

Government Debt Ring of Fire: The US is out, Norway is in? - cwan
http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2010/February+2010+Gross+Ring+of+Fire.htm

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jakarta
Gross is spot on with Canada being an ideal country for investments. I think
AUS needs to be thrown in too. Both countries have regulated oligopolies in
their banking sectors, reducing competition and in turn risk for blow up. Both
countries are much better in terms of government spending debt to GDP too. And
they are endowed with natural resources that will be essential for supplying
the materials necessary for building China, India, and other developing
nations.

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bd_at_rivenhill
Couldn't agree more. I definitely like Australia over Canada because their
government seems much more conservative in its spending habits (as indicated
on the graph in the article) and their physical proximity to China and India
give them a cost advantage in transporting commodities to fuel the growth.

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esja
I am Australian and am wary of investing in Australia, despite the many
wonderful things about the economy over the last few years. The currency is at
all time highs, meaning if you are a foreigner you are paying a historically
high price for whatever you buy. The domestic economy is skewed toward
resources largely funded by Chinese stimulus/speculation, which could turn on
a dime. House prices are stratospheric and almost any rise in interest rates
or unemployment (which are again at historic lows and have one way to go) will
put the brakes on housing very quickly, leading to serious issues in the
banking system and onward from there.

I am trying to persuade my parents to sell their house in Australia (which
they no longer live in), diversify into beaten down currencies like the USD,
and try to buy into a different asset class at the bottom, somewhere else.
Possibly even US land or similar, if America takes its medicine.

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steveplace
Beware of PIMCO pubs-- they push their book.

Also, consider these comments:

 _You will note that missing from the chart is the $5.5 trillion in mortgages
that the Uncle Sam has on their books, having followed Gross’ suggestion that
the government make the GSE backing explicit instead of implicit.

Essentially, Gross is complaining that (amongst other factors) the government
listened to him..._

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billswift
I'm not sure how much you should trust their numbers, because this:

>25% of homeowners are underwater

is probably not true. In the US less than 2/3 of houses even have mortgages
and most of them are not in areas that dropped in value significantly (my
house's appraisal went up slightly last year, after going down about a third
of that 3 years before that). And from what I have read, most countries have a
smaller percentage of home mortgages than the US does.

(This is from memory from general reading - that's why I wrote probably - I
didn't feel like digging for the specific numbers.)

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jbooth
And just think, 10 years ago we were sitting on the X axis as far as current
deficits and somewhere in between 25-50% for overall debt as a percentage of
GDP.. we were solidly in the green zone.

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asmithmd1
And 10 years ago a US 10 year T bill was paying around 6%

Why is anyone buying our T bills now when we are a worse credit risk and they
are paying <4%

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mynameishere
_and they are paying <4%_

Try <0%

[http://www.zerohedge.com/article/flight-capital-
back-1-month...](http://www.zerohedge.com/article/flight-capital-back-1-month-
bill-now-negative)

~~~
asmithmd1
That is for 1 month T-Bills. For 10 year T-Bills it is around 3.75%

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mynameishere
It's not a big deal, but the bills are a year or less, and the longest is
fetching an awesome 0.3 percent

<http://www.bloomberg.com/markets/rates/index.html>

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mynameishere
5 hours later, they dropped 7 basis points. Unreal.

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andrewcooke
where on earth do you get your title from? the us is in the ring; norway is
nowhere near it.

~~~
cwan
Pimco's "Ring of Fire" describes the risk of various sovereign securities.
Those in the ring are considered to be getting riskier while those outside of
the ring are moving in the other direction. Therefore they imply Norway is
becoming more attractive by being outside the ring while the US is less so
inside the ring (though to keep the title short, it does mix metaphors a bit).

