ART

Yesterday I noted that all of Borealis is valued at $35 million – and that ‘people routinely pay more than that for paintings.’ I was so proud of my handiwork with those colors (I’ve already been offered $230,000 for the signed original HTML), I didn’t want to risk screwing it up with a hyperlink. Because then it would have looked like this: paintings. Booooooooor-ing. Even so, it’s interesting to see what a good de Kooning is going for these days ($137 million). A grand time to be rich and powerful in America.

FX

Kathryn Lance: ‘Will you please talk a little more in your column about the foreign bond funds? I have had most of my money laddered in short-term CD’s, and had been doing pretty well, but now I can’t find anything over five percent. So I’ve decided to go for a little more risk and put money into foreign bond funds for a while, since I’m positive the US dollar will keep going south.’

☞ I’ve put a bunch of my retirement money in four of the exchange-traded foreign currency funds, which is as simple as buying any ‘stock’ with a stock symbol, except that instead you wind up effectively owning a chunk of the currency. The symbols are FXA (Australian dollars), FXB (British pounds), FXC (Canadian dollars), FXE (euros).

These are not bond funds, they are like foreign-currency savings accounts. You make a little from the interest, as you would here. But if the dollar does continue to depreciate, you would also one day realize a lightly-taxed long-term capital gain.

It makes me feel nervous – and more than a little foolish – that I have come so late to this game. But like Kathryn, I fear the dollar may indeed continue to depreciate. And if we turn out to be wrong, that would of course be wonderful for other reasons.

Foreign bond funds might be an even better investment, but evaluating them is a little more complicated. How good is the manager? Is the fund worth its fees? Is there credit risk (i.e., default by foreign corporations if the fund owns their securities)? What is the interest rate risk? (If the general level of interest rates rises, the value of longer-term bonds fall.)

If I had more of a need for current income (hey, I only need enough to power two 25-watt CFLs and buy the occasional case of Dentyne Ice), I might look at this more closely – starting with the three Less Antman suggested here a few days ago: ‘Pimco’s Foreign Bond Fund (PFBDX), T. Rowe Price International Bond Fund (RPIBX) and American Century International Bond (BEGBX) are two other solid alternatives for unhedged foreign exposure, assuming someone wants to expose themselves to foreigners.’ But it’s actually not clear these funds will outperform the currency ETF’s, and my brain is clogged enough as it is.

MERRILL’S $8.4 BILLION LOSS

Mike Shapiro: ‘Who dreamed up those collateralized debt obligations (CDOs)? Who sold them to Merrill? If Merrill Lynch lost $8billion doesn’t somebody else have that money? Who?’

☞ Well, as to the last part of your question, the answer is basically, ‘the folks who sold their homes, and developers who sold their developments, for more money than they ever dreamed they could.’ Those sales were often financed by mortgages that now cannot be repaid. But the seller has his cash – and if he was smart, did not reinvest it into something even more outlandishly priced.

As to the first part of your question . . . how it all happened . . . I refer you to this item from last week: Jeff Bauer: ‘Why bother trying to figure out the subprime mortgage mess when these two fellows present it in such a candid and entertaining way?’

 

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