that they can't really be compared, I hate to say.

One unwelcomed effect of truly liberating the dollar -when the central bank and the gov. stop intervening in the market- would be a renewed demand for it -which may see an initial drop followed by a movement upwards-. Don't forget the dollar -as is- has become unattractive as "store of value" vs inflation. In my view, the theory of the dollar as a currency dropping to 2.20/2.50 is just part of a scare tactic.

The real question is, why would a currency appreciate when fiscal policies are completely loose, accounting is not clear and there is literally no foreign investment? Inflows from tourism are not the same as centrally-planned investment policies. Argentina is continually moving away -by virtue of its own decisions- from international funding. The latter would have helped to finance long term mortgages, among other things. In the meantime, there is a continued redistribution of income between sectors as per the core peronist view.
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WTMendoza.com
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Posted on Wednesday, March 26, 2008 - 9:26 am:   Edit PostPrint Post

BBC News - Argentina roadblocks

http://news.bbc.co.uk/2/hi/americas/7314067.stm

Argentine farm taxes row deepens
Farmers in Argentina have pledged to continue a nationwide protest after the government refused to back down on tax rises on agricultural exports.
Two weeks of blockades by farmers have left many shops in the main cities short of meat and dairy products.

Amid the shortages, thousands of Argentines, banging pots and pans, took to the streets to back the farmers.

President Cristina Fernandez, in office since December, says the increased taxes on farm exports are justified.

Protesters have been stopping lorries carrying farm produce and either turning them back or dumping their goods on the road.

Speaking on national television, President Fernandez said the agricultural sector was one of the country's most profitable with global demand growing for Argentine beef, corn, wheat and soybeans.


"I'm not going to submit to extortion. I understand the industry's interests but I want them to know that I'm the president for all Argentines," she said, making it clear there would be no talks while the farmers' strike continued.

Soon after her address, demonstrators in Buenos Aires and other cities gathered on the streets to stage pot-banging protests.

"This is a pretty ugly wake-up call for the government after just a few months in power," protesters Hector Bernardino told Reuters.

He said middle-class Argentines, like the farmers, were tired of taxes and double-digit inflation.

Flashpoints

Argentina is one of the world's top exporters of soya, wheat and beef and any prolonged conflict will have a major effect on vital export earnings, says the BBC's Daniel Schweimler in Buenos Aires.

The farmers' strike is the biggest crisis faced by Ms Fernandez since she took office more than three months ago, succeeding her husband Nestor Kirchner, our correspondent adds.


The government has been using taxes on grain and commodity exports to boost state revenues.


Taxes on a range of goods including soybeans, sunflower oil and beef are being raised by up to 45%, increases that farmers have described as crippling.

"We will continue the strike for as long as necessary," said Eduardo Buzzi, president of the Argentine Agrarian Federation (FAA).

Trade at Argentina's largest grain and cattle markets has ground to a halt while many shops are reporting shortages of supplies.

There have been disputes between farmers and truck drivers, and armed police have been deployed at potential flashpoints.
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WTMendoza.com
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Posted on Wednesday, March 26, 2008 - 9:44 am:   Edit PostPrint Post

Argentine newspaper - English snippets for free - and you can pay for the full articles

http://www.ambitoweb.com/diario/portada/index_ingl es.htm
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Roberto
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Posted on Friday, March 28, 2008 - 1:14 am:   Edit PostPrint Post

Well... who would have thought.

Al started this thread on September 05, 2007, about a month and a half before presidential elections. Although I wasn't shocked by the title Al had chosen I must admit I was taken by surprise a bit... Just like many members here I suspected that new problems would arise at some point and that there were definite bad signs brewing in the background. But 4 months into Cristina's presidency wasn't in the cards. My view, for what is worth, is that in the next few days the gov. might be able to maneuver themselves out of this and that perhaps in one month or so all may be forgotten. But there is always a chance that this may turn into a much bigger problem, specially if the situation in the US worsens to the point it starts to hit other countries (China > Brazil > Argentina). Let's stay alert!
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WTMendoza.com
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Posted on Friday, March 28, 2008 - 6:05 am:   Edit PostPrint Post

Well at least she asked nicely this time:=> I really think that no matter who is the president, that noone should give in to a strike of this type.....you can't hold the country hostage with it's food supply...these farmers are doing the wrong thing in my opinion. She has said she will discuss the situation once the strike stops and that the doors are open. Why don't the farmers give her this chance at least.
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Post-it
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Post Number: 7
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Posted on Friday, March 28, 2008 - 7:44 am:   Edit PostPrint Post

Roberto, like you say, maybe the government can manoeuvre itself out of this, but it looks to me that it will not be easily forgotten. It seems that the export tax increase has two effects: 1. it fills the coffers of the state, and 2. it hits the 'Oligarquia'. If I'm not mistaken, the Kirchners are not known as big fans of the landowners. This could be a deep sentiment and may influence also other decisions in the future, IMHO.

The dispute is economical/financial but also political/social/emotional. It seems to me that based on the huge increases in the world market prices of agricultural products and the relatively low production costs (and high yields)in Argentina, producers can afford the increase (but I'm not sure about the smaller farmers). However, I imagine that many are fed up with the regular interference of the government.

And unfortunately regular interference is an important characteristic of economic policy in Argentina (now and in the past), leading sooner or later to market distortions. Fundamental is the correct allocation of resources and this is normally better left to market forces, without too much government intervention. In this respect the Economist article (Brazil - Argentina) is very interesting.

It is also important what the government actually does with the extra money. And there I understand many people in Argentina have serious doubts. There seem to be a lot of re-distribution between different groups of the society. Because of the low exchange rate, record commodity prices and tourism, a lot of money is entering the country (though not enough real direct investments..) and tax revenues are increasing substantially. I don't think this situation will change very much in the near future; in fact I believe that Argentina is in a unique position to keep benefitting from good macro-economic circumstances.

But for me it is not clear on what this extra tax money is actually spent. Ideally it should go to improvements of the infrastructure, education, high-end tourism, export promotion etc and possible reduction of foreign debt.

I find it difficult to figure out whether money is used for re-distribution (social policies) or preparing a more solid basis for the future (infrastructure etc).
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Post-it
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Posted on Friday, March 28, 2008 - 10:18 am:   Edit PostPrint Post

Forgot to say that all this makes Argentina of course one of the most fascinating countries in the world!

Below links to two articles in the Economist of today:

http://www.economist.com/world/la/displaystory.cfm?story_id=10925670

http://www.economist.com/opinion/displaystory.cfm?story_id=10925509

(Message edited by admin on March 28, 2008)
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Roberto
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Post Number: 1610
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Posted on Saturday, March 29, 2008 - 12:19 pm:   Edit PostPrint Post

Postit, Sean... I agree with some caveats.

The reason it won't be forgotten is because it has brought to the surface the real deal, the real KK, what is really at stake. Peronists, since the time of Juan Domingo have polarized the nation with their "lucha de clases' siren music. It isn't a group of isolated farmers holding the country hostage with its food supply. And it isn't the Kirchners simply being opposed to 'terratenientes'. In my view, this is much deeper and is bringing unfinished business back to the forth from 1945 and not to a small extent back from the 70's with a very strong revival of the montoneros siren version. What we are seeing is the essence of the peronist movement, their complete distrust to free markets and capitalism that leads to all prices being fixed and all markets being controlled. Herein lies the differences between Argentina and neighboring countries like Brazil and Chile.

If there is a recession worldwide and extends its severity to Argentina -which it might if Brazil is affected- expect to see a bigger fight in the redistribution arena. Where we go from here, noone knows.
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Post-it
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Posted on Saturday, March 29, 2008 - 10:06 pm:   Edit PostPrint Post

Roberto, thanks very much for this far-reaching clarification.

You don't have the habit of missing nails, but this one may unfortunately be right on top...

I thought already that political/social and emotional reasons played a bigger role than economical/financial, and that the conflict had deeper roots than what was visible on the surface, but I had not realised that it could be related to 'unfinished business' from the past.

Of course you know endlessly more about these periods, but I am reasonably aware about what happened in the '40s and the '70s and I would have thought that voters and politicians would not like to repeat the mistakes made then. Apart from the regrettable political developments, these were also not the most prosperous periods in economical terms in Argentina..

...the essence of the peronist movement, their complete distrust to free markets and capitalism that leads to all prices being fixed and all markets being controlled. This sums it up in just a few words -though slighly extreme, I hope.

It would explain the lower exchange rate, retentions, ban on beef exports, low energy prices, manipulation of inflation rates and no doubt numerous other issues.

I thought that the Peronist party had moved on from then, but this may not be the case. It has not worked in the past and it will work even less in the present, more open, trade dependent, global economy. Surely the decision makers are aware of this (?).
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Roberto
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Posted on Sunday, March 30, 2008 - 1:37 am:   Edit PostPrint Post

> -though slighly extreme, I hope.

All you need to do is listen to their anthem -la marcha peronista-, the one they sang a few days ago before Cristina spoke.

Los muchachos peronistas
todos unidos triunfaremos,
y como siempre daremos
un grito de corazón:
¡Viva Perón! ¡Viva Perón!
Por ese gran argentino
que se supo conquistar
a la gran masa del pueblo
combatiendo al capital.

"Unfinished business" may have not been the most fortunate term. The general idea was that the last time true peronists were in power was back in the 70's. Back then, montoneros were actually rejected by Peron who judged them too radical. Well, now they are finally in power and can put into practice some of their core beliefs. Menem was actually an aberration to hardcore peronists so he doesn't count.

Noone really knows what goes on behind doors. Perhaps there are secret deals being struck with some of the large landowners or those who concentrate a lot of economic power as some have been in the receiving end of a lot of subsidies. Maybe this government presents itself as a populist one while it strucks deals with big interests achieving the opposite of what they had planned in both fronts. Whatever they really are they have created a complete distortion of relative prices. Being pragmatic without a plan is actually bad business. One thing is for sure -as a reassurance- yes, regular folks in the street do not want to go back in time and do not want bad memories to live again.
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WTMendoza.com
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Post Number: 214
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Posted on Tuesday, April 01, 2008 - 12:54 pm:   Edit PostPrint Post

ALERT: from ambito newspaper:...in a nutshell - there are natural market pressures happening to cause the peso to "want to weaken significantly" because of all this farmer's strike chaos...and the Cental Bank is working hard to try to avoid this...

If I understand the below news properly, this is the first clear natural direction hint I have seen in some time of the exchange rate....one may be wise to wait to exchnage alot of dollars for a few more days or weeks ..you may end up with more pesos. Or it could reverse the otherway due to some anti-event. Or they could just hold it where t is, even though it is getting tougher for them to do that.

In my opinion, if this strike goes on much longer, it will be like adding extra high pressure to an already stretched rubberband holding the dollar to the peso....
=====================
Dólar: cien millones ayer para contenerlo

El Banco Central tuvo que sacrificar ayer u$s 100 millones de sus reservas para evitar una suba mayor del dólar. El paro del campo también impactó en esto. En un mercado preocupado por el fracaso del gobierno en frenar la disputa, hubo bajas en bonos que llegaron a superar 1%, como en el caso del Discount. Así, el riesgo-país volvió a subir, esta vez 22 puntos, para ubicar a la Argentina en el tope de los países emergentes. El nerviosismo llegó también al valor del dólar. La falta de liquidación de cerealeros colaboró para que el peso perdiera terreno: en el mercado mayorista, la divisa subió a $ 3,17; y en el minorista, tocó los $ 3,19. Todo a pesar de que el Central vendió u$s 50 millones al contado y otros 50 millones en operaciones a futuro.
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WTMendoza.com
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Post Number: 216
Registered: 7-2007


Posted on Tuesday, April 01, 2008 - 2:07 pm:   Edit PostPrint Post

This just happened this mornng:

from ambitoweb.com:

Confusion in farm
Serious: Argentina closes beef export
Argentine Customs has ordered to stop foreign sales of beef cuts. This measure, which has not been explained by any government aide so far, surprised farming leaders when seeking a solution to solve crisis. A high representative of the sector signalled that "this measure is crazy and causes more unrest." The main goal of this executive decision is supply of local market.
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Post-it
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Posted on Tuesday, April 01, 2008 - 2:16 pm:   Edit PostPrint Post

And (just) now also a new ban an the export of beef...

All these government interventions cost a fortune and lead to all sorts of misallocations, that again cost millions..

After the posts of Roberto and going through numerous newspaper articles and a bit of Argentinian history, it seems to me that this conflict has very deep roots and the main issue is (maybe) not the increase of retentions on cereals, but basically the ideological future of the country in social/economical terms.

If this is true, it could take quite some time before a solution is found. And in the meantime all sorts of indicators will turn to red.

Under normal circumstances Argentina should be worried about an appreciating currency (like all neighbouring countries); it should not be necessary to spend large amounts on supporting the peso.
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Post-it
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Posted on Wednesday, April 02, 2008 - 1:13 pm:   Edit PostPrint Post

One thing that always strikes me in Argentina: while many decisions of the government are quite controversial (to say the least), the articles in the newspapers in general are very good, giving very clear analyses of the situation. It seems to me that most journalists know very well what is going on and show a good understanding of the deeper motives.

All together there has been quite an opposition against the government in the press. I was surprised that there was so much support for the farmers in the comments to the articles (electronic versions). It is easy to imagine that they could be blamed for the food shortages and disruptions, but it seems that this is not the case.

I am certainly no expert on all this (and far away), but I am actually quite puzzled why in fact the farmers ended the strike and lifted the road blocks. Had they come to the conclusion that a continuation would be pointless; was the support for the president yesterday so impressive; do they really think that there will be a fair compromise after new negotiations (last time it did not result in anything concrete); or has there already been some sort of dealmaking behind the scenes?

And could this (temporary) outcome lead to the return (?) of stability, or are the wounds so deep that each new decision of the government could trigger new protests?
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WTMendoza.com
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Posted on Wednesday, April 02, 2008 - 1:32 pm:   Edit PostPrint Post

Yes the news agencies are reporting right now that most of the roadblocks are bein lifted as I type this and eveyone is hoping that an end to the strike will be annouced formally today - lets keep our fingers crossed.

Maybe yesterday's news about the beef export ban placed additional pressure on the farmers, and maybe created animosity between farmers....not to mention the threat of a higher dollar...

let's see what happens
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Roberto
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Posted on Wednesday, April 02, 2008 - 3:36 pm:   Edit PostPrint Post

Cristina played a good hand. She not only presented the farmers as working against the common good, she also succeeded in breaking up their cohesive lines (by the cut off at 150 hectares).

But not much has changed. In particular what matters: a sloppy government that has no plan and it is not particularly inclined to discuss things democratically. Continuation of the strike would have weaken farmers to a point of losing truckers support. If we are seeing the beginning of the end of the commodities run, the government may find themselves in a much weaker position down the road and unsolved situations may come back full force.
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WTMendoza.com
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Post Number: 223
Registered: 7-2007


Posted on Wednesday, April 02, 2008 - 10:10 pm:   Edit PostPrint Post

Hey that was a surpise accord for 30 days in light of the emotion behind this one...now these trucks better get a move on and lets see how fast they can get the stuck stuff though the system ...and maybe an eye should be kept for older veggies or product that has gone off - even product trying to get market today from the farm has to deal with a clogged system for several days, and unless my stomach cries out in real hunger we are hunkering down until the prices stabilize over the coming weeks. Here's hoping nothing like this happens any time soon again...comon guys use these 30 days to make your deals with no more games.
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Arial
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Post Number: 186
Registered: 10-2006


Posted on Thursday, April 03, 2008 - 4:07 pm:   Edit PostPrint Post

Hello all. Wonder if any of you read Bill Bonner's Daily Reckoning. He is a financial publisher and author. I just read today's issue. I think he lives part time in Argentina. Here is the story that he tells.

The price of grains has risen significantly (as we all know) so as normally intelligent businessmen (he didn't put it exactly that way!) Argentina farmers planted as much of their land as they could in soybeans. Now the president has levied a 49% tax on the soybeans, meaning that she intends to take half of the results of their labor and investment. And this AFTER the farmers have done the work.

If this is true, my heart breaks for Argentina farmers. No WONDER they are upset. Everyone in Argentina should support them. I was so impatient. At one point I sat on a bus for 30 hours trying to get back when my mother was sick. Thirteen hours longer than the trip should have taken. I knew it was over a tax but had no idea, in my impatience, how critical it is if this is true.
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Post-it
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Post Number: 13
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Posted on Friday, April 04, 2008 - 5:58 pm:   Edit PostPrint Post

Arial, I just read the article, thanks for drawing the attention to it. It was quite clear some time ago that prices of agricultural products would rise. This is the logical result of biofuels and a few hundred thousand Chinese eating more meat. And this will continue the next few years (with some ups and downs of course). On this basis I bought a small interest in a farm land scheme in Argentina last year.

Of course I don't particularly like the tax increase, but because of the huge price increases the overall figures still look ok (the 49% is actually 44% max). Maybe this is different for small farmers that are fully dependent of the revenues of the land, but also for them the situation should be better now than 2 or 3 years ago.

Therefore I do not believe that the conflict is economical/financial in the first place (though I also have read that the government needs money as quite some public debt falls due this year..). The point seems to be that the government has shown its intention to pursue the old Peronist policies based on government interventions, subsidies, taxes, price controls, exchange rate manipulation, export taxes, export bans etc etc. This policy has been tried before and has basically led to the excesses in the 40's and 70's.

And this is the real tragedy that is taking place, imho. Apart from the economical shortcomings, this policy has also the tendency to undermine social cohesion. In the past whole groups of the society got alienated from each other. But Roberto knows much more about this of course.

I just don't believe in too much market manipulation. Sooner or later it leads to misallocations and imbalances. And it seems to be happening every time again in Argentina. It is of course significant that this thread is entitled: 'Preparing for the next crisis', as if it is a given that a crisis will come and the question is only how to prepare for it...!
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WTMendoza.com
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Post Number: 231
Registered: 7-2007


Posted on Wednesday, April 23, 2008 - 6:59 am:   Edit PostPrint Post

Argentina stocks, bonds, peso fall on farm doubts
Tue Apr 22, 2008 4:58pm EDT

http://www.reuters.com/article/rbssFinancialServic esAndRealEstateNews/idUSN2261092720080422
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WTMendoza.com
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Post Number: 232
Registered: 7-2007


Posted on Friday, April 25, 2008 - 7:20 am:   Edit PostPrint Post

Facts about new econ minister

http://www.reuters.com/articlePrint?articleId=USN2 545858720080425

FACTBOX: Facts about new Argentine economy minister
Fri Apr 25, 2008 1:11am EDT
BUENOS AIRES (Reuters) - Carlos Fernandez was named Argentina's economy minister on Thursday to replace Martin Lousteau, who resigned. Here are some facts about him.

* Since March, Carlos Fernandez headed the Federal Public Income Administration, or tax agency, known as AFIP in Spanish. Previously he was economy minister for the populous and economically powerful province of Buenos Aires.

* Other jobs with the national government included economy subsecretary for relations with the provinces and national director of tax coordination with the provinces. He also worked as subsecretary of fiscal policy in Buenos Aires province.

* He has a degree in economics from La Plata National University, and specialized in public finance and tax administration.

* He is a Peronist and considered close to President Cristina Fernandez and her husband ex-President Nestor Kirchner, as well as to powerful Cabinet Chief Alberto Fernandez. But he also has a reputation as a technocrat, having worked in previous administrations since the late 1980s.

(Editing by Eric Walsh)
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Benco
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Post Number: 48
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Posted on Friday, April 25, 2008 - 9:40 pm:   Edit PostPrint Post

After Lousteau learned that the Kirchners had rejected his plan to fight inflation he quit with this remarkable explanation:

Estas medidas son las que, a mi juicio, deberían adoptar en adelante para evitar una crisis grave. Son todas ideas conocidas. En distintos momentos hablamos de ellas, porque te las propuse a vos, Alberto, y a la Presidenta. Creo que si no tomamos estas iniciativas, o algunas muy parecidas, vamos hacia una crisis delicada. No estoy en condiciones de seguir demorando la solución y, por eso, me voy.


I think he is right. Inflationary expectations are rising fast and the only official measures so far are faking statistics and arbitrarily threatening people with phone calls. The current economic policy is extremely pro-cyclical and couples public finances strongly to notoriously volatile commodity markets. Also Nestor Kirchner´s heterodox politics are beginning to show their widely expected disastrous long-term effects, notably in the energy sector, but also in transport, agriculture and what else has been mismanaged by Moreno.

In addition the conflict with the farmers has made clear that Argentina will miss out on the golden opportunity to increase agricultural production in the context of high world-market prices. Redistribution of existing wealth is apparently more important than incentives for future growth. Obvious obstacles to growth such as high legal risks, low quality of state institutions, high taxes with rampant evasion, ridiculous labour laws, a huge informal sector, a broken financial system, etc. are not getting better. Instead an ever growing amount of subsidies is distributed via a public administration that is known to be one of the most corrupt in the world.

Foreign direct investment is virtually absent and government bonds reveal a rising country risk. It seems everybody is expecting another meltdown. Argentina has little access to international funding and private households understandably prefer consuming over saving. This consumption is the main driving force of the economy, and when things go in reverse, it will be a hard landing. Already today people are nervous, and any external shock could trigger a panic.

This may not necessarily happen soon. Under favorable external market conditions many incompetent governments have been "successful" for a long time, e.g. those benefiting from the recent oil bonanza. But at some point the cycle turns, and it will be the poor who will suffer most when inflation gets out of control.

Unfortunately another hyperinflation is not at all unlikely, given the government´s obsession with growth numbers and its total disregard for inflation. They think they are going to rewrite all those textbooks about monetary policy, but in fact their view of reality is blocked by ideological nonsense. When the economy slows while inflation remains high they will choose devaluing the currency further over losing jobs. It remains to be seen whether the resulting inflation will then spiral out of control.

So in short I think this thread is as important as ever.
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Roberto
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Username: Admin

Post Number: 1641
Registered: 12-2004
Posted on Saturday, April 26, 2008 - 11:56 pm:   Edit PostPrint Post

Great post, Benco! Unfortunately, the appointment of the new minister of economy shows authorities taking the wrong turn. Buy dollars while they are cheap!
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WTMendoza.com
Intermediate Member
Username: Welcometomendoza

Post Number: 233
Registered: 7-2007


Posted on Sunday, April 27, 2008 - 8:48 am:   Edit PostPrint Post

Friday afternoon wrap:


source:
http://www.reuters.com/article/marketsNews/idARN25 41228620080425?rpc=44&sp=true

Argentina markets hit by economy ministers exit
Fri Apr 25, 2008 4:47pm EDT
(Updates with closing prices)

BUENOS AIRES, April 25 (Reuters) - Argentine bonds closed down 3.2 percent on average on Friday, a day after Economy Minister Martin Lousteau resigned, while the peso languished at its lowest level since January 2003 in informal trade.

Lousteau resigned from the Cabinet and was replaced by Carlos Fernandez, an economist who is seen as close to President Cristina Fernandez and her husband, former President Nestor Kirchner.

Traders had widely expected Lousteaus exit, but it still weighed on markets, which have been jumpy for days due to increasingly tense talks between the government and farmers, who staged a three-week strike last month.

"It isn't good news since (Carlos) Fernandez is the type to give more power to (Domestic Commerce Secretary Guillermo) Moreno. The market would have liked someone more orthodox," said one trader.

Moreno is the government's price-control watchdog, who enforces the price accords the government has used as a key weapon against inflation.

Argentine stocks ended down 1.31 percent at 2,101.40 points.

In informal trade between foreign exchange houses, as measured by Reuters, the peso <arsb=> slipped 0.08 percent to close at 3.2500/3.2525 per dollar after trading as weak as 3.2650/3.2700 earlier in the session.

In formal interbank trade <ars=rasl> the central bank sold off dollars to shore up the peso, and the currency ended 0.31 percent stronger at 3.1725/3.1750 per dollar after sagging 0.24 percent at the opening.

On the debt market <ar/bonos>, Argentine bonds traded locally tanked on investor caution over Lousteau's resignation. Hardest hit was the peso-denominated Discount paper, which shed 6.7 percent.

"The new minister is more of the same thing we're used to from this government, which confirms the downward trend of bonds," a trader said.

Lousteau stepped down due to reported differences over how to handle soaring inflation, which has soured an economic boom in Latin America's No. 3 economy. (Reporting by Walter Bianchi and Jorge Otaola; Writing by Helen Popper; editing by Gary Crosse)
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Post-it
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Username: Postit

Post Number: 17
Registered: 2-2008
Posted on Thursday, May 01, 2008 - 11:55 am:   Edit PostPrint Post

Brilliant analysis from Benco on 25/4, covering all the main elements and clearly showing the interrelation between politics and the economy.

I was very bullish on the Argentinian economy; in February I even wrote in another thread in this forum "I think that in the next x years agriculture and ever increasing tourism will bring so much 'hard' (?) currency to the country that it will be difficult for any government to mismanage." I've probably underestimated this government.

No country with a GDP/capita of around USD 15.000 can grow close to 10%/year for 5-6-7 years. But why can't Kirchner be happy with a solid 5%/year, which is much easier to sustain and does not create excessive strains on the economy??

Does anyone actually know what was Lousteau's plan to fight inflation? It seems to me that there are not so many options (left); monetary instruments are probably not very effective under these circumstances and to lower consumption (with not many places to put savings, like ApBA always points out) is not as simple as it sounds. What really needs to be done is an increase in the productive base, but who dares to invest a significant amount of money in this if the outlook over the next 5-10 years is totally unclear (like it always seems to be the case in Argentina...)

Just read today in La Nacion that supermarket 'facturacion' increased by 41% (in pesos) over the last 12 months...
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Roberto
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Post Number: 1650
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Posted on Thursday, May 01, 2008 - 1:00 pm:   Edit PostPrint Post

> But why can't Kirchner be happy with a solid 5%/year

Choose among these 3:

- votes
- populace (a subtle version of the above)
- his own idiotic ego

Or how about trying to create inflation -while growing the economy (or viceversa)- and pay pennies to the "club de Paris" and other debt holders (licuación de pasivos - remember, the peso is virtually pegged).

Lousteau wanted basically to "cool down" the economy which is why they came out saying 'no cooling' after he left. He proposed among other things tight fiscal policy and possibly set an inflation target, but I need to research some more. I think the 41% figure needs to be taken cautiosly. How much of that figure is inflation? Perhaps, all of it. Or was it an adjusted for inflation number?
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Post-it
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Post Number: 18
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Posted on Friday, May 02, 2008 - 7:01 am:   Edit PostPrint Post

Thank you Roberto. About creating inflation, I have read somewhere that the interest on part of the public debt is indexed to the (official) inflation. Is this actually true? -if this is the case, at least there would be some rational financial reason for the two differing figures.

About the 41%, this covers both inflation and volume increases, but the division is not clear to me (25-30% and 11-16%??). I mentioned it just because of the sheer size of the figure; it gives at least some indication about the inflation. I have also seen similar figures for import and export increases last year.

Below is the latest article in the Economist about Argentina; I doubt that it helps to convince (badly needed) potential investors..

http://www.economist.com/world/la/displaystory.cfm?story_id=11293743

Considering the overall situation, I could imagine that real estate prices keep increasing (real growth of 8-9%, tourism, prices in USD, no alternative for savings, buffer against inflation/future crisis) ?

(Message edited by admin on May 02, 2008)
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Roberto
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Post Number: 1651
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Posted on Friday, May 02, 2008 - 8:58 am:   Edit PostPrint Post

You may be right about argentine bonds being indexed. And this may be the reason for their price drop every time the gov. publishes official inflation figures... Bond holders feel they are scammed. I think Mike (AptsBA) has been firm on stable/growing real estate prices. It appears that since the market is not subject to too much -or none- credit/mortgage turmoil there is little downside risk. However, there is chance that the government may want to devalue the currency more in which case real estate prices measured in dollars may remain steady or drift downward somewhat. But then, foreigners and growth may provide some support. "Bricks" -as some call it- have never disappointed in Argentina. Specially commercial (locales, in A locations). Take everything I say with a grain of salt. I am just an armchair economist.

Good article, thank you. I liked the "rent-a-mobs" qualification. As for this line "She is blessed with a weak and divided opposition", it is probably our worst nightmare. And there is nothing in the horizon... I know Sergio from School. He also thinks that Argentina has a long way to fall before it becomes 'africanized'. So he has (or had) a pretty pesimistic view. Too much of a doomer I'd say. I wouldn't bet against K's but I seriously doubt they may succeed in installing a new K dynasty in their lifetime.
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Apartmentsba.com
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Username: Saint

Post Number: 473
Registered: 5-2005


Posted on Friday, May 02, 2008 - 9:24 am:   Edit PostPrint Post

The inflation is VERY real. Certainly it is at least double of the 8.5% that the government says it is. I live here and have for over 4 years now. Just about the price of everything is much more expensive. From taxis, groceries at the grocery store,water, employee's salaries, restaurants... It's all more.

I do a LOT of renovations and new builds and the cost of renovations has gone up almost 30% in the past 1.5 years. It's so bad that you will get a quote on materials and it's only good for 10 days at a time. This is why I stopped buying new construction that is more than 10 or 11 months out. I typically will only buy real estate that at least the entire building is up already. Lots of inexperienced players could have problems the next 2-3 years.

The positive thing is that salaries to the best of my knowledge are more than keeping up with inflation. People are spending more money than ever. Go to the shopping malls on the weekends and they are more packed than ever before (that I've seen since 2002). Look at new car sales here the past 5 years. Each year there has been an explosion in growth. People ARE spending money. Yes, inflation is a factor but salaries seem to be keeping up with the inflation.

After all these years, look at all the things I've written about real estate in Argentina "bricks" and look at what I wrote would happen to real estate in the USA (and the UK and Spain). You will see ALL those things have come true.

I still say that there is NOTHING really to invest that is "safe" for the locals besides "bricks". Many locals look at small apartments more like bank accounts vs. real estate. They simply don't park their money in bank accounts here. Sure, they will keep some in it to pay bills, etc. but no one after the crash keeps big money in their bank accounts here. The banks are a nightmare here.

So they look to apartments. Remember what I've said since 2002 about the reasons why real estate would go up. All have been spot on target. There are many other factors you have to look at but a simple one is that people simply don't put their money in the banks here, they can't easily open up bank accounts in first world countries these days after 9/11 and the majority don't invest in the stock market or any other type of investment.

Look at this article that was in the Clarin a few weeks ago

http://www.clarin.com/diario/2008/04/09/laciudad/h -03803.htm

It confirms what I've been saying. Look at the trend locally. It's smaller apartments that people are buying. Not BIG monstruous houses or huge apartments. It's small studio and 1 bedroom units. Why? Because the locals don't have the huge sums of money to buy these big units so they can afford these smaller units. That's why these smaller units are growing at a good rate. I'm mostly buying this profile of property now.

There are less foreigners buying in Argentina the past few months, especially from the USA as the real estate mess there makes everyone feel poorer. Now I see many more Canadians buying with their strong dollar. Europeans are still buying as well as British but I've predicted over the past 1.5 years that the same thing happening in the USA will happen in the UK. That appears like that prediction will come true as well.

Certainly Christina has been a big disappointment. They desperately need foreign investments in Argentina. That's something that they MUST get as it's clear Argentina can't do it on it's own.
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Robbie
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Username: Ganavan

Post Number: 34
Registered: 8-2006
Posted on Friday, May 02, 2008 - 2:19 pm:   Edit PostPrint Post

When inflation is around, it is difficult to understand sometimes its origins. Here is a very interesting article about the deception that the politicians all round have and are performing. It certainly does not answer all questions, but puts a bit of a light on some of the reasons.

http://www.tampabay.com/news/article473596.ece

Here is a slightly more analytical study of the lies.

http://www.financialsense.com/Market/wrapup.htm

(Message edited by admin on May 02, 2008)
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Dan Sandefur
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Username: Panamadan

Post Number: 17
Registered: 4-2007
Posted on Friday, May 02, 2008 - 5:52 pm:   Edit PostPrint Post

Robbie,

Ignore what the politicos say about inflation and unemployment figures. They are rarely, if ever, accurate.
It is just another man or woman behind just another curtain...

Inflation is always an inherent result of ANY paper currency, that is not based on a real commodity, such as gold, etc.
Inflation on those paper currencies cannot be avoided, it can only be attempted to be avoided, and manipulated.
When more of that paper is introduced into the system, inflation will always increase proportionally, due to the dilution and devaluation effect of that increased supply of worthless paper.
It has been proven time and time again throughout history.

It is really that simple and basic.
Ignore any attempts by anyone to make it seem more complicated.
For further information and reference, consult the Ludwig von Mises Institute at: mises.org.
It looks like he is/was the expert on this.

As proof of this, crude oil is the same price today, when measured in gold, as it was in 2000.
It is only higher now, measured in USD, or other devalued currencies.
The same amount of oil today is still worth the same amount of gold, as it was 8 years ago.
It is only the paper that has been devalued since then.
Pull up a crude oil price vs. gold price chart, for the past decade, as proof. That illustrates the effect of inflation.
Regardless of any particular worthless paper currency.
This explains the actual cause of inflation, but I will leave any discussion on the political motives behind this to everyone else.
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Arial
Intermediate Member
Username: Arial

Post Number: 205
Registered: 10-2006


Posted on Friday, May 02, 2008 - 8:57 pm:   Edit PostPrint Post

Dan, this is a very thoughtful and well-informed post. Thank you for contributing it.

Regarding pervasive deception of government that you mentioned, I want to offer the following: an article from Harper's magazine in the May 2008 issue. It is http://www.mindfully.org/Reform/2008/Pollyanna-Cre ep-Economy1may08.htm.

I tried to do that link thing like Roberto does. Let's see if it worked. Arlean
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Arial
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Username: Arial

Post Number: 206
Registered: 10-2006


Posted on Sunday, May 04, 2008 - 5:19 pm:   Edit PostPrint Post

Here is a link that looks at the effects on other countries of the excess printing of money by the Federal Reserve. Because the US dollar is the world's reserve currency, when we inflate, we export that inflation all over the world.

http://www.moneymorning.com/2008/04/29/the-feds-di lemma-rescue-the-housing-market-or-feed-the-poor

For those who are not aware, the money in the US is created by debt. Although we say "printed," the truth is very little is ever printed. When we borrow, no one worked and produced something and put the "money" in the bank that we borrow. It is "created" on a ledger. The more money is borrowed, the more "money" is created. The lower the interest rates, the more money is borrowed and the more inflation we create.

If this is confusing, read The Creature from Jekyl Island by G. Edward Griffin. The way it all works is well explained there.
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Post-it
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Username: Postit

Post Number: 19
Registered: 2-2008
Posted on Sunday, May 04, 2008 - 6:10 pm:   Edit PostPrint Post

The first article of Robbie is of course the same as the one from Arial, but with a different presentation (journalists sometimes are not unlike politicians...; and talking about journalists, of course they also have to produce earth-shattering articles from time to time...).

I'm slightly less sceptical regarding 'official' data; it's very often a matter of you're damned if you do and if you don't. If the index does not take into account changes in purchase patterns and quality, it would still be comparing prices of T Ford's and transistor radio's.

Having said that, of course statistics are manipulated all over the world, and of course generally in the interest of the government. But these figures should always be checked against other sources and they should be read and used in a specific context.

GDP figures have very relative meaning, some people think that they ultmately reflect some sort of overall 'happyness'. I think that it is Bhutan that uses a certain official hapiness index instead of a GDP figure.

I do agree that it is pure manipulation not to include increases of food and energy prices in the official 'base' inflation rates. Food and energy are used by everybody on a daily basis, and price increases should absolutely be included. Real inflation in the world is definitely a lot higher at the moment than the 'official' 3-4%.

Regarding inflation (post from Dan): 'Inflation is always an inherent result of ANY paper currency, that is not based on a real commodity, such as gold, etc.'

There may be a difference between cause and effect/result here: the effect of inflation is always that a currency represents a lower amount of goods/services than before, but the cause of inflation can grosso modo be or excessive printing of paper money or excessive demand compared to an insufficient productive base. The former was the case in Argentina on quite a few occasions in the past (but this does not show up now in the 'official' statistics....), but there are good reasons to think now that investment has been insufficient to meet continuous high demand. A classic case of demand exceeding supply (?).

Hyper inflation always involves excessive printing of money, but we are not so far yet..
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Benco
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Username: Benco

Post Number: 49
Registered: 4-2007
Posted on Sunday, May 04, 2008 - 8:12 pm:   Edit PostPrint Post

I agree that official statistics are probably tampered with all over the world, and that changes in methodology rarely lead to less favorable numbers. But it is also clear that there is no single valid answer on which definition of unemployment is correct and which index should be targeted by central banks.

What I would say is important is transparency, so that the methods used are clearly communicated and that anyone who prefers other definitions can make his corrections.

With respect to Argentina what has happened at the INDEC since January 07 is quite extraordinary though. It started with the displacement of officials and small lies about prices in tourism and medical care, and got worse ever since then. These are no longer small changes in methodology but rather blatant manipulations without justifications.

It is so obvious for various reasons. The manipulations are limited to the national numbers of the INDEC, while statistical institutes in the provinces are out of reach for the federal government. The numbers used to be in line and then drifted apart since the polemic changes were implemented. The INDEC is under enormous internal stress with frequent protests by its staff. The published numbers are loaded with inconsistencies, e.g. retail prices are reported to be lower than wholesale prices.

Economists also use other tools to estimate inflation, e.g. by looking at the growth of VAT revenues. And everybody agrees that the numbers of the INDEC make no sense whatsoever. Nobody knows how the official calculations are done, so the INDEC has basically lost its credibility. It is more like a rather opaque political machine spitting out whatever the government wants to see.

And the political motivations are clear. On the one hand it is about hiding bad news and avoiding political costs, e.g. related to rising poverty figures. But there is also a clear financial motivation, since a large part of government debt is adjusted by CER (which depends on the official consumer price index). Assuming that real inflation is 10 percent higher, manipulating the INDEC saves about 3000 million dollars per year.
(http://www.lanacion.com.ar/Archivo/Nota.asp?nota_i d=1001742).
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Post-it
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Username: Postit

Post Number: 20
Registered: 2-2008
Posted on Friday, May 09, 2008 - 8:11 pm:   Edit PostPrint Post

I apologize in advance, I have two really silly and basic questions, just because I'm not used to high inflation situations.

1. Real growth is around 8-9%, real inflation is probably around 25%. Is it so that salaries of 'normal/average' private sector employees increase by over 30%/year?

2. How are salaries of public sector employees adjusted, if the government claims that the inflation is 'only' 9%?
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Apartmentsba.com
Advanced Member
Username: Saint

Post Number: 474
Registered: 5-2005


Posted on Friday, May 09, 2008 - 8:36 pm:   Edit PostPrint Post

Post-It,

These aren't silly questions. For many people it's hard to imagine the kind of inflation that exists here. It IS indeed about 25% or so. More on some things.


1. Yes, real inflation is probably around 25% per year. Most salaries are being raised each year. Probably not 30% but I can speak from experience that I've raised salaries with true inflation the past few years and getting ready to raise it again. No one forces companies to raise salaries but most companies do look at raising to keep good employees. I look at reviewing salaries at least every 6 months to keep up with inflation. I'd say probably most good firms raise at least with inflation.

2. I think governmental salaries and the public sector is going up at least with the government's "official" (i.e. fake inflation #'s). In the paper here you always read about protesting or strikes to increase salaries. I'm not sure on the official numbers as typically what you read in the paper here is wrong half the time anyway but I'd say definitely salaries are going up.


The inflation problem is VERY real. The costs for just about everything are going up. I do many projects building and also many renovation projects and renovations are a good 25% - 30% more vs. 1 to 1.5 years ago. The cost of both building materials, labor and materials and supplies keep going up.

It's to the point on some quotes the vendors only give you a quote good for 7 days. They can't guarantee the prices longer than 7-10 days. On specialty work like custom steel objects....sometimes I get quotes good for only 48 hours believe it or not.

Prices keep going up as well. Just today they announced the taxi fares are going up YET AGAIN here in Buenos Aires starting in June. A good example is taxi fares. They just increased them in November 2007 and now they are raising it 22.5% more starting in June.

Take a look at the price increases over the past 4 years:

March 2004 - 1.44 pesos for the starting meter (with the meter moving up at 0.18 each tick during the journey)

January 2004 - 1.60 pesos (meter moving up 0.20)

November 2005 - 1.98 pesos (meter moving up 0.22)

August 2006 - 2.16 pesos (meter moving up 0.24)

January 2007 - 2.60 pesos (meter moving up 0.26)

November 2007 - 3.10 pesos (meter moving up 0.31)

June 2008 - 3.80 pesos. (meter moving up 0.38)


Granted for tourists taxis are still cheap compared to the USA or Europe taxi fares but these are big increases for locals who with all these increases are taking the bus and metro more.

Most things are affected. The cost of local (non tourist) rents for standard long-term rents went up 27% in 2006 and they went up another 26% in 2007. Office rents in swanky areas in Recoleta have as much as doubled from a few years ago. Great if you are property owners but not so great if you are renting.


I don't know of anything that isn't affected with inflation.

It's a bit surreal. The only benefit I've experienced is I bought an import car (convertible last year in April 2007). I bought it for 120,000 pesos and I barely use it. Only on the weekends and a bit in Punta del Este where I spend some weekends. The dealership just offered to buy it back from me a year later. Get this.... the cost now is 140,000 pesos!!!

That is the only benefit I've received with the inflation. Over a year later my used car is worth more than I bought it new! I'm not going to sell it but still a bit ironic that it's worth more now a year later after a year's worth of use.
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Roberto
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Username: Admin

Post Number: 1665
Registered: 12-2004
Posted on Saturday, May 10, 2008 - 12:23 am:   Edit PostPrint Post

> It's a bit surreal.

Only to foreigners, Mike. Sadly, to us... it's almost back to normal. Hard assets is the name of the game. Hoarding and incurring debt.
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Apartmentsba.com
Advanced Member
Username: Saint

Post Number: 475
Registered: 5-2005


Posted on Saturday, May 10, 2008 - 11:35 am:   Edit PostPrint Post

Yes Roberto. I think I've lived in Argentina too long as I'm already used to all of this. I agree with you that "hard assets" is the name of the game in Argentina. As you and I chatted so many times including in my office....some things will probably never change for Argentina. It goes in these cycles every several years. I guess somethings will never change.

I hope you are doing well.
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AMARAGGI
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Username: Amar

Post Number: 8
Registered: 12-2006
Posted on Saturday, May 10, 2008 - 12:30 pm:   Edit PostPrint Post

Usually such level of inflation would cause a devaluation of the currency. How is Argentina managing to avoid that , this is a mystery for me. Has any memeber of the forum an explanation?
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Post-it
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Username: Postit

Post Number: 21
Registered: 2-2008
Posted on Saturday, May 10, 2008 - 2:14 pm:   Edit PostPrint Post

Apartmentsba, many thanks for the clarification. Especially the info on taxi rates is very indicative I guess.

I have some difficulties to imagine the negotiations between the government and civil servants; one side claiming an increase of 25%+ and the government offering 9%+ a bit maybe....

Also if the purchasing power stays more or less the same, where does the real growth of 8-9% end up?? Simply more public sector employees?

And finally, like Amar points out, normally the currency should devaluate. I guess (simplified explanation) it doesn't because of government intervention, a weak dollar, a trade surplus thanks to high commodity prices and a budget surplus thanks to retentions...

Too many questions...it's probably too challenging to really understand the Argentinean economy...not enough stable reference points...

But one things seems certain: if this situation continues much longer, everything will be very expensive and Argetina loses its competitiveness. It must be a threat for sectors that try to export; is nobody worried about the tourist sector? (I'm not sure about tickets from the US, but from Europe these are really expensive), one of the attractions was of course low local prices in Argentina.

Hard assets...always a good protection against inflation (even including a car apparently!), but possibly especially in Argentina with so much uncertainty. And the best thing is that prices will probably continue to go up (even in USD) because so many people are doing it...
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Benco
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Username: Benco

Post Number: 50
Registered: 4-2007
Posted on Saturday, May 10, 2008 - 2:22 pm:   Edit PostPrint Post

Amaraggi, I would say the devaluation of the peso caused by inflation is visible when you look at the ARS/EUR exchange rate, it was 4:1 a little over a year ago, now it is 5:1. It is not visible in the dollar exchange rate because of the recent weakness of the dollar (due to the credit crisis, the Fed lowering interest rates, looming US recession etc.).

My two cents: if the dollar situation stabilizes, the Argentinean central bank will not be able to keep the exchange rate at 3:1 any longer.
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Roberto
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Username: Admin

Post Number: 1666
Registered: 12-2004
Posted on Saturday, May 10, 2008 - 4:52 pm:   Edit PostPrint Post

Hey Mike... doing fine here at the beaches. Starting to get hot though and pretty soon headed for BA. How was your trip to Chicago? Did you see any interesting deals in the land of opportunities? Or are you back for good in the pampas?

Good point, AMARAGGI and I agree with Post-it "simplified" explanation. At this time, inflation seems to be generated by BCRA's currency policy (exchange rate targeting as opposed to inflation targeting) which deters dollars from becoming store of value. Money -instead- goes to hard assets (real estate boom) or consumption (growth of domestic market). Two things seem to be happening simultaneously: both the government and Redrado buy dollars in the open market and keep the offer in check. The BCRA accumulates reserves. If a flight from the peso is attempted, BCRA responds swiftly as a net seller (07/07, 10/07 and more recently 04/08) sending a signal to the market NOT to play the dollar game -kills one leg of the demand for it-. This policy creates more pesos in the market and it generates inflation (not cost-push but induced by monetary policy).

But there seems to be some signs of cracking. I would like to see unofficial figures of certificates of deposits not being renewed. This money is almost certainly being parked in dollars although what the BCRA publishes seems to indicate increase in deposits. If not true and the trend is flight from the peso we will soon know, as it may accelerate. Also, watch for the grain exporters dynamics. As the dollar strengthens (perhaps) and as the central bank finds it more difficult to maintain the rate of exchange (not happening in the near term) they may decide to delay their liquidations creating more of an imbalance.

With u$d 50 billion in reserves, Redrado can certainly fight a run on the peso. In my view, the general picture is what matters most:

- Argentina is not favored in international investment/credit circles.
- Government has deterred credit/investment agents by rigging numbers.
- Fiscal policy seems to be out hand.
- Extreme concentration of power by the executive branch.
- Erosion of institutional framework.
- No political party system whatsoever (opposition).
- Trade balance forecasted to shrink 2008/2009
- Fiscal balance forecasted to shrink 2008/2009
- Legal issues regarding argentine bonds that may prevent roll-overs 2009/2011.

My thinking is that these conditions will certainly generate a tendency to flight from the peso, much more than inflation. But don't ask who came first, the chicken or the egg. I don't know. Keep an eye on a potential Brazil China-led debacle or a sharp "REAL" (brazilian currency) depreciation... nothing in the horizon yet, but. Then, whatever problems were apparent will come to the front full force.

Missed Benco's post while writing this. Completely agree. If the dollar strengthens -not clear if or to what degree- Redrado will have a much harder time.

(Message edited by admin on May 10, 2008)
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Gloria Melgar Estevez
Member
Username: Glorita

Post Number: 85
Registered: 12-2007
Posted on Saturday, May 10, 2008 - 5:52 pm:   Edit PostPrint Post

"Sometimes I get quotes good for only 48 hours believe it or not"...posted by Mike.

This quote is truling very telling Mike! It does not surprise me, and yes I believe it. It reminds me of the late 1980's actually....if the government doesn't wisen up, this can take on a life of it's own eventually. I hope not, but this can be the beginning of yet another inflationary period in Argentina.
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Apartmentsba.com
Advanced Member
Username: Saint

Post Number: 476
Registered: 5-2005


Posted on Monday, May 12, 2008 - 12:11 pm:   Edit PostPrint Post

Yes, I think Christina really has some problems on her hand. Last night in most of Recoleta (at least in the upscale part near Avenida Alvear and Callao and Quintana/Callo many people took to the streets to bang on pots and pans. People were banging on pots and pans from their windows, their balconies and many took to the streets to protest against the government and the mess with the farmers.

I walked around a good bit last night to see how far it extended and it was in many areas. Banging away. Interesting to see really refined and wealthy people all dressed up and banging away on the pots and pans. The last time they did this I believe was when the banks closed during the crises.

People are starting to get fed up with the artificial inflation numbers presented by the government. More and more you are seeing newspapers and people demanding the numbers be accurate.

Also, something I found interesting last night is you are starting to see developers advertise in the La Nacion from Miami trying to get Argentineans to buy real estate in Florida. I found that a really telling sign of just how bad the situation is in the USA (especially Florida) market.

The half page ad in yesterday's La Nacion talks about the "FountainBleau Lakes Condos". It brags about being able to "invest for the same price as 10 YEARS ago". (as if that was something to brag about). It was also interesting to see the price per sq. meter they are saying the development is going for at u$s 1,992 per sq. meter which is far less than new construction in Buenos Aires per sq. meter in good upscale areas.

Also, I liked how they mentioned the fact that "financing at up to 30 years in fixed mortgages payments is possible with a 20% down payment". I seriously doubt they would give 30 year mortgages to foreigners that live in Argentina.

I got a good laugh from seeing that. It does show the power of what I've been saying for many years. Locals do NOT put their money in the stock market, they don't invest in start ups, they don't like gambling. They like investing in real estate "bricks". I know many that own properties in Florida....it will be interesting to see how many locals take advantage of the low prices in the USA and the mess there. Many of my European clients are scouting out properties in the USA now with their strong Euro.

As far as the exchange rate.....I think in the next year you may see an exchange rate as high as 3.80 - 4.25 to 1.
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Arial
Intermediate Member
Username: Arial

Post Number: 208
Registered: 10-2006


Posted on Monday, May 12, 2008 - 3:35 pm:   Edit PostPrint Post

Hi Apts, thanks for this detailed and interesting account. Two years ago I posted here that I must return to the US because my mom was sick. Hard to believe it's been two years! She passed away on March 24 and I am moving out of this apartment and preparing to return to Argentina. Am I going back at a bad time? I wonder. But good to have a clear description of what is going on in the streets of Buenos Aires.

I have to say that I admire the Argentina people. It appears to me that they are not apathetic nor do they consider themselves too dignified to make their voices (err . . . well . . . pots 'n' pans) heard!

I like them!
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Apartmentsba.com
Advanced Member
Username: Saint

Post Number: 477
Registered: 5-2005


Posted on Monday, May 12, 2008 - 4:11 pm:   Edit PostPrint Post

You're welcome Arial. I agree with you that I also admire the locals. They are extremely strong to put up with all the shenanigans that go on in this country. Imagine the devaluation and how Americans would act if this happened in the USA. People would literally be blowing up banks. I'm convinced if the same thing happened in the USA, you would have people blowing up banks, you'd have people open firing at banks. I'm not joking around either. It would be pure chaos.

I've always admired the locals for their calmness during tense and difficult situations. I guess it's just that they are used to it as there is some crises every 10 years or so. Americans wouldn't do so well under a similar situation.

The reason why I pointed out that wealthy people were taking to the streets last night is that I think there is a big and fundamental difference between poor people or "piqueteros" protesting en the Centro vs. wealthy citizens of Recoleta taking to the streets. You can't just blow off the protesters in these kind of situations. Many times the locals say the piqueteros are just "hired hands" to protest or are blown off. You can't do that when you see the more affluent citizens all dressed up banging on pots and pans near Quintana/Callao. To me it shows how frustrated the locals are. (ALL locals...not just the lower or middle class...the upper class as well).

Arial, certainly I think Argentina is going through some tough times but I'd say the quality of life here is still good if you have money/savings so come on down. Inflation is a big factor here but the cost of living is much lower than it is in the USA. I'm not sure if you are living off retirement savings. If so, Argentina is ideal as the cost of living is still far less than the USA. Health care is very good as well if you have a good private insurance medical plan.
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Apartmentsba.com
Advanced Member
Username: Saint

Post Number: 478
Registered: 5-2005


Posted on Monday, May 12, 2008 - 4:39 pm:   Edit PostPrint Post

Roberto - I totally missed your earlier post. Sorry. Glad to hear you are doing well. I had a good trip to the USA. I hit several different cities. A bit of vacation and a bit of work as well. I looked at some real estate in a few different areas. The prices are softer each time I go back to the USA. I still am sticking with my prediction I made last year of the end of 2008 or beginning of 2009 being the right time to buy in the USA. I forecasted that last year and I'm sticking to it.

It will be interesting to see if there is any "hand out" from the government on the real estate mess in the USA. I agree with you Roberto about what you mentioned on the exchange rate issues. You are also right about it being a bit difficult to play the "dollar game". I've been playing that "game" here pretty effectively over the past few years with the dollar and the Euro and the Peso. I liquidated all my pesos a few months ago as I forecasted the exchange rate could get weaker for the peso. But it is tough playing that game. I caught a cash out of the Euro at a good time but I think it might go back up but the $1.60 range was nice.

ALL the issues you brought up Roberto are spot on. Argentina is not looked upon favorably around the world and by the investment community. I often wonder when they will pay back the Paris Club. The executive branch has too much concentrated power and the locals are starting to get tired of that fact. As you mentioned, there is a big erosion in the institutional framework and no strong opposition which can be dangerous.

I think all would agree that Christina so far has been a big disappointment and even worse than people imagined she might be.
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Arial
Intermediate Member
Username: Arial

Post Number: 209
Registered: 10-2006


Posted on Monday, May 12, 2008 - 9:15 pm:   Edit PostPrint Post

Apts, are you finding the soft prices regional? Or not? I have friends and family in Billings, Montana, and in Hendersonville, N.C. All say that nothing has changed where they are. There was no bubble, and there is no crash. In Billings, bankers never took up the easy credit policy that happened in Florida. One of them told my friend that he didn't have to worry because Montana had remained conservative in their lending. So far he is right.
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Tourism and Web Design
New member
Username: Argentinafull

Post Number: 5
Registered: 8-2007
Posted on Tuesday, May 13, 2008 - 6:23 pm:   Edit PostPrint Post

Hello! and for the "possible" next crisis: what about:
American Express Cheques Secure Funds???

http://www10.americanexpress.com/sif/cda/page/0,16 41,19379,00.asp

Is a good idea?
Tx, Viviana
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Arial
Intermediate Member
Username: Arial

Post Number: 210
Registered: 10-2006


Posted on Wednesday, May 14, 2008 - 4:25 am:   Edit PostPrint Post

I posted on this subject previously with no response. I continue to have the question and I know there are some unusually informed people on this board. So I try again.

Since our "money" is created out of thin air by the bankers, never existed before it became an electronic figure entered on a ledger sheet, no one worked for it or deposited it in any account anywhere . . . you borrow $500,000 to buy a house. You have to pay interest to the bank on money that really never existed. (Sweet deal for bankers, right?)

The real estate crisis comes and your house is now worth $250,000. But you still owe the $500,000 for which YOU must work and produce something in order to pay the bank. If you walk away from your house without paying, who lost besides you? The "wealth" never really existed in the first place. The money to buy it didn't exist and the value didn't exist. It was a pumped up "value" because of "easy credit" causing too many dollars to be dumped into the system by the central bank.

Of course I realize the people who bought the fake "tranches" (bundles of mortgages rated AAA by Moody's and sold as valuable, safe investments) definitely lost. But who knows? Maybe they were bought with fake money too. But that's a whole different issue.

To my thinking this is a puzzle. It all looks like a big scam by the banks to me. Or the FED. Or someone! Is there something I am missing?

For those of you inclined to yell at me that this is supposed to be about Argentina--if the principle that I am looking at is true, it means that people in Argentina who think these crises are contrived in order for those in control to pick up assets in each crisis could be right. Right now I think the fact that credit is not easy in Argentina makes for a more stable real estate market.

Here are two quotes from famous folks:

Permit me to issue and control the money of the nation and I care not who makes its laws. — Mayer Amsched Rothchild, a prominent European banker in the eighteenth century

If the American people ever allow the banks to control issuance of their currency, first by inflation and then by deflation, the banks and corporations that grow up around them will deprive the people of all property until their children will wake up homeless on the continent their fathers occupied. — Thomas Jefferson
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Simon Fawkes
Member
Username: Expatba

Post Number: 66
Registered: 1-2007


Posted on Wednesday, May 14, 2008 - 5:08 am:   Edit PostPrint Post

Hi Arial

Your question is a good one. This is a layman's answer, so is probably a bit simplistic.

My understanding is that banks are legally allowed to lend multiples of the "real" deposits they hold - i.e. they lend "virtual" money. In the UK they can lend 8 times, I believe the multiple is 12 in the US.

The trouble is, although the money can be conjured from thin air, it can't just disappear the same way if there's a bad debt. All loans and debts have to be recorded on the balance sheet, and in a sense become "real".

Therefore, to illustrate with a simple example, suppose a bank has $100 on deposit. It can then lend out 8 times this, i.e. $800. Now suppose $10 of that is bad bebt and is written off. That comes off the balance sheet. So the bank now only really has $90 to lend against, so can only lend $720. It's losing interest on $80 and the amount of credit it can offer has been restricted significantly, despite the rate of loan default ($10/$800) being little more than 1%.

If the rate of default is much higher (10% is currently being bandied about) then this leads to a vicious circle and is a part of the reason for the credit crunch we're seeing at the moment.

Simon Fawkes
Author, The Complete Guide To Real Estate Investment in Argentina, ISBN 1430303980, http://www.amazon.com/exec/obidos/ASIN/1430303980
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Arial
Intermediate Member
Username: Arial

Post Number: 212
Registered: 10-2006


Posted on Thursday, May 15, 2008 - 8:39 am:   Edit PostPrint Post

Simon, thanks so much for that very good and thoughtful explanation. Interesting that you're so knowledgeable when, if I remember correctly, you are not from the U.S.

Do you know if the central bank in Argentina is similar?
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Benco
Member
Username: Benco

Post Number: 51
Registered: 4-2007
Posted on Thursday, May 15, 2008 - 7:19 pm:   Edit PostPrint Post

Viviana, I like your idea with the American Express Cheques - it is great to have some practical tips as well on this thread. In my view it is a trade-off between the risk of theft and the (unlikely) possibility that the Cheques may lose their value.

With dollars in cash you have a huge risk of theft, while the Cheques should be insured once you signed them. On the other hand, a dollar is a dollar, while a cheque is only a promise by American Express to pay a dollar.

Actually I assume only the Argentinean branch of American Express is liable, and the international brand doesn't help you at all in case this branch goes bust. Think of how the large banks lured Argentineans with their international reputation to put money into their bank accounts, and then when the crisis struck, people learned what was written in the small print - the Argentinean branch is an independent bank on its own and can easily go bankrupt with no liability of the other branches.

Nevertheless you may consider this trade-off, and I think the money is safer than on a bank account. Not sure if these cheques (or travellers cheques) were affected in the last crisis. I assume not, but since Roberto noted some time ago that the banks even opened deposit boxes... Maybe there is anyone out there with first-hand experience?

In general I believe there is little risk of a forced conversion of dollars to pesos or similar tricks. What happend in 2002 should be viewed in the context of the convertibility law, but this law no longer exists. A crisis may lead to a massive devaluation of the peso, and the government may default on its debt, but without the legal chaos and forced currency conversion of the last crisis.
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Benco
Member
Username: Benco

Post Number: 52
Registered: 4-2007
Posted on Thursday, May 15, 2008 - 8:03 pm:   Edit PostPrint Post

Arial,
personally I am not so critical about the banking and credit system. I may be wrong (layman as well...) but in my view there is no money created out of thin air when you borrow money to buy a house.

The bank puts the money on the table (at least in Argentina...) and it will own the house when you default on your payments. And the money is coming from bank deposits of other people. A bank can not lend out more money than it obtains in the form of deposits.

The crucial point is of course that there is a risk of devaluation of the house, and also the bank must make sure it can pay back the deposits on the agreed dates. Therefore a bank is not allowed to lend out all of the deposits, it needs to keep a certain percentage in order to ensure liquidity, manage the credit risks, fight bank runs and so on. You may also view this (as Simon has explained well) in terms of leverage: it can only lend out with a limited leverage with respect to its remaining deposits. I think there is sometimes a confusion between "deposits" and "remaining deposits", which may give rise to the idea of some strange multiplication of existing values.

So in my view it is all about bringing together people willing to make deposits and those who need credit, while managing risks and maintaining liquidity. I would say the money/values in play are very real and not created in some a magical or unsustainable way.

The system needs regulation and supervision, and there are many things which can go wrong. But it serves a very important goal, namely converting savings into investment. Look at Argentina, where savings are sent abroad or are sitting under the mattress in an unproductive way, while companies are struggling to finance their investment projects in the absence of credit. It would be an important strategic goal to bring the credit system back to life, but I do not see this happening at the moment.

Here is a recent article about exactly this topic:
http://www.economist.com/finance/displaystory.cfm? story_id=11333109

By the way, the article states that Argentineans hold a staggering 80 percent of their deposits abroad. It seems they are all prepared for the next crisis.
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Roberto
Board Administrator
Username: Admin

Post Number: 1667
Registered: 12-2004
Posted on Thursday, May 15, 2008 - 9:03 pm:   Edit PostPrint Post

> It all looks like a big scam by the banks to me. Or the FED. Or someone! Is there something I am missing?

Arial, another layman's contribution here...

I think your inquiry is at the heart of what monetary policy is about and how generation of credit works (and sources of generation of credit). Credit in itself is not a bad thing -my belief- as it allows business agents and individuals to reach further (start-up loans, making possible acquiring assets that would otherwise be out of reach, etc). Credit seems to be a self-reinforcing force that creates a cycle of improvement -as it has been called- a virtuous circle. Most developed economies based their progress on readily available credit. Once fiscal surplus and trade surplus begin to shrink, you will see how quickly Argentina's growth stalls. All development of the last few years has been funded almost entirely on the country's net profit... something that is not realistic nor sustainable. So your posting is very appropriate to this thread as a fundamental weakness Argentina has is the lack of external credit as well as domestic credit for small businesses and/or individuals for consumption.

Here is a link (wikipedia, what else) that adds to Simon friendly and concise explanation -and more recently Benco's- on how banks operate and appear to create money out of thin air:

Reserve requirements

I'd like to comment too, if I may -using my nicest layman hat- on Benco's amex cheques/devaluation risks. As Viviana suggested and Benco has confirmed, they may have some use in case of a crisis. But I am not sure we are headed towards such outcome. If anything, pesos and dollars have been converging and continue to do so. At this pace, by the end of 2009 pesos and dollars would have reached their long term parity which will mean that even at a 3 to 1 exchange, the dollar cost of goods would be similar to the pesos cost of goods in relation to the parity of most of the 80's and most of the 90's, an equilibrium so to speak. What appears to be happening, given the agri issues together with a deterioration of fiscal accounts -please note I didn't bring up the inflation problem as this is part of the ongoing converging scheme-, is that some entities are starting to doubt that the government has a handle on issues. Three runs were averted by Redrado since last year, the last one on April. Taking into account all liquid desposits by private individuals as well as certificates of deposits by businesses, the 50 billion dollars in reserves (close to 60 billion if all accounts are added) are not enough to cover all circulating pesos. In other words, if everybody -including businesses- decide that this government is flaky, expectations of higher inflation will be set firm and most of this money will be converted to dollars. So the key word seems to be "expectations". And these expectations are making some people nervous as they could end up representing a spiral in actual inflation with its corresponding dramatic hard landing.

All paths appear gloom. Even if the government succeeds in the converging of pesos/dollars, imports will become cheaper and part of the apparatus that led to the recovery will be gone, the protection to the industry as well as the international competitive advantage. Some think this soft landing would be more manageable and perhaps not lead to a crisis, whereas an external shock (read Brazil) or a determination by local actors that the government has lost it would all end up in a bigger crisis.

(Message edited by admin on May 15, 2008)
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Roberto
Board Administrator
Username: Admin

Post Number: 1668
Registered: 12-2004
Posted on Thursday, May 15, 2008 - 9:06 pm:   Edit PostPrint Post

> Look at Argentina, where savings are sent abroad.

It is estimated that 4/5 of argentine savings are abroad. Morgan Stanley estimations.
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Arial
Intermediate Member
Username: Arial

Post Number: 213
Registered: 10-2006


Posted on Friday, May 16, 2008 - 12:07 am:   Edit PostPrint Post

Benco, thanks.

If that is how the Argentina banks work, it sounds like the way the US banks operated before the Federal Reserve came into being. In that case the money is "real." Someone actually created something for it and deposited it. This is probably the reason that financing is so difficult to get in Argentina. AND is probably the reason that the real estate market in Argentina is stable and "has not disappointed" as someone said.

It is the easy credit in the US that creates money (as Simon explained so well). That is what created the bubble in the US and is the reason so many people are now losing their homes.

Of course the people who took the mortgages are responsible too but, in my opinion, there are so many people who just can't figure things out that I think the banks have a responsibility to them. I think that the banks knew that these people probably would not be able to pay when the loans were reset so they protected themselves by offloading the consequences to unsuspecting buyers by selling them the loans.

I'm afraid, Benco, that I am critical. But of course this also is just my opinion. Just trying to think this through.

Thank you for your input.
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Francoise Lerusse
New member
Username: Franleru

Post Number: 1
Registered: 1-2008
Posted on Sunday, May 18, 2008 - 6:15 am:   Edit PostPrint Post

Hello

I am from Europe and I intend to invest in Miami in an apartment for temporary renting.

Is it time to buy, considering the present Euro rate ?

What are the best places for such a business ? Is it Palm Beach (Boca Raton) or Miami itself, and wich part of Miami ?

Off season, is it possible to rent to business clients, or turistic and business areas are different places ?

What return is possible?

What budget is necessary for a 1 bedroom +/- 100 M2 apartment well situated ?

Thanks to all. This forum is a great place!
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movingtoargentina.typepad.com
Intermediate Member
Username: Sapphos

Post Number: 123
Registered: 2-2006
Posted on Sunday, May 18, 2008 - 9:17 am:   Edit PostPrint Post

Hi Francoise,
My husband is French and would love to talk with you about Miami. He left France for Miami five years ago and can give you some very good insight.

Laura
Ebook Moving to and Living in Buenos Aires, Argentina
http://movingtoargentina.typepad.com
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Roberto
Board Administrator
Username: Admin

Post Number: 1670
Registered: 12-2004
Posted on Sunday, May 18, 2008 - 4:47 pm:   Edit PostPrint Post

Francoise, welcome!

It might be better to start a new thread -and you are welcome to do so- to explore opps. in Miami real estate... This forum actually focuses in Argentina but given the many americans participating there may be room for getting some advise. Some here are very familiar with southern Florida.

Getting back to the focus of this thread and in relation to "credit" I just found an article about the pending usd 28 billion in debt Argentina still owes to american bondholders and how not paying may worsen future growth prospects.

http://atfa.org/cgi-data/news/files/601.shtml
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WTMendoza.com
Advanced Member
Username: Welcometomendoza

Post Number: 253
Registered: 7-2007


Posted on Tuesday, May 20, 2008 - 10:09 pm:   Edit PostPrint Post

Here are some posts that could be appropiate over here on this thread:

http://www.travelsur.net/cgi-bin/discus/show.cgi?t pc=20&post=8246#POST8246

http://www.travelsur.net/cgi-bin/discus/show.cgi?t pc=20&post=8249#POST8249
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Gloria Melgar Estevez
Member
Username: Glorita

Post Number: 91
Registered: 12-2007
Posted on Saturday, May 24, 2008 - 9:23 am:   Edit PostPrint Post

I just finished reading an article in "La Nacion" which makes me wonder if perhaps the ghosts of 2001 are back to haunt Argentina. The article can be found in today's edition(May 24,2008), entitled "En 5 dias se triplico la fuga de depositos"
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Roberto
Board Administrator
Username: Admin

Post Number: 1698
Registered: 12-2004
Posted on Saturday, May 24, 2008 - 8:02 pm:   Edit PostPrint Post

Thank you, Gloria. Some additional (and recent) analyses...

Miguel Kiguel, Executive Director of EconViews and a former Undersecretary of Finance and Chief Advisor to the Minister of Economy in Argentina: In recent weeks investors have become more concerned about the possibility of a new Argentine default. One critical question is whether these concerns reflect a deterioration in the economic fundamentals, e.g. in the ability to pay, or if instead they are related to a perception that there is less willingness to pay.

The financial requirements for this year are only $3.5 billion, a figure that the government can easily raise in the local market. Perhaps the concerns reflect the roughly $10 billion that the government needs for 2009. However, our estimates indicate that it can raise around $5 billion from domestic institutional investors and in a worse-case scenario there is room under current legislation to obtain around $2.5 billion in temporary advances from the Central Bank. Of course, one can get worried about 2010, but to be honest the problem is not the capacity to pay but the perceived willingness to pay. Using almost any measure of creditworthiness, Argentina should be able to meet its financial obligations in coming years.

The risks appear in extreme scenarios where Argentina has no access whatsoever to the financial markets for a prolonged period. While the risk of default is not nil, the economic fundamentals are still in good shape, and the spreads appear to have overreacted. They are primarily driven by an intense negative mood that was generated by the manipulation of the official inflation rate and by the stubborn position that the government has taken in the negotiations with farmers. While the rigid attitude could prevail for some time, and hence the spreads could remain high during that period, we expect that the political system will eventually work and that the country will again access international financial markets. It's the politics this time, and the problem is that investors understand the evolution of economic crises much better than political ones.

Claudio Loser, Senior Fellow at the Inter-American Dialogue and former Head of the Western Hemisphere Department at the International Monetary Fund: Argentina's debt has been growing steadily since the country's authorities reached a deal with bondholders in 2005. At present, the debt of the public sector is at about the same level as before the 2001 default, at some $150 billion. Seen from that perspective, there may be serious questions about the sustainability of external indebtedness. However, circumstances are considerably different than they were seven years ago, even as there are serious problems of economic management in other areas.

First and foremost, Argentina was able to restructure debt equivalent to about one-third of the total stock outstanding at very favorable terms, specifically a 40-year maturity and low interest rates. In addition, the country has reduced its debt obligations with international financial institutions, like the IMF and the World Bank, and has replaced them with expensive but long-term loans from Venezuela, and also with domestic issuances, that tend to be more stable. Furthermore, Argentina is still recording a trade surplus, reasonably strong (although weakening) public finances, and high levels of international reserves, while the debt burden as a proportion of GDP has been declining and is now at a level equivalent to 50 percent of GDP, well below the 150 percent observed in 2002. Under these conditions it is unlikely that the government considers itself in a situation close to default. Nonetheless, if conditions deteriorate the authorities may be tempted, against good judgment, to move in the direction of a default, although not in the near future

Vladimir Werning, Vice President at JP Morgan Chase & Co. : The market is braced for a 35 percent probability of a default on hard currency debt considering the 620 basis point (bp) spread over swaps on five-year Argentine CDS contracts. And bonds are trading even cheaper: five-year dollar debt is priced at a spread of 950 bp above US Treasuries, and inflation-linked peso debt trades at a real spread of 1230 bp above US TIPs.

While Argentina has ample capacity to pay its debt, market prices are reflecting investor doubts over its willingness to do so for good reasons. The market doubts arise because authorities have 1) hit a budget constraint but eluded the opportunities to reconcile differences over tax policy with farmers; 2) systematically postponed a conventional policy response to high and rising inflation; 3) discarded the use of reliable macro statistics in a way that suggests disinterest in confronting economic reality that entails political and financial costs; 4) repeatedly sacrificed economy ministers that offered ideas that moderately deviated from the policy status quo; and 5) increasingly regulated and segmented goods and financial markets with a mind to controlling the price discovery mechanism, to mention a few issues.

The market is also concerned that authorities do not realize that their reliance on market financing is greater than acknowledged: for instance, in 2008 given $5.7 billion of amortizations to private creditors and $3 billion of issuance in the market alongside $6.5 billion of interest indexation and capitalization, Argentine risk held by investors is rising by about $4 billion on a net basis. While local pension fund capacity to fully absorb Treasury debt issuance in 2008 is comforting, higher issuance requirements in 2009 raise market concerns. Of course, with $50 billion in Central Bank reserves, a $12 billion trade surplus, and 3.8 percent of GDP primary surplus, Argentina has a lot of insurance it can tap in order to survive outside the market for a long period of time. Yet this is of limited comfort to investors who require that the credits they invest in not only have contingent strategies during times of financial stress but also an inclination and a strategy to come back to the market to secure minimum financing over a reasonable timeframe—which is what Argentina currently lacks.
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Francoise Lerusse
New member
Username: Franleru

Post Number: 7
Registered: 1-2008
Posted on Wednesday, July 09, 2008 - 4:08 pm:   Edit PostPrint Post

Hi Mike,

Here I am on the forum again, reading your such interesting information and thoughts about real estate.

May I ask you a question? When you'll have bought some properties in the USA, what will be the best way of making profit with them? Because buying properties is one thing, making profit in such a mess is another one.

About buying in cash, do you think it's better than the leverage of mortgages?

Thank you for your input.
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Apartmentsba.com
Senior Member
Username: Saint

Post Number: 516
Registered: 5-2005