The thing that really makes me mad, Nemo, is you did exactly what your father told you not to do and look at the danger you put him in. You little piece of spoiled clownfish.
Freud believed that verbal slips come from repressed desires. However, cognitive psychologists would counter that slips can represent a sequencing conflict in grammar production. Slips may be due to cognitive underspecification that can take a variety of forms -- inattention, incomplete sense data or insufficient knowledge. Secondly, they may be due to the existence of some locally appropriate response pattern that is strongly primed by its prior usage, recent activation or emotional change or by the situation calling conditions (MacMahon, 1995). Some sentences are just susceptible to the process of banalisation: the replacement of archaic or unusual expressions with forms that are in more common use. In other words, the errors were due to strong habit substitution (MacMahon, 1995)
Ye gods, doesn't anybody get away from the vid-ee-oss and read the classics anymore?
OK, half-serious question. Why do the Chinese reserve requirements matter if their currency is pegged to the dollar? Doesn't the currency peg mean the (much larger) U.S. money supply should dominate?
Or, put another way, don't these "anti-inflationary" measures simply make the currency peg ever harder for the People's Bank to maintain?
It's interesting that one can effectively test the level of levering by simply raising reserve requirements and looking at the amount of delevering it produces. Might be able to actually figure out the average "gearing" at any given time this way, not to mention keeping speculators on their toes. Who says a bubble cannot be measured when it's happening?
This must not be very innovative, or we'd be doing it.
this entire "SHOW" is more damn interesting than anything on TV or at the movies
each night i can hardly wait for tomorrow to read more shit talk from the bobble heads
and
see what the market does, and PMs and oil, and look at the foreclosure map.
its like a massive multi car crash on the freeway...i just cant look away
hoocoodanode that communists would be fighting inflation like this while capitalists would be drowning people in it.
only thing that needs to be done is to send all the bankers responsible for the current crisis to china so the chinese can execute them on one of their stadiums.
i know it sounds harsh, but in the wake of the article i red recently which promises asia as a eldorado for investment bankers from wallstreet i think this move would bring some sense into these guys. the article was really fun, i mean these guys in denial bankrupted us banks and now dream about big money in asia where they can fleece asian souvereign fonds, i mean is this not sweet
The story behind the Shanghai exchange over the last couple months is not much different than the what we experienced during the Dot-Com boom. It was a typical euphoria aided by poor rates of returns on government run banks and an astonishing belief that the government would bail out the little guy if the worst occurred. Common knowledge at the time held that the government "wouldn't let" the stock market fail before the Olympics, due to national prestige or some other fanciful idea. The rationale failed to consider the limits of central planning: If a bubble collapses, not even a government can save it.
Having followed the Chinese stock market, with great interest, over the past year, it struck me with great surprise that investors here were betting on foreign countries to produce solid returns. China, for instance, has a run-away inflation problem that only tight monetary policy can solve. Combined with the run-up in commodity prices, which has hurt China particularly hard considering the large portion of income spent on food as well as the reliance on basic commodities for production, China seems to have dark storm clouds on its horizon.
under the military commissions act the big prez has the authority to declare anyone he chooses including the criminal bankers, as enemy combatants and send them on a trip of extraordinary rendition to be tortured...at least a little, how bout it
BTW, China dropped its currency peg over a year ago. The yuan has increased dramatically against the dollar since.
That's what I could never out; I remember China dropping it in 06, but then I hear Obama mentioning all the time that China manipulates it's currency. So, I'm assuming the yuan has a floating peg?
"Still, the U.S. counters that the peg keeps China's goods at artificially low prices and hence gives China's companies an artificial competitive advantage in trade. China has turned aside those and other U.S. concerns, particularly the trade deficit, arguing that if the U.S. wishes to lower its trade deficit, its citizens should save more and consume less, and the U.S. government should eliminate its budget deficit."
Why is the US government so afraid to treat us like adults? Do they feel like they're being patronizing or fascists. A lot of people would change their habits if they knew about things like trade deficits and saving.
I have a mini newsletter for PNW values around my hood, it says Last May (07) 58 homes sold w/ avg price of $318K and median of $290K. Median days on mkt @ 51.
This year, (may 08) 42 homes sold @ avg of $270K and median of $278K, days on mkt @ 68.
Transactions down 28%, avg price down 15%, median price down 4% and median days on mkt up 33%.
And the rain continues in earnest as well as the metaphorical stuff
It is unlikely that Mr. Bernanke has ever deeply studied control theory. Bernanke is attempting to control two outputs: inflation & growth by wiggling one input (the Fed Funds Rate). As we know, there is a time lag between changes in the FFR and changes in inflation and growth.
What Bernanke doesn't realize (or will not publicly acknowledge) that the system is very much out of his control. Modern finance, with the invention of esoteric products like synthetic CDOs (e.g. CDOs composed of credit default swaps) levered through currency trades are far, far too complex to be modulated by Ben's old-fashioned wiggles of the FFR.
Now that the deep flaws in our financial system are apparent (criminally loose lending standards, pass-the-risk-on investment banking, etc.) and the asleep at the switch regulators are being exposed for the patsies they've been, it is inevitable that an extraordinarily thunderous event looms. Regardless of what BB does.
The Chinese are just learning about the other side of a bubble. Wait till they begin to grok all the wealth (manufactured goods) they traded for depreciating dollars.
tj: i see your point. It's so bizarre in SC that so many idiots down here are willing to surrender of all their civil liberties under the Patriot Act or the AUMF in the name of national security, but don't see anything wrong with citibank being partly controlled by a foreign government. It's almost as if they separate national security from national sovereignty...
I'm currently registered republican, but both parties offend me beyond belief. I haven't voted for someone I really believe in for quite a while, and hell, back when I did it was likely because I was blissfully ignorant.
thought he did good for the country and ruled from near the middle, right of center often but ok.
i'm left of center but believe in fiscal conservatism.
that's one reason why i didn't like Reagan and don't like this prez...the two of them have run up more national debt than all other administrations put together
there are some good politicians out there...and a lot of bums,
thought it was sad when the senator from RI, Loncol Chafee lost re-election, was a man of principle but got caught up in the shifting of the political wind.
R. Lugar is also a sterling republican
believe it or not i like ron paul and dennis kucinich...one ultra right and the other ultra left...but both speak the truth as they know it and don't lie or bs
Only prez that I can remember that put the nation's above his own. S&L bailout, desert storm, and balanced budget with across the board tax increases, and getting the Saudis to erase the 1991 current account deficit.
I'm trying to determine of the combination Pelosi Congress and Obama have any clue what they're headed for. Today, Obama was still promoting universal health care and stimulus crack as his #1 issues.
I think only Paul really knows how bad it's going to get.
there are some prostitutes over there...and i'm sorry for disrespecting prostitutes that way.
we have got to get more independance from our elected leaders, and that means, somehow limit campaign contributions to citizen and constituency...keeping big organizations, lobbying groups and people not from that congressional district from buying the election
mock turtle: its like a massive multi car crash on the freeway...i just cant look away
just to clarify... it is more like the guy three cars in front of you has spun out and the guy right behind him as T-boned him -- meanwhile the guy in front of you has his brakes locked up and is in a skid.
i think it is still better to be in the Chinese market than most. The nation has vast amounts of growth potential ahead. Can't go up in a straight line. And my Chinese stocks are all green but then I got into them in 2004/5 before everybody was aware of them.
But, the dollar king is coming back. CNBC told me so! Even though every D.C. crack head promotes 0 dollar strengthening actions. Huff and puff is all we get.
I bet our deficit hits over $600b this year. Maybe $750b with the war. But we're on our way to a balanced budget in 2010! YAY!
Anonymous writes:
"The People's Bank of China said over the weekend that it would require banks must put aside 17% of deposits as reserves"
Reserves what novel idea. The US banks ain't got any except borrowed ones
That's cause US grew the economy for the last decade based on spending their reserves and deficit inflationary expansion.
I betcha before the decade is up, the concept of inflationary spending for growth will be proven as a scam!
Think logically, has anyone gotten rich by spending more than you earn? It may work if all that access credit was used to boost productivity but obviously that did not happen.
Stock markets and salaries and all are not adjusted for inflation, I betcha real wages went down and thus standard of living!
And really what does stimulus actually do? if you give everyone 1000 bucks, how long can that last? and now i hear about a 2nd stimulus... LOL.
Get market for real capitulation in 2009 when the ARM resets.
tj & the bear writes: I'd always heard that Chinese banks were not in that great of shape, but there's no way in hell our banks could survive those reserve requirements.
McGruff the Crime Dog says, if it's too good to be true, it probably is. I mean, really guys, how do you think they make the impossible numbers?
People who want to send the crooked bankers to China, that is like the modern equivalent to sending coals to Newcastle. They have any number of such specimens already.
Don't let our stock mingle or they'll breed with the locals and produce offspring with hybrid vigor.
dr strangemoney writes: just to clarify... it is more like the guy three cars in front of you has spun out and the guy right behind him as T-boned him -- meanwhile the guy in front of you has his brakes locked up and is in a skid.
Hope you can drive well.
Don't forget to mention that you're in a semi-tractor hauling an overweight load of sweating dynamite.
"You got your industrial bubble in my credit bubble! No, you got your credit bubble in my industrial bubble!"
Regulators are expected to seek more than $100 million in fines and restitution against CompuCredit Corp and affiliate banks related to credit-card marketing and debt-collection practices
Just out of curiosity, why is everyone berating Bernanke for being softer on inflation than the Chinese? Their inflation rate is far higher, in excess of 8%! Todays move was necessary in order to ensure the government is doing SOMETHING to tame wild prices.
Kevin writes:
Just out of curiosity, why is everyone berating Bernanke for being softer on inflation than the Chinese? Their inflation rate is far higher, in excess of 8%! Todays move was necessary in order to ensure the government is doing SOMETHING to tame wild prices.
What do you think the REAL US inflation rate is at?
What do you think the REAL US inflation rate is at?
For that matter, how much do you trust the Chinese figures? You don't engage in something as costly as pervasive surveillance and censorship without reaping the benefits.
I don't trust the chinese figures but at least they are DOING something as opposed to talk.
Or has Ben actually done something apart from bailing out financials and taking on junk in their books.
I hope Ben knows what he is doing, Trichet just upped the ante in the poker match that was going on.
BTW, China dropped its currency peg over a year ago. The yuan has increased dramatically against the dollar since.
They dropped their hard peg and now peg against a basket of currencies. But if you don't think they still manipulate the yuan to dollar exchange rate then I have a bridge to sell you.
China could stop most of their inflation overnight if they addressed the major issue: their undervalued currency.
Instead they manipulate their currency lower so that they can export, but they need to recycle the dollars which causes massive domestic inflation. This inflation is showing up everywhere, not least of which in the equities markets. The Chinese then target the equities markets, a symptom not a cause IMO.
they are no different/better than the US Fed/Treasury. The PROBLEM is/was the loose credit and unregulated shadow banking system as well as federal and individual deficits. The solution sought by our officials hasn't been to decrease inappropriate credit and to reduce deficits... instead it is to increase deficits and find ways to increase credit... or should I say liquidity?
The solution sought by our officials hasn't been to decrease inappropriate credit and to reduce deficits... instead it is to increase deficits and find ways to increase credit... or should I say liquidity?
16.5% sounds like a lot more than banks in the US keep on hand- BTW, aren't depository reserves in the US negative these days? (But, ignore that graph because we "redefined" the accounting.)
In a speech to bankers which hardly touched on the current economic outlook beyond saying that growth was slowing and inflation rising, King said he wanted to use his second term as governor to put in place a framework for preserving financial stability as robust as that for monetary policy.
He said that the Bank would learn from the experience of its Special Liquidity Scheme launched in April -- where banks can exchange hard-to-trade assets for more liquid ones from the central banks at a price -- to create a new liquidity facility.
What China do is to castrate the excess mobility of inflow of US $ printing facility. The more the US Fed print, the more the excess money got into hand of Chinese bank in Yuan form, and effectively healthy US citizens became chinese red-capitalists.
Have you seen a recent Chinese cartoon about How Helicopter Ben's weapon is captured by the PLA ?
China, for instance, has a run-away inflation problem that only tight monetary policy can solve. Combined with the run-up in commodity prices, which has hurt China particularly hard considering the large portion of income spent on food as well as the reliance on basic commodities for production, China seems to have dark storm clouds on its horizon.
[...]
BTW, China dropped its currency peg over a year ago. The yuan has increased dramatically against the dollar since.
Kevin | 06.10.08 - 1:43 am | #
China moved from an official peg to a de facto 'sliding' peg via FX market manipulation - that is a LONG way from freely trading currency. I'm not sure I want them to have a completely free trading currency though considering how volatile their markets are. You know, the old 'Be careful what you wish for'...
Regardless if the Chinese freed up their currency they would see a lot less inflation. Of course if they did we'd see a lot more inflation for the same reasons.
Setser has run some very interesting discussions on this lately, including how Chinese inflation is constraining the fed - maybe as much as US inflation.
Regulators are expected to seek more than $100 million in fines and restitution against CompuCredit Corp and affiliate banks related to credit-card marketing and debt-collection practices
The banks set up systems for maximizing credit card profitability during good times. Those systems kept expanding incrementally bigger, and profits kept growing bigger, and everyone was happy.
But those systems are not set up for hard times or consumers who are pinching pennies and fighting back. Millions more people are questioning and disputing bogus practices and card charges. It is starting to overwhelm the systems.
Did you ever wonder what it costs a credit card company to do such things as investigate a dispute or cancel and replace a card involved in fraud?
The banks were willing to absorb these costs to keep the profit machine running. But now, the profits are disappearing with defaults and the card frauds, disputes and claims keep rising.
Credit cards have been one of U.S. banks' biggest cash cows for more than a decade. No more.
A note from a famous quant who just gave a lecture at a big conference (which include lectures from academics too):
" I confess to being shocked. (My turn to be naïve!) This is a man who lectures on finance at a respected university, to students paying a lot of money, and here he was admitting that he lectures on things that do not work, that he keeps some of the good stuff to himself."
How do you feel about your MBA now? I know, I know, your school would never have taht sort of thing going on.
"What do you think the REAL US inflation rate is at?"
BB | 06.10.08 - 6:13 am | #
My question would be "What are you using to figure it?". Close to 75% of our tennants are new within the last six months. The SMALLEST savings in rents for them is 350.00. The largest is north of 2k(FC'd). If you don't think that helps,well you should see the new cars in the parking lot. The tennants have told me they now have some disposable income...BTW,Not a single late rent in six months. The turn around from 18 months ago is pretty good. Your view may vary.
Dallas Federal Reserve President Richard Fisher on Tuesday said the U.S. central bank will not rescue the country from its obligations to underfunded government retiree and health care benefit programs.
"The financial market crisis is not yet over, Bank of England Governor Mervyn King warned on Tuesday, as he set out his thinking on how to prevent future crises, including the creation of a new liquidity facility..."
Gotta agree with the sentiment.
As long as the focus of financial policy is not paying the price when you screw up, we're just going to dig ourselves in to deeper and deeper holes.
Bank of Canada unchanged versus a 25 bp cut expected. First the Bank of China, then Trichet, last night Bernanke, now the Bank of Canada. Looks like we have a global central bank war on inflation emerging. Given the global economic tragectory we're on, I'd have to say the chances of that severe recession most people on this site are looking for just got a lot bigger.
Trade deficit #'s in - $60.9 B, big increase though not a record - one word: oil. Whoocoodanode...
I gotta say, the 19.2% YoY increase in exports is impressive tho. I wonder how much of that is inflation and how much of that's real.
If that kind of thing continued it could solve a lot of our problems, alas I still have the suspicion that a lot of that may be driven by global bubbles and excess capacity buildup.
Certain economists who've been right about most aspects of the big picture so far are still suggesting global recession and overcapacity are coming next.
I gotta say, the 19.2% YoY increase in exports is impressive tho. I wonder how much of that is inflation and how much of that's real.
None of it is 'real' as its all 'inflated' - the stuff going out (inflated ag commodities & air craft, etc.) to pay for inflated oil & consumer products coming in.
But either we need MORE inflation to balance the CAD (higher prices coming in to shut off consumption) or we need to sell more inflated stuff going out.
I never once suggested rebalancing would be painless w/ or w/out fed 'easing' - there is no painless way out. Just choose your pain... inflation, unemployment or some 'misery index' mix of both.
Certain economists who've been right about most aspects of the big picture so far are still suggesting global recession and overcapacity are coming next.
ac | 06.10.08 - 9:22 am | #
It doesn't HAVE TO HAPPEN that way but probably will. If Chindia stimulated their own demand - they could soak up a whole lotta capacity right there. Lord knows they have 'needs' - everything from infrastructure to health care to ag products.
They just have to back down their addiction to US export market... it would be beneficial for BOTH the US & them.
But it won't happen until their gov'ts incentivize domestic consumption (tax code & safety nets & infrastructure spending).
We borrowed how much from foreigners for the stimulus?
We then consumed how much of it which was bought from the same foreigners?
And what is the interest rates on the money that was borrowed?
This isn't going to end well. This is the road to default or hyperinflation.
Florida's tomato industry is in "complete collapse" and $40 million worth of tomatoes will rot unless federal regulators quickly trace the source of a salmonella outbreak and clear the state's produce, an industry official said on Tuesday.
Dallas Federal Reserve President Richard Fisher on Tuesday said the U.S. central bank will not rescue the country from its obligations to underfunded government retiree and health care benefit programs.
This is the most hawkish thing the Fed has said. Inflation is devastating for the health of entitlement programs. Social Security is linked to CPI and Medicare and Medicaid are linked to health care costs.
Social Security COLA linked to CPI is published at the end of Oct. and this year will be in the 4-5% range, the highest in many years. Medicare cost inflation probably running 5-7%.
There's no way to inflate entitlement programs back to health unless Congress changes the laws.
This comment is prologue justification for the next Fed phase as inflation fighters, like all other central banks in the world are already doing.
It doesn't HAVE TO HAPPEN that way but probably will. If Chindia stimulated their own demand - they could soak up a whole lotta capacity right there. Lord knows they have 'needs' - everything from infrastructure to health care to ag products.
They just have to back down their addiction to US export market... it would be beneficial for BOTH the US & them.
But it won't happen until their gov'ts incentivize domestic consumption (tax code & safety nets & infrastructure spending).
The same thing could have been said during the early 1930s in the US.
Of course these things are far easier said than done because in reality these things require substantial redistribution of power and wealth within an economy - and individuals, businesses and markets have a tendency to revolt violently when governments try to accomplish this.
Frankly I think the US needs some redistribution of wealth to become healthier, but as soon as it becomes my wealth that's being redistributed, then I move it all out of the country and/or cut the hours of work I do in half to get into a lower tax bracket or join some paramilitary group and hole up on the side of a mountain with all my wealth in gold buried in a bunker, etc.
Most economic positions China takes are done from weakness, not strength. The theory of another billion people entering the middle class is nice, but it's a long, long way from happening. And short of a major technological revolution, I don't see the raw materials available to make it happen. Oil is used for everything on the market and is not replaceable as an energy source now. Most of China, as evidenced by the earthquake damage, is pretty damn poor and underdeveloped. Unless you just stay in Beijing. Overall, I remain dubious about the red menace, or its threat to our 'way of life'.
When you think about, China is very much like the US circa 1930. Huge stock market bubble collapsing, basically insolvent banking system (China's banks today make Japan's circa 1989 look like paragons of prudence), massive overinvestment in manufacturing capacity, massive rural migration... China may have potential internal demand, but it's economy is oriented to exports in a low-cost world - what is rapidly becoming a broken model. I've been thinking hard landing in China since their stock markets went into overdrive last summer.
I've never bought into China. Even Jim Rogers who has been uber-bullish on China ended up not moving there. He moved to Singapore instead. I've got about 800 million reasons why...
I forgot to add a decade of ridiculously easy money to the above. Of course, take away the rural migration part, and substitue real estate for manufacturing, and you could be talking about the US for most of this decade as well.
Central bankers have always over-reacted to inflation at the end of a business cycle, and it looks like we're about to head down that path again. Think I'm going to have to change my outlook from a shallow, but long slowdown, to a nasty recession.
"China moved from an official peg to a de facto 'sliding' peg via FX market manipulation - that is a LONG way from freely trading currency."
Sliding peg or not (I think at a target 2% per year), the Yuan has appreciated greatly against the dollar, something impossible, by definition, under a hard peg.
Short term - China will have a dot com crash. Mid term, their infrastructure, manufacturing, reserves, and Yuan strength will help them through the crash. Long term, they will run into a generation issue due to their one child mandate.
Off the topic, I pulled out of MGEMX when I realized that they were 17% invested in China. While I loved that the fund return was 50% for me, you have to know when to fold them so I went all cash in December. I got back in early 2008 and then sold out May 20th for another quick 10%. I was advising one of my cowokers at the time and he earn 25% last year. However, his son who is a financial advisor convinced him to let him manage his money. In the last two week, he has probably cost his dad approximately $30K in possible profits and lost another $30K due to his allocation changes. If he had followed me into short term bonds and cash, he would only be down 0.5% instead of 5%.
As far as my plans, I will be in cash and bonds until I see a break in the China and Hong Kong down turn. It might be after the Olympics as I expect China to revaluate their Yuan to address inflation. With the Chinese reserves, I expect that China will be able to navigate through the coming global slow down.
This is no surprise to Madonna.
global recessio
Just remember that it is easier to peddle you passengers downhill than uphill. But, also remember, that it is difficult to stop.
But that's impossible. Last year that guy on CNBC said the China trade was a sure bet at least through the Olympics!
Who mentioned the decoupling theory agin?
Nemo, That was P. Sherman, 42 Wallabee Way, Sidney. Not China. Where is Dorie and Marlin?
I'd always heard that Chinese banks were not in that great of shape, but there's no way in hell our banks could survive those reserve requirements.
The thing that really makes me mad, Nemo, is you did exactly what your father told you not to do and look at the danger you put him in. You little piece of spoiled clownfish.
How do I move my savings account to a Chinese Bank?
CR, I think you meant Index is off 50% Unless, of course, you were doing your best CNBC impersonation by being grossly inaccurate.
MT,
Chopsticks?
The only thing grossly inaccurate around here is Jas Jain and, I think, he is now swimming with Nemo.
republicans are traitors, sorry - I cleared that up - I meant 5% tonight. Close to 50% overall.
Best Wishes
Re: 17% of deposits as reserves
Nice!
CR, no need for apology, best and one of the most informational sites around.
Freud believed that verbal slips come from repressed desires. However, cognitive psychologists would counter that slips can represent a sequencing conflict in grammar production. Slips may be due to cognitive underspecification that can take a variety of forms -- inattention, incomplete sense data or insufficient knowledge. Secondly, they may be due to the existence of some locally appropriate response pattern that is strongly primed by its prior usage, recent activation or emotional change or by the situation calling conditions (MacMahon, 1995). Some sentences are just susceptible to the process of banalisation: the replacement of archaic or unusual expressions with forms that are in more common use. In other words, the errors were due to strong habit substitution (MacMahon, 1995)
Ye gods, doesn't anybody get away from the vid-ee-oss and read the classics anymore?
OK, half-serious question. Why do the Chinese reserve requirements matter if their currency is pegged to the dollar? Doesn't the currency peg mean the (much larger) U.S. money supply should dominate?
Or, put another way, don't these "anti-inflationary" measures simply make the currency peg ever harder for the People's Bank to maintain?
The last classic I read was "Lehman's Bad Real Estate Investments".
It's interesting that one can effectively test the level of levering by simply raising reserve requirements and looking at the amount of delevering it produces. Might be able to actually figure out the average "gearing" at any given time this way, not to mention keeping speculators on their toes. Who says a bubble cannot be measured when it's happening?
This must not be very innovative, or we'd be doing it.
It certainly looks decoupled!
That was me @ 1:27
i gotta admit
this entire "SHOW" is more damn interesting than anything on TV or at the movies
each night i can hardly wait for tomorrow to read more shit talk from the bobble heads
and
see what the market does, and PMs and oil, and look at the foreclosure map.
its like a massive multi car crash on the freeway...i just cant look away
hoocoodanode that communists would be fighting inflation like this while capitalists would be drowning people in it.
only thing that needs to be done is to send all the bankers responsible for the current crisis to china so the chinese can execute them on one of their stadiums.
i know it sounds harsh, but in the wake of the article i red recently which promises asia as a eldorado for investment bankers from wallstreet i think this move would bring some sense into these guys. the article was really fun, i mean these guys in denial bankrupted us banks and now dream about big money in asia where they can fleece asian souvereign fonds, i mean is this not sweet
And now Shanghai is down over 7% for the night.
WELCOME TO SHANGHAI STOCK EXCHANGE
And it's not even their lunchtime yet!
What is sweet is:
To sleep
Perchance to dream,
Aye there is the rub,
Please put it on the ribs,
And then throw them on the spit.
hoocoodanode that communists would be fighting inflation like this while capitalists would be drowning people in it.
As I mentioned above, we can't do it here. The medicine will kill the patient quicker then the disease.
So, will SDS go up or down tomorrow?
It's like a goddamn roulette table. I put my money on red last week, to get stopped out on Wednesday, so was off the table Friday.
Bear markets = volatility I guess. Need to make some more liberal stop margins I guess.
The story behind the Shanghai exchange over the last couple months is not much different than the what we experienced during the Dot-Com boom. It was a typical euphoria aided by poor rates of returns on government run banks and an astonishing belief that the government would bail out the little guy if the worst occurred. Common knowledge at the time held that the government "wouldn't let" the stock market fail before the Olympics, due to national prestige or some other fanciful idea. The rationale failed to consider the limits of central planning: If a bubble collapses, not even a government can save it.
Having followed the Chinese stock market, with great interest, over the past year, it struck me with great surprise that investors here were betting on foreign countries to produce solid returns. China, for instance, has a run-away inflation problem that only tight monetary policy can solve. Combined with the run-up in commodity prices, which has hurt China particularly hard considering the large portion of income spent on food as well as the reliance on basic commodities for production, China seems to have dark storm clouds on its horizon.
My prediction? China recession: 2009
If given the chance what bank would you trust your money to? One with 17.5% reserves or one with 1% reserves.
Do they have a snax break there, like in Japan?
under the military commissions act the big prez has the authority to declare anyone he chooses including the criminal bankers, as enemy combatants and send them on a trip of extraordinary rendition to be tortured...at least a little, how bout it
BTW, China dropped its currency peg over a year ago. The yuan has increased dramatically against the dollar since.
Hey Mock,
Are you getting the heavy rain tonight?
2Fat2Care
yeah
it's been the ugliest spring here is 30 years...cold and wet
PNW
only one major asian market not down tonight
NZ
must be clean living
I think Volker is working for the reds.
Yah, cold wet and fungus love it!
mock,
You read Wolfe?
you mean Ben and the reds right?
BTW, China dropped its currency peg over a year ago. The yuan has increased dramatically against the dollar since.
That's what I could never out; I remember China dropping it in 06, but then I hear Obama mentioning all the time that China manipulates it's currency. So, I'm assuming the yuan has a floating peg?
mock turtle
just wait, we will take one for the team!
Were down 2% yesterday so swings and roundabouts.
which wolfe
Tom, Naomi
yes to those two
andy in nz
right neighborly of ya
NZ great country
The enemy is always within, but will Ben have a job in six months?
mock,
Thought so. Scary shit. As much damage as this admin has done to the economy, the assault on our rights is worse.
"Still, the U.S. counters that the peg keeps China's goods at artificially low prices and hence gives China's companies an artificial competitive advantage in trade. China has turned aside those and other U.S. concerns, particularly the trade deficit, arguing that if the U.S. wishes to lower its trade deficit, its citizens should save more and consume less, and the U.S. government should eliminate its budget deficit."
Why is the US government so afraid to treat us like adults? Do they feel like they're being patronizing or fascists. A lot of people would change their habits if they knew about things like trade deficits and saving.
This means China is dumping all their dollars. Prediction: dollar becomes a Weimar Reichsmark.
A lot of people would change their habits if they knew about things like trade deficits and saving.
Um, no, I don't think so.
OT on Yuan.
I have a mini newsletter for PNW values around my hood, it says Last May (07) 58 homes sold w/ avg price of $318K and median of $290K. Median days on mkt @ 51.
This year, (may 08) 42 homes sold @ avg of $270K and median of $278K, days on mkt @ 68.
Transactions down 28%, avg price down 15%, median price down 4% and median days on mkt up 33%.
And the rain continues in earnest as well as the metaphorical stuff
NZ great country
mock turtle
sometimes!
tj and the bear
yeah i hear ya
there are more than a few republicans i respect and a few i admire...even tho i consider myself a dem.
i don't care for this prez at all because he is a pretender.
would never have been prez under his own power...was privileged
doesn't respect the rule of law and doesn't understand why, how, this country is great, especially the bill of rights
the neocons have wiped their feet on the 1st, 4th, 5th 7th and 8th amendments to the constitutio
A lot of people would change their habits if they knew about things like trade deficits and saving.
Um, no, I don't think so.
Oops, forgot that I live in a deep red state where people do anything that Dubya tells them.
argento,
I live in a bright blue state and they wouldn't give a damn, either.
It is unlikely that Mr. Bernanke has ever deeply studied control theory. Bernanke is attempting to control two outputs: inflation & growth by wiggling one input (the Fed Funds Rate). As we know, there is a time lag between changes in the FFR and changes in inflation and growth.
What Bernanke doesn't realize (or will not publicly acknowledge) that the system is very much out of his control. Modern finance, with the invention of esoteric products like synthetic CDOs (e.g. CDOs composed of credit default swaps) levered through currency trades are far, far too complex to be modulated by Ben's old-fashioned wiggles of the FFR.
Now that the deep flaws in our financial system are apparent (criminally loose lending standards, pass-the-risk-on investment banking, etc.) and the asleep at the switch regulators are being exposed for the patsies they've been, it is inevitable that an extraordinarily thunderous event looms. Regardless of what BB does.
The Chinese are just learning about the other side of a bubble. Wait till they begin to grok all the wealth (manufactured goods) they traded for depreciating dollars.
Interesting times ahead.
One last exciting fact on my area:
469 homes on the mkt, including 68 over $600K; over 467 land parcels, which equal an 11 month supply of homes and a 67 month supply of land!
tj: i see your point. It's so bizarre in SC that so many idiots down here are willing to surrender of all their civil liberties under the Patriot Act or the AUMF in the name of national security, but don't see anything wrong with citibank being partly controlled by a foreign government. It's almost as if they separate national security from national sovereignty...
mock,
I'm currently registered republican, but both parties offend me beyond belief. I haven't voted for someone I really believe in for quite a while, and hell, back when I did it was likely because I was blissfully ignorant.
tj and the bear
yeah, i liked the first Prez Bush.
thought he did good for the country and ruled from near the middle, right of center often but ok.
i'm left of center but believe in fiscal conservatism.
that's one reason why i didn't like Reagan and don't like this prez...the two of them have run up more national debt than all other administrations put together
there are some good politicians out there...and a lot of bums,
thought it was sad when the senator from RI, Loncol Chafee lost re-election, was a man of principle but got caught up in the shifting of the political wind.
R. Lugar is also a sterling republican
believe it or not i like ron paul and dennis kucinich...one ultra right and the other ultra left...but both speak the truth as they know it and don't lie or bs
i meant Lincoln Chafee
yikes cant type
"yeah, i liked the first Prez Bush."
Only prez that I can remember that put the nation's above his own. S&L bailout, desert storm, and balanced budget with across the board tax increases, and getting the Saudis to erase the 1991 current account deficit.
mock,
Let's not absolve that cesspool known as Congress of it's fair share of the blame. That recent ag bill is a model of bipartisan pandering and pork.
wow
shanghai index now down 6.8% with an hour left to go in their trading day.
gonna say goodnight from the west coast to get up for the NYSE opening
mock, et al...
Goodnite!!!
I'm trying to determine of the combination Pelosi Congress and Obama have any clue what they're headed for. Today, Obama was still promoting universal health care and stimulus crack as his #1 issues.
I think only Paul really knows how bad it's going to get.
yeah,
there are some prostitutes over there...and i'm sorry for disrespecting prostitutes that way.
we have got to get more independance from our elected leaders, and that means, somehow limit campaign contributions to citizen and constituency...keeping big organizations, lobbying groups and people not from that congressional district from buying the election
good night
mock turtle: its like a massive multi car crash on the freeway...i just cant look away
just to clarify... it is more like the guy three cars in front of you has spun out and the guy right behind him as T-boned him -- meanwhile the guy in front of you has his brakes locked up and is in a skid.
Hope you can drive well.
i think it is still better to be in the Chinese market than most. The nation has vast amounts of growth potential ahead. Can't go up in a straight line. And my Chinese stocks are all green but then I got into them in 2004/5 before everybody was aware of them.
Hang Seng: -1,055
*that's triple digits for those of you keeping score at home
After the market crash and the deflationary debt collapse, Ben will receive his million $ book advance.
The last paragraph of the book, summing up the multi-year, negative real interest rate reflationary effort, has been leaked:
"The operation was a success. Unfortunately the patient died."
Last?
Shanghai down 255 / minus 7.68%
U.S. banks leading the way down will soon be to low to raise capital.
it actually finished off over 8.4%
things are moving faster than the news stories are able to summarize them.
.. and since the limit move down in china is + / - 10% a good many stocks would have hit the limit and ceased trading before close.
Hang Seng: -1,055
*that's triple digits for those of you keeping score at home
I count four, but maybe I misunderstand.
It would be ironic if the fact that china has manipulated the market for year came back and bit them in the behind.
Npthing but ugly in the international markets. Has anyone here ever seen such an ocean of red before?
CR,
you should really use a log chart. If we break 2600, LOOK OUT BELOW.
BlackRock's Doll says Fed on hold for indefinite future
BlackRock's Doll says Fed on hold for indefinite future
| Reuters
Couldn't know that because his butt buddy Bernankie told him so could? Nooooooooo
Give me a pocket full of Yuan any day. Bucky is toast.
But, the dollar king is coming back. CNBC told me so! Even though every D.C. crack head promotes 0 dollar strengthening actions. Huff and puff is all we get.
I bet our deficit hits over $600b this year. Maybe $750b with the war. But we're on our way to a balanced budget in 2010! YAY!
Short term trends i think consists of global interest hikes to contain inflation, money will flow back in, evidence of this is USD index is improving.
So maybe oil and commodities will fall after all since saudi is even worried now and calling for meetings.
But as BEN says, he has solved the downturn and now wants to tackle inflation!
Yahoo! 404 - Page Not Found
On another note about gold, it couldn't maintain 900, inflation is here to stay but gold is down.. so much for the 'inflation hedge'.
"The People's Bank of China said over the weekend that it would require banks must put aside 17% of deposits as reserves"
Reserves what novel idea. The US banks ain't got any except borrowed ones.
Ben talks tough and the traders say we'll see you and raise. The sucker at the poker game is going to get another lesson.
Anonymous writes:
"The People's Bank of China said over the weekend that it would require banks must put aside 17% of deposits as reserves"
Reserves what novel idea. The US banks ain't got any except borrowed ones
That's cause US grew the economy for the last decade based on spending their reserves and deficit inflationary expansion.
I betcha before the decade is up, the concept of inflationary spending for growth will be proven as a scam!
Think logically, has anyone gotten rich by spending more than you earn? It may work if all that access credit was used to boost productivity but obviously that did not happen.
Stock markets and salaries and all are not adjusted for inflation, I betcha real wages went down and thus standard of living!
And really what does stimulus actually do? if you give everyone 1000 bucks, how long can that last? and now i hear about a 2nd stimulus... LOL.
Get market for real capitulation in 2009 when the ARM resets.
tj & the bear writes:
I'd always heard that Chinese banks were not in that great of shape, but there's no way in hell our banks could survive those reserve requirements.
McGruff the Crime Dog says, if it's too good to be true, it probably is. I mean, really guys, how do you think they make the impossible numbers?
People who want to send the crooked bankers to China, that is like the modern equivalent to sending coals to Newcastle. They have any number of such specimens already.
Don't let our stock mingle or they'll breed with the locals and produce offspring with hybrid vigor.
dr strangemoney writes:
just to clarify... it is more like the guy three cars in front of you has spun out and the guy right behind him as T-boned him -- meanwhile the guy in front of you has his brakes locked up and is in a skid.
Hope you can drive well.
Don't forget to mention that you're in a semi-tractor hauling an overweight load of sweating dynamite.
"You got your industrial bubble in my credit bubble! No, you got your credit bubble in my industrial bubble!"
Regulators are expected to seek more than $100 million in fines and restitution against CompuCredit Corp and affiliate banks related to credit-card marketing and debt-collection practices
CompuCredit target of FDIC, FTC probes -WSJ
| Reuters
Get those bastards!
Just out of curiosity, why is everyone berating Bernanke for being softer on inflation than the Chinese? Their inflation rate is far higher, in excess of 8%! Todays move was necessary in order to ensure the government is doing SOMETHING to tame wild prices.
"The operation was a success. Unfortunately the patient died."
Technocracy in a nutshell.
Kevin writes:
Just out of curiosity, why is everyone berating Bernanke for being softer on inflation than the Chinese? Their inflation rate is far higher, in excess of 8%! Todays move was necessary in order to ensure the government is doing SOMETHING to tame wild prices.
What do you think the REAL US inflation rate is at?
BB:
What do you think the REAL US inflation rate is at?
For that matter, how much do you trust the Chinese figures? You don't engage in something as costly as pervasive surveillance and censorship without reaping the benefits.
I don't trust the chinese figures but at least they are DOING something as opposed to talk.
Or has Ben actually done something apart from bailing out financials and taking on junk in their books.
I hope Ben knows what he is doing, Trichet just upped the ante in the poker match that was going on.
An interesting article supporting the inflation fiasco numbers in the US :-
Importance of Real US Inflation Rate in Forming Investment Decisions :: The Market Oracle :: Financial Markets Analysis & Forecasting Free Website
Re Asian Markets
"protect yourself so that you are not burnt out and in a coma"
Video - Not a good time to invst
Figures don't lie, but liars figure....workin' on gettin a job at the bureau.
While we're on the subject of cliff diving....
Products and Services Overview
BTW, China dropped its currency peg over a year ago. The yuan has increased dramatically against the dollar since.
They dropped their hard peg and now peg against a basket of currencies. But if you don't think they still manipulate the yuan to dollar exchange rate then I have a bridge to sell you.
China could stop most of their inflation overnight if they addressed the major issue: their undervalued currency.
Instead they manipulate their currency lower so that they can export, but they need to recycle the dollars which causes massive domestic inflation. This inflation is showing up everywhere, not least of which in the equities markets. The Chinese then target the equities markets, a symptom not a cause IMO.
they are no different/better than the US Fed/Treasury. The PROBLEM is/was the loose credit and unregulated shadow banking system as well as federal and individual deficits. The solution sought by our officials hasn't been to decrease inappropriate credit and to reduce deficits... instead it is to increase deficits and find ways to increase credit... or should I say liquidity?
Yearning to Learn writes:
The solution sought by our officials hasn't been to decrease inappropriate credit and to reduce deficits... instead it is to increase deficits and find ways to increase credit... or should I say liquidity?
Spot on!
And lo behold.. oil is up 2 bucks today to 136.. look for it to go to 140 soon.
16.5% sounds like a lot more than banks in the US keep on hand- BTW, aren't depository reserves in the US negative these days? (But, ignore that graph because we "redefined" the accounting.)
Why does China seem to do everything right?
More printing ...
The financial market crisis is not yet over, Bank of England Governor Mervyn King warned on Tuesday, as he set out his thinking on how to prevent future crises, including the creation of a new liquidity facility.
In a speech to bankers which hardly touched on the current economic outlook beyond saying that growth was slowing and inflation rising, King said he wanted to use his second term as governor to put in place a framework for preserving financial stability as robust as that for monetary policy.
He said that the Bank would learn from the experience of its Special Liquidity Scheme launched in April -- where banks can exchange hard-to-trade assets for more liquid ones from the central banks at a price -- to create a new liquidity facility.
Another thing that I should add is that the graph looks a lot like the Nasdaq did in 2001-2002. Bubbles bust.
Trade deficit widens to 60.9b now.
And oil is now 137.22, anyone want to guess what price oil will settle at today?
What China do is to castrate the excess mobility of inflow of US $ printing facility. The more the US Fed print, the more the excess money got into hand of Chinese bank in Yuan form, and effectively healthy US citizens became chinese red-capitalists.
Have you seen a recent Chinese cartoon about How Helicopter Ben's weapon is captured by the PLA ?
sorry wealthy, not healthy.
And in other figures news, small biz confidence at lowest since 1980:
Small Business Confidence at Lowest Since 1980 - CNBC
meanwhile, just days ago ADP said small biz hiring like gangbusters:
ADP Report Shows Increase in Jobs | Innovation Update | Financial Articles & Investing News | TheStreet.com
Watch how everyone in the biz press fails to reconcile this when they report on confidence figures today.
Kevin writes:
BTW, China dropped its currency peg over a year ago.
What the US needs to rectify this imbalance is a peg leg, preferably a floating one.
China, for instance, has a run-away inflation problem that only tight monetary policy can solve. Combined with the run-up in commodity prices, which has hurt China particularly hard considering the large portion of income spent on food as well as the reliance on basic commodities for production, China seems to have dark storm clouds on its horizon.
[...]
BTW, China dropped its currency peg over a year ago. The yuan has increased dramatically against the dollar since.
Kevin | 06.10.08 - 1:43 am | #
China moved from an official peg to a de facto 'sliding' peg via FX market manipulation - that is a LONG way from freely trading currency. I'm not sure I want them to have a completely free trading currency though considering how volatile their markets are. You know, the old 'Be careful what you wish for'...
Regardless if the Chinese freed up their currency they would see a lot less inflation. Of course if they did we'd see a lot more inflation for the same reasons.
Setser
has run some very interesting discussions on this lately, including how Chinese inflation is constraining the fed - maybe as much as US inflation.
"Just out of curiosity, why is everyone berating Bernanke"
Need to drag that bastard out in the street and tar and feather his ass, enough of this berating because it ain't working.
Trade deficit #'s in - $60.9 B, big increase though not a record - one word: oil. Whoocoodanode...
The banks set up systems for maximizing credit card profitability during good times. Those systems kept expanding incrementally bigger, and profits kept growing bigger, and everyone was happy.
But those systems are not set up for hard times or consumers who are pinching pennies and fighting back. Millions more people are questioning and disputing bogus practices and card charges. It is starting to overwhelm the systems.
Did you ever wonder what it costs a credit card company to do such things as investigate a dispute or cancel and replace a card involved in fraud?
The banks were willing to absorb these costs to keep the profit machine running. But now, the profits are disappearing with defaults and the card frauds, disputes and claims keep rising.
Credit cards have been one of U.S. banks' biggest cash cows for more than a decade. No more.
The US April trade deficit was worse than expected as increased exports failed to make up for the higher price of imported oil.
The Commerce Department reported a $60.9 bln deficit, up 7.8% from the revised $56.5 bln March trade gap.
Business finance news - currency market news - online UK currency markets - financial news - Interactive Investor
Still buying 2 billion more for foreigners a day then the US produces. Buy, Bye, Bucky
all it takes is a rule change, in china or here in the u.s., and our free market plans and investments go into turmoil
except for those who knew ahead
Ipodius-
A note from a famous quant who just gave a lecture at a big conference (which include lectures from academics too):
" I confess to being shocked. (My turn to be naïve!) This is a man who lectures on finance at a respected university, to students paying a lot of money, and here he was admitting that he lectures on things that do not work, that he keeps some of the good stuff to himself."
How do you feel about your MBA now? I know, I know, your school would never have taht sort of thing going on.
"What do you think the REAL US inflation rate is at?"
BB | 06.10.08 - 6:13 am | #
My question would be "What are you using to figure it?". Close to 75% of our tennants are new within the last six months. The SMALLEST savings in rents for them is 350.00. The largest is north of 2k(FC'd). If you don't think that helps,well you should see the new cars in the parking lot. The tennants have told me they now have some disposable income...BTW,Not a single late rent in six months. The turn around from 18 months ago is pretty good. Your view may vary.
Chris
Dallas Federal Reserve President Richard Fisher on Tuesday said the U.S. central bank will not rescue the country from its obligations to underfunded government retiree and health care benefit programs.
Fed's Fisher-Fed won't rescue Social Security
| Reuters
Want to bet? You simply will not have a choice in the mater Richard.
More printing ...
"The financial market crisis is not yet over, Bank of England Governor Mervyn King warned on Tuesday, as he set out his thinking on how to prevent future crises, including the creation of a new liquidity facility..."
Gotta agree with the sentiment.
As long as the focus of financial policy is not paying the price when you screw up, we're just going to dig ourselves in to deeper and deeper holes.
Bank of Canada unchanged versus a 25 bp cut expected. First the Bank of China, then Trichet, last night Bernanke, now the Bank of Canada. Looks like we have a global central bank war on inflation emerging. Given the global economic tragectory we're on, I'd have to say the chances of that severe recession most people on this site are looking for just got a lot bigger.
"global central bank war on inflation emerging"
Dump the dollar as the worlds reserve currency and that little problem would go away for all of them but one.
Trade deficit #'s in - $60.9 B, big increase though not a record - one word: oil. Whoocoodanode...
I gotta say, the 19.2% YoY increase in exports is impressive tho. I wonder how much of that is inflation and how much of that's real.
If that kind of thing continued it could solve a lot of our problems, alas I still have the suspicion that a lot of that may be driven by global bubbles and excess capacity buildup.
Certain economists who've been right about most aspects of the big picture so far are still suggesting global recession and overcapacity are coming next.
I gotta say, the 19.2% YoY increase in exports is impressive tho. I wonder how much of that is inflation and how much of that's real.
None of it is 'real' as its all 'inflated' - the stuff going out (inflated ag commodities & air craft, etc.) to pay for inflated oil & consumer products coming in.
But either we need MORE inflation to balance the CAD (higher prices coming in to shut off consumption) or we need to sell more inflated stuff going out.
I never once suggested rebalancing would be painless w/ or w/out fed 'easing' - there is no painless way out. Just choose your pain... inflation, unemployment or some 'misery index' mix of both.
But it still has to happen.
Certain economists who've been right about most aspects of the big picture so far are still suggesting global recession and overcapacity are coming next.
ac | 06.10.08 - 9:22 am | #
It doesn't HAVE TO HAPPEN that way but probably will. If Chindia stimulated their own demand - they could soak up a whole lotta capacity right there. Lord knows they have 'needs' - everything from infrastructure to health care to ag products.
They just have to back down their addiction to US export market... it would be beneficial for BOTH the US & them.
But it won't happen until their gov'ts incentivize domestic consumption (tax code & safety nets & infrastructure spending).
We borrowed how much from foreigners for the stimulus?
We then consumed how much of it which was bought from the same foreigners?
And what is the interest rates on the money that was borrowed?
This isn't going to end well. This is the road to default or hyperinflation.
Florida's tomato industry is in "complete collapse" and $40 million worth of tomatoes will rot unless federal regulators quickly trace the source of a salmonella outbreak and clear the state's produce, an industry official said on Tuesday.
North America tomato industry reeling: growers
| Reuters
Ain't going to be the only thing in "complete collapse" before this is over.
This is the most hawkish thing the Fed has said. Inflation is devastating for the health of entitlement programs. Social Security is linked to CPI and Medicare and Medicaid are linked to health care costs.
Social Security COLA linked to CPI is published at the end of Oct. and this year will be in the 4-5% range, the highest in many years. Medicare cost inflation probably running 5-7%.
There's no way to inflate entitlement programs back to health unless Congress changes the laws.
This comment is prologue justification for the next Fed phase as inflation fighters, like all other central banks in the world are already doing.
It doesn't HAVE TO HAPPEN that way but probably will. If Chindia stimulated their own demand - they could soak up a whole lotta capacity right there. Lord knows they have 'needs' - everything from infrastructure to health care to ag products.
They just have to back down their addiction to US export market... it would be beneficial for BOTH the US & them.
But it won't happen until their gov'ts incentivize domestic consumption (tax code & safety nets & infrastructure spending).
The same thing could have been said during the early 1930s in the US.
Of course these things are far easier said than done because in reality these things require substantial redistribution of power and wealth within an economy - and individuals, businesses and markets have a tendency to revolt violently when governments try to accomplish this.
Frankly I think the US needs some redistribution of wealth to become healthier, but as soon as it becomes my wealth that's being redistributed, then I move it all out of the country and/or cut the hours of work I do in half to get into a lower tax bracket or join some paramilitary group and hole up on the side of a mountain with all my wealth in gold buried in a bunker, etc.
The U.S. Federal Reserve said on Tuesday it was adding temporary reserves to the banking system via overnight repurchase agreements.
Fed adding temporary reserves via overnight repos
| Reuters
Watch what they do not what they say.
Socialize the...
"17 banks creating a system to move trades through a clearinghouse that would absorb a failure by one of the market-makers"
"A central counterparty, more automated trading and settlement and other fixes"
Fed, Banks Agree to Default-Swap Changes to Cut Risk (Update3) - Bloomberg.com
Its heartening to see this kind of cooperative behavior from IBs. We can all get through this crisis if we work together...
and are backstopped by the FED.
Most economic positions China takes are done from weakness, not strength. The theory of another billion people entering the middle class is nice, but it's a long, long way from happening. And short of a major technological revolution, I don't see the raw materials available to make it happen. Oil is used for everything on the market and is not replaceable as an energy source now. Most of China, as evidenced by the earthquake damage, is pretty damn poor and underdeveloped. Unless you just stay in Beijing. Overall, I remain dubious about the red menace, or its threat to our 'way of life'.
"said the U.S. central bank will not rescue the country from its obligations to underfunded government retiree and health care benefit programs"
What a bunch of neocon objectivist wankers.
When you think about, China is very much like the US circa 1930. Huge stock market bubble collapsing, basically insolvent banking system (China's banks today make Japan's circa 1989 look like paragons of prudence), massive overinvestment in manufacturing capacity, massive rural migration... China may have potential internal demand, but it's economy is oriented to exports in a low-cost world - what is rapidly becoming a broken model. I've been thinking hard landing in China since their stock markets went into overdrive last summer.
I've never bought into China. Even Jim Rogers who has been uber-bullish on China ended up not moving there. He moved to Singapore instead. I've got about 800 million reasons why...
I forgot to add a decade of ridiculously easy money to the above. Of course, take away the rural migration part, and substitue real estate for manufacturing, and you could be talking about the US for most of this decade as well.
Central bankers have always over-reacted to inflation at the end of a business cycle, and it looks like we're about to head down that path again. Think I'm going to have to change my outlook from a shallow, but long slowdown, to a nasty recession.
Gamma-
Always have respected JR, you knew something was structurally wrong when he closed it up here and moved to singapore...
One of the only people to call out the banks in public.....too bad he had to leave the country to do it.
Ciao
MS
2wet2care writes:
I think Volker is working for the reds.
Well Cincinatti could use some help, but don't you think he is a little old to be playing baseball.
"China moved from an official peg to a de facto 'sliding' peg via FX market manipulation - that is a LONG way from freely trading currency."
Sliding peg or not (I think at a target 2% per year), the Yuan has appreciated greatly against the dollar, something impossible, by definition, under a hard peg.
Its a step in the right direction:
Currency Converter - Yahoo! Finance
Short term - China will have a dot com crash. Mid term, their infrastructure, manufacturing, reserves, and Yuan strength will help them through the crash. Long term, they will run into a generation issue due to their one child mandate.
Off the topic, I pulled out of MGEMX when I realized that they were 17% invested in China. While I loved that the fund return was 50% for me, you have to know when to fold them so I went all cash in December. I got back in early 2008 and then sold out May 20th for another quick 10%. I was advising one of my cowokers at the time and he earn 25% last year. However, his son who is a financial advisor convinced him to let him manage his money. In the last two week, he has probably cost his dad approximately $30K in possible profits and lost another $30K due to his allocation changes. If he had followed me into short term bonds and cash, he would only be down 0.5% instead of 5%.
As far as my plans, I will be in cash and bonds until I see a break in the China and Hong Kong down turn. It might be after the Olympics as I expect China to revaluate their Yuan to address inflation. With the Chinese reserves, I expect that China will be able to navigate through the coming global slow down.
I can smell jie jie's perfume.