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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: elmatador who wrote (85776)	8/31/2007 1:13:10 PM
From: Elroy Jetson	Respond to of 110194

When Australian businesses and pension funds make foreign investments, and fund a portion of these foreign investments with foreign debt, this reduces their risk. As an example, the purchase of an American shopping center paid for in part with US Dollar debt reduces risk. Why? If the value of the US Dollar rises or falls significantly, the value of the shopping center and the loan rise and fall in tandem. In contrast, funding an American investment with an Australian loan introduces currency risk. This is the sort of foolish risk Brazil (and Asian nations like Thailand) have traditionally employed - making Brazilian investments with US Dollar loans. This introduces currency risk which can make it impossible to pay back the loan. Your comments suggest that the reason Brazilians are not sensible in these ways is because they don't understand the underlying principles of risk reduction. This lack of education among Brazilians is the greatest source of risk when investing in Brazil. Some, like yourself, have a partial High School education while many more are wholly illiterate. Almost all believe they know more than they do. .