09-02-2015, 02:21 AM
Few comments:
1) FX rate is relative in a fiat world. What that means is that competitive devaluation is actually dependent on the anchor you are talking about. In this case USD is the anchor and the current trend is that it is actually tightening not easing. Hence QE in US is significant globally rather than QE even in Japan nowadays, global QE per se may not be that significant as you think. Nonetheless obviously RMB will be a major factor in near future as it internationalises. It is interesting to note that SNB, RBI, RBA, MAS, PBoC and even Russian Central Bank eased in the course of 5 short weeks of 2015. IMHO I think there is a global reverse-Plaza accord happening due to the nature of the timing.
2) "For countries whose economy is doing well, however, the real interest rate should increase due to more economic activity. The effect will be although nominal interest rates are low, deflation will occur. This is because Nominal Interest Rates minus Inflation gives Real Interest Rates. If Real Interest Rates increase but Nominal Interest Rates stay low due to government intervention, Deflation has to occur. " - I think you got the horse and cart mixed up on this
3) "Assuming that most countries will have to print money to counter effects of global QE, the country that can invest the printed money well would likely generate high real interest rates. Thus, one way is to look for countries that 1) have a capable government and 2) have a plenty of projects that can be invested to give high returns"
- I think in almost all instances, effective use of public money will be net economic positive in the long run, whether high or low real interest rate. Lousy projects have low or zero returns, but good public projects might not have great returns in a direct way. But in an indirect way, tax revenue and efficiencies can be increased in the economy. that's where the attirbution is much less precise and complicated and policy makers have to decide if they want to do the easy but ineffective way, or the hard to attribute but long term effective way
4) SGD is a controlled currency so you can't use a US textbook to understand it. Secondly SGD is managed through FX and not interest rate so FX is the primary conduit. For example in the event that SGD is to appreciate against the NEER, and the currencies of the basket is depreciating, SGD interest rate might actually be stable or even decline because the reference NEER currencies are already weakening.
Actually the genius of WB is his ability to explain very complex things in very simple terms.
However not many people have the discipline, patience and tenacity to follow his style. That is also probably why he is actually very open to sharing his investment philosophy. You can actually learn a lot by reading his AR.
WB is not a contrarian investor but value focused. there is a difference. He is not interested to be outstanding or different, or doing opposite to what the market participants are saying. He just do things simple yet effective.
http://www.valuebuddies.com/thread-5705-...#pid106429
1) FX rate is relative in a fiat world. What that means is that competitive devaluation is actually dependent on the anchor you are talking about. In this case USD is the anchor and the current trend is that it is actually tightening not easing. Hence QE in US is significant globally rather than QE even in Japan nowadays, global QE per se may not be that significant as you think. Nonetheless obviously RMB will be a major factor in near future as it internationalises. It is interesting to note that SNB, RBI, RBA, MAS, PBoC and even Russian Central Bank eased in the course of 5 short weeks of 2015. IMHO I think there is a global reverse-Plaza accord happening due to the nature of the timing.
2) "For countries whose economy is doing well, however, the real interest rate should increase due to more economic activity. The effect will be although nominal interest rates are low, deflation will occur. This is because Nominal Interest Rates minus Inflation gives Real Interest Rates. If Real Interest Rates increase but Nominal Interest Rates stay low due to government intervention, Deflation has to occur. " - I think you got the horse and cart mixed up on this
3) "Assuming that most countries will have to print money to counter effects of global QE, the country that can invest the printed money well would likely generate high real interest rates. Thus, one way is to look for countries that 1) have a capable government and 2) have a plenty of projects that can be invested to give high returns"
- I think in almost all instances, effective use of public money will be net economic positive in the long run, whether high or low real interest rate. Lousy projects have low or zero returns, but good public projects might not have great returns in a direct way. But in an indirect way, tax revenue and efficiencies can be increased in the economy. that's where the attirbution is much less precise and complicated and policy makers have to decide if they want to do the easy but ineffective way, or the hard to attribute but long term effective way
4) SGD is a controlled currency so you can't use a US textbook to understand it. Secondly SGD is managed through FX and not interest rate so FX is the primary conduit. For example in the event that SGD is to appreciate against the NEER, and the currencies of the basket is depreciating, SGD interest rate might actually be stable or even decline because the reference NEER currencies are already weakening.
(08-02-2015, 08:06 AM)Life is a game Wrote: [ -> ]If things are so simple looking then everyone can succeed in investing. Scratching the surface and looking at events unfolding and solving them one at a time is not going to work. WB has his own ways to succeed at his time but today is not yesterday. reading history and predicting future is what alot of investment gurus are doing. Contrary thinking is what WB is advocating not his style of investment or his past glorious. If anyone think they can understand who who more and by reading some AR or FS he/she can fully understand this or that then it is in itself this thinking that is dangerous and leading to self review risk.
Actually the genius of WB is his ability to explain very complex things in very simple terms.
However not many people have the discipline, patience and tenacity to follow his style. That is also probably why he is actually very open to sharing his investment philosophy. You can actually learn a lot by reading his AR.
WB is not a contrarian investor but value focused. there is a difference. He is not interested to be outstanding or different, or doing opposite to what the market participants are saying. He just do things simple yet effective.
http://www.valuebuddies.com/thread-5705-...#pid106429