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Posts Tagged ‘Chinese’

Dollar Hegemony and the Rise of China

Michael Hudson writes a letter. 

Dollar Hegemony and the Rise of China

Courtesy of Michael Hudson 

Hudson to Premier Wen Jaibao, March 15, 2010

Dear Premier Wen Jiabao,

I write this letter to counteract some of the solutions that Western politicians are recommending for China to cope with its buildup of excess foreign-exchange reserves. Raising the renminbi’s exchange rate against the dollar will not cure the China-US payments imbalance. The dollar glut will continue, and so will the currency fluctuation among the dollar, euro and sterling, leaving no stable store of value. The cause of this instability is that each of these three currency areas has grown top-heavy with by debts in excess of the ability to pay.

What then should China should it do with its buildup of excess reserves, if not recycle its inflows into their bonds? Four possibilities have been suggested: (1) to revalue the renminbi, (2) to flood China’s economy with credit (as Japan did after the Plaza Accord of 1985), (3) to buy foreign resources and assets, and (4) to use excess dollars to buy back foreign investments in China, given US reluctance to permit Chinese investment in America’s own most promising economic sectors.

I explain below why China’s best course is to avoid accumulating further foreign exchange reserves. The most workable solution is to use its official reserves to buy back US and other foreign investments in China’s financial system and other key sectors. This policy will seem more natural as a response to an escalation of US protectionist moves to block Chinese imports or block China’s sovereign wealth funds from buying key US assets.

China’s excess reserves will impose a foreign-exchange loss (as valued in renminbi)

Every nation needs foreign currency reserves to ward off currency raids, as the Asia Crisis showed in 1997. The usual kind of raid forces currencies down. Speculators see a central bank with large foreign currency holdings, and seek to empty them out by borrowing even larger sums, selling the target currency short to drive down its price. This is the tactic that George Soros pioneered against the British pound when he broke the Bank of England.

Malaysia’s counter-tactic was not to let speculators cover their bets by buying the target currency. Its Malaysia’s success in resisting that crisis showed that currency controls prevent speculators from “cashing out” on their exchange-rate bets, blocking their attempt to…
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Ugly 2010 for China’s Stock Market

Collective effort, Ugly 2010 by Rom at Bondsquawk, with introduction by Pragcap:

We’ve often noted the fact that China’s equity market has served as a very reliable leading indicator over the last few years.  They led the way with a dramatic market crash that started in 2007 and they bottomed several months in advance of the 2009 bottom in the S&P.  We recently highlighted the bearish action in Chinese stocks while U.S. investors continued to pile into the S&P (one of three primary reasons we built short positions for the first time in 2 years prior to the recent stock collapse).  Ultimately the market faltered and China’s equity market is once again looking prescient. China is displaying classic post-bubble market action.  Our friends at Bondsquawk ask the important question that should be on everyone’s mind:

"Could the Chinese markets lead the rest of the world back down?"

[BEWARE THE BIG RED LEADING INDICATOR, The Pragmatic Capitalist]

Ugly 2010 for China’s Stock Market

Courtesy of Rom at Bondsquawk

China’s Shanghai Composite Index has led the rally in the global markets after sinking in late October 2008, almost 5 month ahead of the lows seen in the US markets. However, the rally has stalled as China’s equity markets have declined by 20.9 percent in 2010. Could the Chinese markets lead the rest of the world back down?

China’s Shanghai Composite Index 2-Year Historical Chart

The New York Times reported the following:

After a spectacular rise last year, China’s stock market has plummeted on growing concerns about Europe’s debt crisis and expectations that Beijing is about to take strong action to slow the nation’s booming economy and prevent it from overheating, analysts say.

Investors are worried that Chinese exports to Europe will slow in the coming months and that government efforts to tame this country’s economy by tightening credit will hamper a wide array of industries, including the nation’s fast-growing real estate market.

Read the Full Article>>


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Obama Selling Military Secrets To China For Debt Forgiveness?

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Obama Selling Military Secrets To China For Debt Forgiveness?

Courtesy of Zero Hedge
 
Ran across this article posted in Jumping In Pools. Not sure how credible it is, but allegedly Barack Obama will provide the blueprints for the B-2 stealth bomber to China in exchange for $50 billion in debt relief. According to author Richard Hogarty:

According to the Administration, this proposal will help the United States resolve its debt issues. They point out their belief that the B-2 bomber is "strategically obsolete", according to a source in the White House Press Office. In addition, the source claims that the Chinese would be unable to create their own functioning stealth bomber fleet for "at least eight years."

American allies Taiwan, Japan, and South Korea are very wary of the proposal. Koo Syi, a geopolitical analyst from South Korea, points out that this technology could be passed to China’s allies. This was the case when Chinese nuclear technology was transferred to Pakistan and North Korea. According to Koo, Obama has rendered US allies’ opinions as "irrelevant."

While this proposal is controversial, it is not being presented to Congress, where it could meet with stern opposition. Instead, the State Department has been informed to assisted the Defense Department with the transfer of materials.

A little skeptical here as frankly $50 billion is less than a drop in the bucket of Chinese Treasury holdings which are easily well over $1 trillion. The economic impact of this transaction would be negligible to zero. On the other hand, if this ends up being true, it is quite frightening, as it merely demonstrates, aside from all the scary geo-political considerations, just how bad of a dealmaker our President is.

In other China-related news, Reuters reporting that Tim Geithner’s soothing words from his Beijing whirlwind tour that "Chinese assets are very safe," drew loud laughter from the audience.

"Chinese assets are very safe," Geithner said in response to a question after a speech at Peking University, where he studied Chinese as a student in the 1980s.

His answer drew loud laughter from his student audience, reflecting scepticism in China about the wisdom of a developing country


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Former Chinese Central Bank Advisor Questions Geithner’s Math, Calls Federal Reserve Assets “Rubbish”

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Former Chinese Central Bank Advisor Questions Geithner’s Math, Calls Federal Reserve Assets "Rubbish"

Courtesy of Mish
 
A former Chinese central bank adviser says Global Crisis ‘Inevitable’ Unless U.S. Starts Saving.

Another global financial crisis triggered by a loss of confidence in the dollar may be inevitable unless the U.S. saves more, said Yu Yongding, a former Chinese central bank adviser.

It’s “very natural” for the world to be concerned about the U.S. government’s spending and planned record fiscal deficit, Yu said in e-mailed comments yesterday relating to a visit to Beijing by U.S. Treasury Secretary Timothy Geithner.

The Obama administration aims to reduce the fiscal deficit to “roughly” 3 percent of gross domestic product from a projected 12.9 percent this year, Geithner reaffirmed today. The treasury secretary added that China’s investments in U.S. financial assets are very safe, and that the Obama administration is committed to a strong dollar.

It may be helpful if “Geithner can show us some arithmetic,” said Yu. “We need to know how the U.S. government can achieve this objective.”

The deficit is projected to reach $1.75 trillion in the year ending Sept. 30 from last year’s $455 billion shortfall, according to the Congressional Budget Office.

The U.S. needs a higher savings rate and a smaller deficit on the current account, which is the broadest measure of trade, or “another financial crisis triggered by a dollar crisis could be inevitable,” the Chinese academic said.

Referring to the Federal Reserve “as the world’s biggest junk investor,” and to Chairman Ben S. Bernanke as “helicopter Ben,” Yu said the Fed has dropped “tons of money from the sky since the subprime crisis.”

“The balance sheet of the Federal Reserve not only has expanded like mad but is also ridden with ‘rubbish’ assets,” he said

Yu Yongding is not the only one questioning Geithner’s math. How about it Tim, can we see your scribbles?

In related news Geithner tells China its dollar assets are safe. The crowd laughed…

U.S. Treasury Secretary Timothy Geithner on Monday reassured the Chinese government that its huge holdings of dollar assets are safe and reaffirmed his faith in a strong U.S. currency.

China is the biggest foreign owner of


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Help One Of Our Own PSW Members

"Hello PSW Members –

This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible.  Feel free to contact me directly at jennifersurovy@yahoo.com with any questions.

Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts.  After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.)  Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.

http://www.youcaring.com/medical-fundraiser/help-get-shadowfax-out-from-the-darkness-of-medical-bills-/126743

Thank you for you time!

 
 

Phil's Favorites

GOLDMAN: We're Blaming The Stock Market Sell-Off On A Pullback In Buybacks

GOLDMAN: We’re Blaming The Stock Market Sell-Off On A Pullback In Buybacks

Courtesy of 

Ever since the financial crisis, S&P 500 companies have spent about $2 trillion buying back shares of their own stock.

Some market experts have warned that a pullback in buybacks would cause stock prices to fall.

Goldman Sachs' David Kostin believes a temporary pullback may explain why the S&P 500 has tumbled from its all-time high of 2,019 on Sept. 1...



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Zero Hedge

Stocks Green Despite Big Blue; Greenback & Black Gold Red

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

If only stock indices only included stocks that were green... IBM's 80-point weight on the Dow disappointed some but that was no problem for the index-pushers who needed the S&P 500 to tap its 200DMA. The only thing that mattered to stocks today was EURJPY... and that managed to get the S&P 500 'almost' to its 200DMA (but noit quite) and ensure a green close for the Dow. The USDollar slipped lower all day (-0.4%) led by EUR and GBP strength. Gold ($1245) and silver gained on the day but even with a weak USD, oil and copper dropped (with oil very volatile). US Treasury yields drifted lower by 1-2bps (thin trading) de...



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All About Trends

Mid-Day Update

Reminder: David is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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Chart School

A New Look at the Total Return Roller Coaster

Courtesy of Doug Short.

Note from dshort: I received a recent email on historical total returns that prompted an update to my Roller Coaster Return series. I've updated the charts below based on monthly data through the September close.

Here's an interesting set of charts that will especially resonate with those of us who follow economic and market cycles.

Imagine that five years ago you invested $10,000 in the S&P 500. How much would it be worth today, with dividends reinvested but adjusted for inflation?

The purchasing power of your investment has increased to $19,967 for an annualized real return of 13.91%.


...



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OpTrader

Swing trading portfolio - week of October 20th, 2014

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Insider Scoop

UPDATE: Bank Of America Reiterates On ITT Educational Services As Shares Surge But Risks Remain

Courtesy of Benzinga.

Related ESI Urban Outfitters Drops On Q4 Profit Warning; Mead Johnson Nutrition Shares Spike Higher ITT Educational Services Shares Soar On Preliminary Results

In a report published Monday, Bank of America analyst Sara Gubins reiterated an Underperform rating on ITT Educational Services, Inc. (NYSE: ESI), and raised the price target from $7.00 to $8.00.

In the report, Bank of America noted, “ESI shares rall...



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Market Shadows

Falling Energy Prices: Sober Look takes a Sober Look

Falling Energy Prices: Sober Look takes a Sober Look

What do falling energy prices mean for the US consumer? Sober Look writes a brief yet thorough overview of the consequences of the correction in the price of crude oil. There are good aspects, particularly for the consumer, bad aspects, and out-right ugly possibilities. For more on this subject, read James Hamilton's How will Saudi Arabia respond to lower oil prices?  In previous eras, Saudi Arabia would tighten the supply to help increase prices, but in this "game of chicken," the rules m...



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Stock World Weekly

Stock World Weekly

Newsletter writers are available to chat with Members regarding topics presented in SWW, comments are found below each post.

Here's this week's Stock World Weekly. Just sign in with your PSW user name and password. (Or take a free trial.)

#457319216 / gettyimages.com

 

...

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Sabrient

Sector Detector: Semiconductors get slammed as investors scramble to protect profits

Courtesy of Sabrient Systems and Gradient Analytics

Volatility continues to increase in the stock market and many of the leaders are breaking down. In particular, semiconductors took a rather big hit when one of the bellwethers warned of weakening global demand. Nevertheless, despite the significant headwinds, I do not think this spells the end of the bull market. But the technical damage to the charts is severe, particularly to the small caps, which are in full-blown correction mode. The large caps must show leadership and rally immediately -- or it will put at risk the critical and widely-anticipated year-end rally.

In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then offer up ...



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Option Review

Release Of Fed Minutes, Icahn Tweet Boost Shares In Apple

Shares in Apple (Ticker: AAPL) are near their highs of the session in the final hour of trading on Wednesday, adding to the muted gains seen earlier in the day, following the release of the September FOMC meeting minutes and after activist investor and Apple shareholder Carl Icahn tweeted, “Tmrw we’ll be sending an open letter to @tim_cook. Believe it will be interesting.” Icahn’s tweet hit the ether at 2:33 pm ET and was met with a spike in volume in Apple shares. The stock is currently up 2.0% on the day at $100.75 as of 3:15 pm ET.

Chart – Apple rally accelerate...



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Digital Currencies

Bitcoin Has Been Getting Obliterated

Joe has found a place for Bitcoins, and if you hold a lot of them, you won't like it.

Bitcoin Has Been Getting Obliterated

Courtesy of 

Remember Bitcoin?

There's not much to say about it, except that it's doing TERRIBLY.

Here's a chart going back to earlier this summer. Charts don't get uglier than this.

Bitcoinwisdom

Interestingly, the Bitcoin industry continues to be quite excited about the prospects for the digital currency, and there continue to be announcements about expand...



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Promotions

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Pharmboy

Biotechs & Bubbles

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

Well PSW Subscribers....I am still here, barely.  From my last post a few months ago to now, nothing has changed much, but there are a few bargins out there that as investors, should be put on the watch list (again) and if so desired....buy a small amount.

First, the media is on a tear against biotechs/pharma, ripping companies for their drug prices.  Gilead's HepC drug, Sovaldi, is priced at $84K for the 12-week treatment.  Pundits were screaming bloody murder that it was a total rip off, but when one investigates the other drugs out there, and the consequences of not taking Sovaldi vs. another drug combinations, then things become clearer.  For instance, Olysio (JNJ) is about $66,000 for a 12-week treatment, but is approved for fewer types of patients AND...



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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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