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This is good, us should learn to live without foreign support

It cant, without foreign investment the USA would not be able to support its trade deficit.

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Free markets are immune to political agendas!

I wouldnt be so sure. If something is capable of being manipulated for monetary gain and a person can get away with it then people will do it. Politics is Economics by another name. I could give numerous examples of how markets have been manipulated by business in collusion with the government using the political process. Its called sovereign risk.

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However, most western markets are generally regarded as free markets whereby money follows the path of arbitrage-free pricing models.

The best countries to demonstrate the wonders of the free market are countries like Russia. Most Western countries are highly socialised, including the United States. The classic diatribe on the evils of government is Free to Choose by Milton Friedman.

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Investors are wealthy for a reason ... they are saavy and intelligent with their money.

Yes some are. But I doubt most are any smarter than the Hoi Poloi.
There is a saying that money goes to money and by and large its true.

In fact given some of the phenomenally stupid business decisions that are made by the Captains of Industry I would suggest that many are very foolish.

I once read an excerpt from a study into decision making at auctions and it put paid to the rational market theory, that is that people will make rational choices based on the information available for personal gain. Economic purchases are quite frequently made out of impulse, emotional attachment and other background noise irrelevant to the strict issues. That equally applies to the stock market which is why there are bubbles. Investors are no different in their thinking than anyone else.

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It's subject to change of course, but right now, the money trail apparentely leads to the US ...

The glory days of the US stock market are over. Of course people still think the good times are going to come back but they wont. Just like in Japan after the bubble burst, people kept putting money back in the Japanese stock market only to get burned time and time and time again until finally anyone with any sense just bailed. Why would anyone buy US stocks when the prices are by and large overvalued and their prices will go down in real terms because
1) the currency will go down
2) interest rates will go up to prop up the government deficit making stocks a less attractive purchase as opposed to debt for investors.

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Originally posted by rupert I wouldnt be so sure. If something is capable of being manipulated for monetary gain and a person can get away with it then people will do it. Politics is Economics by another name. I could give numerous examples of how markets have been manipulated by business in collusion with the government using the political process. Its called sovereign risk.

You misunderstand. I didn't say free markets are immune to manipulation. My specialization in economics was public finance so of course I realise there are market failures and externalities that require government intervention/regulation. The point I was getting at, was that free markets put money first and political agendas second. It doesn't matter if investors have personal beliefs or political ideaologies inhibiting them from making business decisions, market aggregates will always achieve arbitrage-free environments.

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The best countries to demonstrate the wonders of the free market are countries like Russia. Most Western countries are highly socialised, including the United States. The classic diatribe on the evils of government is Free to Choose by Milton Friedman.

Russia is a free market without any regulation. Nobody is arguing for completely unrestricted free markets. It is basically understood however, that the least amount of government interaction in free markets once externalities are corrected for is the most efficient market system.

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Yes some are. But I doubt most are any smarter than the Hoi Poloi. There is a saying that money goes to money and by and large its true. In fact given some of the phenomenally stupid business decisions that are made by the Captains of Industry I would suggest that many are very foolish.

Of course you can't say that the wealthy never make mistakes, however, you don't stay wealthy by being foolish. Also there are a lot of fools who inherit their money rather than making it on their own accord.

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I once read an excerpt from a study into decision making at auctions and it put paid to the rational market theory, that is that people will make rational choices based on the information available for personal gain. Economic purchases are quite frequently made out of impulse, emotional attachment and other background noise irrelevant to the strict issues. That equally applies to the stock market which is why there are bubbles. Investors are no different in their thinking than anyone else.

Investors with accumulated wealth are most certainly different from investors with no accumulated wealth, and therefore can no longer be classified as an investor . However, investors WILL not let arbitrage opportunities exist. If you go back to the point I was originally establishing, the claim was that investors were avoiding more lucrative opportunities because they were simply following the crowd. However, my point is that although some MAY to this, the market aggreggate will not allow arbitrage situations to exist for very long.

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The glory days of the US stock market are over. Of course people still think the good times are going to come back but they wont. Just like in Japan after the bubble burst, people kept putting money back in the Japanese stock market only to get burned time and time and time again until finally anyone with any sense just bailed. Why would anyone buy US stocks when the prices are by and large overvalued and their prices will go down in real terms because 1) the currency will go down 2) interest rates will go up to prop up the government deficit making stocks a less attractive purchase as opposed to debt for investors.

Well than I suppose if you are correct, then market forces will naturally correct itself and foreign investment will dip in the years to come and America will learn it's lesson/descend into Rupert's hypothetical doomsday scenario. Therefore, problem solved ...

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Retro ...

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Originally posted by occrider You misunderstand. I didn't say free markets are immune to manipulation. My specialization in economics was public finance so of course I realise there are market failures and externalities that require government intervention/regulation. The point I was getting at, was that free markets put money first and political agendas second. It doesn't matter if investors have personal beliefs or political ideaologies inhibiting them from making business decisions, market aggregates will always achieve arbitrage-free environments.

It seems that you are talking in principles here. Do you truly believe that markets of today being the way they are continue to put money first and politics second? I'm talking in generalities here, but it seems to me that with K Street and their respective lobbyists(and I'm not just talking about HBO's version), free markets and their respective businesses have a heavy hand in politics, much more heavier than to have it as a second priority. I don't know, I just tend to think that markets are a little more involved into politics more than ever, and they've come to realize that the elected representatives have a direct impact on their businesses.

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Well than I suppose if you are correct, then market forces will naturally correct itself and foreign investment will dip in the years to come and America will learn it's lesson/descend into Rupert's hypothetical doomsday scenario. Therefore, problem solved ...

I don't think it's doomsday, but there's most certainly a correction coming around the corner.

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Whence September dusk grows crisper still,
with leaves all crimson conquered,
I yearn to shout,
and dance about,
and stick pickles in my honker...

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Originally posted by MisterOpus1 It seems that you are talking in principles here. Do you truly believe that markets of today being the way they are continue to put money first and politics second? I'm talking in generalities here, but it seems to me that with K Street and their respective lobbyists(and I'm not just talking about HBO's version), free markets and their respective businesses have a heavy hand in politics, much more heavier than to have it as a second priority. I don't know, I just tend to think that markets are a little more involved into politics more than ever, and they've come to realize that the elected representatives have a direct impact on their businesses.

We are talking of different politics. I've stated that markets can be manipulated and businesses are going to lobby for better business deals/laws. That's an evident truth everywhere. However, when it comes to markets, money/profits (the factor driving companies to lobby to begin with) have priority OVER politics. If a company gets a better deal from a democratic candidate they will likely lobby that candidate into power over their personal political preference. If foreign investors abroad despised America in light of recent events, yet lucrative opportunities existed in the US for foreign investors to invest in, then foreign investors WILL invest despite personal political agendas. Like I said, when it comes to free markets, MONEY has precedence over politics. Don't confuse the business world's use of politics to attain that ultimate objective with them having some other kind of objective. Therefore, going back to my original point, if Madagascar has lucrative investments worth the potential risks then it will attract investors JUST as easily as investments in the US.

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Retro ...