Daily Investment Tips

In a speech given in New Delhi March 25, 2011, the chairman of Berkshire Hathaway, Warren Buffet predicted the decline of the U.S. dollar.

The billionaire investor warned investors to avoid “long-term fixed-dollar investments” such as 10-year U.S. Treasury bonds. Buffett worries that the $2.3 trillion in new money the US government has pumped into the economy, when combined with interest rates so low they’re practically giving money away, are combining to dilute the value of the dollar.

U.S Dollar Projection: Forecast : Prediction

As a result, Buffett warns: “If you ask me if the U.S. Dollar is going to hold its purchasing power fully at the level of 2011, 5 years, 10 years or 20 years from now, I would tell you it will not.”

written by Constantine Njeru \\ tags: 10 Years, Berkshire Hathaway, Billionaire, Buffett, Decline, Dollar Investments, Economy, Giving Money, Interest Rates, Investor, Investors, March 25, New Delhi, New Money, Purchasing Power, Trillion, U S Treasury, U S Treasury Bonds, Us Government, Warren Buffet

China’s foreign exchange reserves rose to a record $2.85 trillion at the end of 2010, an 18.7 per cent increase year-on-year, sparking concerns about the country’s already excessive liquidity, analysts said. Compared with nearly $2.65 trillion in foreign reserves by the end of September, the figure increased by $199bn in the fourth quarter, marking the fastest rate on a quarterly basis in 2010, according to a statement from the People’s Bank of China released on Tuesday January 2011, China Daily reports.

China Forex Reserves for 2011

If China forex reserves keeps at that pace, Chinese forex exchange reserve could rise by $1 trillion in 2011.

written by Constantine Njeru \\ tags: Bank Of China, China Daily, Chinese Forex, Exchange Reserve, Foreign Exchange Reserves, Forex Exchange, Forex Reserves, Fourth Quarter, Liquidity, Pace, Quarterly Basis, Rose, Trillion

Jim Simon is a hedge fund manager with Renaissance Technologies. A.K.A as “Quants”  Traders with PHds and rely on complex mathematics in making money.

When they came to the scene with their mathematical models for investing it seemed they had found the answer to the age old question “Is there a perfect formula to make money in the stock market?”

From a NYT article:-

Mr. Simons was celebrated as the King of the Quants after his in-house fund, Medallion, posted an average return of nearly 39 percent a year, after fees, from 2000 to 2007. It was an astonishing run rivaling some of the greatest feats in investing history.

With those kind of results it was easy for investors to get carried away with the idea that Jim Simon and the rest of Quants family were the messiahs.

Past results is not an indicator of future performance.

After the collapse of Bear Sterns and Credit crises most Quant funds are fighting for their own survival. The NYT article further reported : -

The combined assets of quantitative funds specializing in United States stocks have plunged to $467 billion, from $1.2 trillion in 2007, a 61 percent decline. And One in four quant hedge funds has closed since 2007

written by Constantine Njeru \\ tags: Bear Sterns, Collapse, Crises, Feats, Hedge Fund Manager, Investment Returns, Jim Simon, Jim Simons, Mathematical Models, Medallion, Nyt, Nyt Article, Phds, Quant Funds, Quant Hedge Funds, Quantitative Funds, Quants, Renaissance Technologies, Stock Market, Trillion

Yahoo finance have an interesting interview with Michael Pento, senior market strategist at Delta Global Advisors. The man has come up with some neat mathematical calculations on why Americas’ debt is a disaster waiting to happen.

I have always thought uncle Sam is too big to fail but after reading Michael Pento interview the US could be another Greece tragedy or may be, another Argentina.

Using Treasury Department’s recent U.S debt estimates that showed total U.S. debt will top $13.6 trillion this year and rise to 102% of GDP by 2015. Moreover, the publicly traded debt (debt excluding intra-governmental obligations) will rise to $14 trillion by 2015, up from “just” $7.5 trillion in 2009.

Mr Pento then calculates, At $14 trillion, the interest payments on the public debt will total about $1 trillion in 2015, he continues; even assuming solid growth and low inflation, that would equal about 30% of total government revenue. “What do you think that does to our bond market?,” Pento wonders. “It leads to a dollar crisis and a bond market crisis. That’s why gold refuses to go down. ”

If Pento is right then expect the yield on US treasuries to rise. Investors in bonds could see the value of the bonds fall.

Read the rest at the Source Yahoo Finance

written by Constantine Njeru \\ tags: Bond Market, Bonds, Debt Crisis, Dollar Crisis, Gdp, Global Advisors, Government Revenue, Governmental Obligations, Inflation, Interest Payments, Market Crisis, Market Strategist, Mathematical Calculations, Michael Pento, Public Debt, Treasuries, Treasury Department, Trillion, Uncle Sam, Yahoo Finance