Join Early Retirement Today
Reply
 
Thread Tools Display Modes
What it means to be a debtor nation
Old 06-23-2005, 08:08 AM   #1
Thinks s/he gets paid by the post
 
Join Date: Mar 2004
Posts: 1,318
What it means to be a debtor nation

Did anyone catch this business story about the Chinese oil company, CNOOC bidding 18.5 Billion in cash for Unocal?
http://money.cnn.com/2005/06/23/news...ex.htm?cnn=yes

Hilarious thing for me was the followup parts of the WSJ story on the topic where US politicos are up in arms about how awful this is, and how they must stop this venal effort by Chinese to take prized American assets.

I guess this is the first time those guys realized that running all those federal deficits means more than just jotting IOUs to China down in a big ledger. Now it means something a little more like a family selling off pieces of furniture and paintings in order to keep living beyond our means.

Oh well, there are lots of prized assets here to sell off to foreigners in the decades ahead. Still it makes you think.

I know China is motivated by its needs for secure access to energy, but this also marks an interesting departure that individual investors might note, too. Should we all be bulking up a bit more on Commodities and Oil & Gas instead of Treasuries?
__________________
ER for 10 years; living off 4.3% of savings (and a few book royalties ;-)
ESRBob is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Re: What it means to be a debtor nation
Old 06-23-2005, 08:19 AM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2003
Location: Kansas City
Posts: 7,968
Re: What it means to be a debtor nation

Are these the same guys from back when Japan was going to buy America back in the late 80's - or is this a new crop of ding dongs.

Hmmm - maybe they(the Chinese are more astute buyers) - at least it's not golf courses and real estate.
unclemick is offline   Reply With Quote
Re: What it means to be a debtor nation
Old 06-23-2005, 08:41 AM   #3
Thinks s/he gets paid by the post
 
Join Date: Dec 2003
Posts: 1,375
Re: What it means to be a debtor nation

Quote:
Originally Posted by unclemick2
Are these the same guys from back when Japan was going to buy America back in the late 80's - or is this a new crop of ding dongs.

Hmmm - maybe they(the Chinese are more astute buyers) - at least it's not golf courses and real estate.
Unclemick:

Oh yeah. Japanese investors bought one of national golf treasures, during that time frame.
(Pebble Beach). They paid far too much for it at the time, so it's returned to it's rightful owner.
(Somebody that can afford it).
During that period of time, they had a "hammer" in their hand and every half-way real estate situation looked like a "nail" to them.
Don't think any of the hundreds of golf courses they bought during that time frame is still under their control.
I remember every marginal real estate developer, etc. etc. that was upside down in their projections was waiting for a Japanese group to bail them out.
Interesting time
Jarhead* is offline   Reply With Quote
Re: What it means to be a debtor nation
Old 06-23-2005, 08:45 AM   #4
Recycles dryer sheets
 
Join Date: Feb 2005
Posts: 239
Re: What it means to be a debtor nation

I do think this may be a significant turn of events. Think about it...what doesn't come from China these days? What are the Chinese getting in return for all these goods? Paper and promises. Now, they are wanting to turn these into hard, practical assets. And they can and will. If not Unocal, then something else. How long can we expect them to sit on stacks of paper
__________________
All the best....Mike
I'd rather live in a rustic cabin and be free than in a McMansion as a slave!
Mountain_Mike is offline   Reply With Quote
Re: What it means to be a debtor nation
Old 06-23-2005, 09:19 AM   #5
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2003
Location: Kansas City
Posts: 7,968
Re: What it means to be a debtor nation

Heh, heh, heh

I can hardly wait for Hollywood to crank out the requiste crop of movies - comedy's and serious wise.
unclemick is offline   Reply With Quote
Re: What it means to be a debtor nation
Old 06-23-2005, 10:35 AM   #6
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,855
Re: What it means to be a debtor nation

Quote:
Originally Posted by ESRBob
... how they must stop this venal effort by Chinese to take prized American assets.
Heck, let's sell them Rockefeller Center, the Chrysler & Sears towers, and even most of Los Angeles. If they'd buy Donald Trump too then we could throw in a couple of free Brooklyn Bridges.

I wonder why China is buying American assets from us instead of buying their American assets from the Japanese?
__________________
*

Co-author (with my daughter) of “Raising Your Money-Savvy Family For Next Generation Financial Independence.”
Author of the book written on E-R.org: "The Military Guide to Financial Independence and Retirement."

I don't spend much time here— please send a PM.
Nords is offline   Reply With Quote
Re: What it means to be a debtor nation
Old 06-23-2005, 10:40 AM   #7
Thinks s/he gets paid by the post
Eagle43's Avatar
 
Join Date: Jan 2005
Location: DFW
Posts: 2,015
Re: What it means to be a debtor nation

Quote:
Originally Posted by Nords
Heck, let's sell them Rockefeller Center, the Chrysler & Sears towers, and even most of Los Angeles. If they'd buy Donald Trump too then we could throw in a couple of free Brooklyn Bridges.

I wonder why China is buying American assets from us instead of buying their American assets from the Japanese?
Clever, Nords! Clever!
__________________
Resist much. Obey Little. . . . Ed Abbey

Disclaimer: My Posts are for my amusement only.
Eagle43 is offline   Reply With Quote
Re: What it means to be a debtor nation
Old 06-23-2005, 11:10 AM   #8
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,708
Re: What it means to be a debtor nation

Quote:
Originally Posted by Nords
I wonder why China is buying American assets from us instead of buying their American assets from the Japanese?
Same thought I was having as I read. This isnt the first time we had a significant foreign interest buying stuff up ... and later taking a bath on a lot of it.
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Re: What it means to be a debtor nation
Old 06-23-2005, 11:15 AM   #9
Thinks s/he gets paid by the post
 
Join Date: Mar 2004
Posts: 1,318
Re: What it means to be a debtor nation

I'm not sure the Chinese can be counted on to take a bath on things they buy from us. I've seen an incredible array of astute, hard-working, patient, intelligent behavior from the hundreds of Chinese people I've known and met -- both from the mainland and already here.

I'm not saying they are warren buffet or that we should all be buying oil companies -- they have their own reasons for wanting to secure energy sources -- but my experience is that matters with the Chinese will be a completely different experience than things were with the Japanese a few decades back.
__________________
ER for 10 years; living off 4.3% of savings (and a few book royalties ;-)
ESRBob is offline   Reply With Quote
Re: What it means to be a debtor nation
Old 06-23-2005, 11:30 AM   #10
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,708
Re: What it means to be a debtor nation

If they want to secure an oil source, they should be investing in our military. Its done wonders for keeping rogue nations that need democracy oil sources well taken care of...
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Re: What it means to be a debtor nation
Old 06-24-2005, 12:56 AM   #11
Recycles dryer sheets
 
Join Date: Jun 2005
Posts: 201
Re: What it means to be a debtor nation

This isn't the first, and certainly won't be the last, instance of Chinese companies (both privately held and those still state controlled) buying overseas assets, including US Corporations. It is noteworthy however, that the buying of an oil company has raised such heckles - I didn't notice such an uproar (more of a mild squeak) when Lenovo bought IBM's pc business or when Haeir bid for Maytag from Hoover only a couple of days ago. Maybe the outcry over UNOCAL is more reflective of the personal motivations/interests of the US Administration (heavily leaning towards the oil and energy sector) than anything else.

As for comparisons with the Japanese spending spree in US assets back in the 80's, the similarities are precisely NIL. The Japanese predominantly bought "trophy" assets, big names and landmarks, more out of hubris,ego and abundance of cash than from a rational ecomomis or business perspective. The Chinese on the other have and will continue to buy long term, sound and strategic assets that specifically catered to their domestic needs and securities issues - note that the overwhelming majority of UNOCAL's reserves are in South East Asia, right on China's doorstep.

Lastly, the earlier analogy with the family selling off the farm is accurate. Asia as a whole, and China and Japan inparticular are massive holders of US federal paper. The US has had it's cash and has spent it. The Administration was happy to take the Chinese / Japanese / Asian / Foreign cash when it wanted to blow out the federal budget, selling off the future tax revenues of generations to come (i.e. the family farm), so it now seems a little churlish to be complaining when those debts come home to roost.

Rather a serious topic for a first post, I know. I promise a few more light hearted post in future!
Honkie is offline   Reply With Quote
Re: What it means to be a debtor nation
Old 06-24-2005, 08:30 AM   #12
Recycles dryer sheets
 
Join Date: Sep 2002
Posts: 252
Re: What it means to be a debtor nation

I dunno... oil companies are richly priced right now (with oil at $60 and all the talk of "peak oil.") Unocal has gone up by over 50% just this year.

Commodities in general have been on a huge tear recently. There are rumors that this is what the Chinese are focusing on - primarily to have access to raw materials.

Of course, if these is a global recession that hurts consumption (like, Americans stop buying crap for whatever reason - like a recession), then not only will the Chinese have overpaid for those commodity producers, but commodity demand will drop. They'll get taken to the cleaners.

Whakamole is offline   Reply With Quote
Re: What it means to be a debtor nation
Old 06-24-2005, 11:37 AM   #13
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,708
Re: What it means to be a debtor nation

Quote:
Originally Posted by Whakamole
Commodities in general have been on a huge tear recently.
Huh...isnt that odd...commodities, which are a very good measure of inflation...off on a tear...yet the CPI says inflation is tame. How weird...
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Re: What it means to be a debtor nation
Old 06-24-2005, 11:55 AM   #14
Recycles dryer sheets
 
Join Date: Sep 2002
Posts: 252
Re: What it means to be a debtor nation

Quote:
Originally Posted by Notth
Huh...isnt that odd...commodities, which are a very good measure of inflation...off on a tear...yet the CPI says inflation is tame. How weird...
So, you're saying commodities are in a bubble?



Many think that we'll see either inflation or a huge rush for commodities. So did I a few years ago when I invested. Now I think otherwise - they've gone way up, but commodites only have value if they're used to produce things.

Stephen Roach and his gang have written about this.

Whakamole is offline   Reply With Quote
Re: What it means to be a debtor nation
Old 06-24-2005, 12:00 PM   #15
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,708
Re: What it means to be a debtor nation

Look at short, mid and long term cd rates and bond yields. From the intermediate to long term range it appears the banks and financial institutions expect rates to start coming back down after 2-3 years.

Rates arent coming down in the face of high inflation and a booming economy...

Commodity bubbles? Over the last few months, yes, no, yes, yes yes, no, no, no...one hell of a volatile asset class that sure isnt very tax friendly...:P
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Re: What it means to be a debtor nation
Old 06-24-2005, 09:30 PM   #16
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,855
Re: What it means to be a debtor nation

Quote:
Originally Posted by Notth
Look at short, mid and long term cd rates and bond yields.* From the intermediate to long term range it appears the banks and financial institutions expect rates to start coming back down after 2-3 years.
Is it possible that banks are afraid to raise their long term interest rates in the same way that airlines are afraid to raise their fares?

I don't know how rates are set, but I've read that the finance industry is "resisting" the Fed's short-term rate increases. Is it possible that the banks fear that raising their long-term mortgages will kill their business? Are they all locked in a mortgage-dealing death spiral that only could benefit the consumer's IO-mortgage lust until the banks collapse?
__________________
*

Co-author (with my daughter) of “Raising Your Money-Savvy Family For Next Generation Financial Independence.”
Author of the book written on E-R.org: "The Military Guide to Financial Independence and Retirement."

I don't spend much time here— please send a PM.
Nords is offline   Reply With Quote
Re: What it means to be a debtor nation
Old 06-24-2005, 09:46 PM   #17
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas: No Country for Old Men
Posts: 50,000
Re: What it means to be a debtor nation

Quote:
Originally Posted by Nords
Is it possible that the banks fear that raising their long-term mortgages will kill their business?
Absolutely. Pricing pressure in a highly competitive environment is keeping a lid on mortgage rates, airfares, auto prices, not to mention many other consumer goods. Hard to believe this can continue with the pressure from increasing oil costs. If (when) the dam bursts and prices do start going up, things will get very interesting.

REW
__________________
Numbers is hard
REWahoo is offline   Reply With Quote
Re: What it means to be a debtor nation
Old 06-24-2005, 10:53 PM   #18
Recycles dryer sheets
 
Join Date: Sep 2002
Posts: 252
Re: What it means to be a debtor nation

Andy Xie over at Morgan Stanley thinks oil is overpriced.

http://www.morganstanley.com/GEFdata...50616-thu.html

Basically, oil is being traded for profits - kind of like housing prices.
Whakamole is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
At, Below, or Above your means Sam FIRE and Money 27 03-30-2007 10:23 AM
Another ER candidate gets it, and this time she really means it! Nords Other topics 19 06-27-2006 09:54 AM
Wonder What This Means? boont FIRE and Money 15 06-13-2006 09:45 PM
Inflation Adjusted Home Profits Means ?? astroboy FIRE and Money 5 03-26-2005 03:42 PM
Being "Early Retired" Means........ Telly Other topics 21 01-28-2004 07:14 AM

» Quick Links

 
All times are GMT -6. The time now is 12:54 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2024, vBulletin Solutions, Inc.