Traders Dive Into The Dollar Bunker

[GoFlyKiteNow]

Traders Dive Into The Dollar Bunker

The Dollar Index (DXY) is in the near 52-week high, as the dollar seems to be gaining from the market riot.

The ten-year treasury has rallied and yields just 3.2%. Interestingly, the spread between inflation protected bonds (TIPS) and plain-vanilla ones is now just 1.93%, which shows timid inflation expectations. Gold is falling, down to $1,183.

The market continues to expose its bluff against the USD. At least with the USD you know who ultimately is backing it, unlike the euro.

Most importantly, it's going to be hard for your boss to blame you for being in this 'safe haven'. If you get killed in here, everyone will be.

Investors Flee En Masse From Over-Hyped BRIC Markets

There's been a massive technical breakdown for emerging markets according to Barron's Getting Technical blog.

Indices for Brazil, Russia, India, and China have all nose-dived in the last few weeks.

China's reversal has been one the ugliest, but in general all emerging markets have slammed.

Barron's: Taken together, the technical breakdowns in these leading markets bode poorly for the rest of the emerging markets across the globe. Indeed, the iShares MSCI Emerging Markets Index Fund (EEM) suffered a false resistance breakout last month and a trendline breakdown this month.

Moreover, the U.S. hasn't exactly had an easy run of things either. We'll leave the full technical analysis to others, but the S&P 500 has given up substantial ground (below) just as emerging markets have. At least those who missed last year's rally might get a chance to enter stocks at lower prices
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[longbow]

Must exclude the Chinese mkt lah. Beijing is busy removing liquidity from market in the form of bank reserve requirement. It is separate issue from the rest of the BRIC. Impact from Chinese Central Bank is much larger than Greek impact. Chinese are trying to deflate asset prices.

Rest of BRIC - Russia, Brazil are major commodities exporters and as per Chanos one way to leverage on Chinese bubble popping is the collapse of these economies due to reduction in demand for commodities. India is also commodity export and worse still it has high public debt and huge budget deficit.

Agree with movement to US$. Chinese already holding US$1 Trillion of that!!

 

[GoFlyKiteNow]

Must exclude the Chinese mkt lah. Beijing is busy removing liquidity from market in the form of bank reserve requirement. It is separate issue from the rest of the BRIC. Impact from Chinese Central Bank is much larger than Greek impact. Chinese are trying to deflate asset prices.

Rest of BRIC - Russia, Brazil are major commodities exporters and as per Chanos one way to leverage on Chinese bubble popping is the collapse of these economies due to reduction in demand for commodities. India is also commodity export and worse still it has high public debt and huge budget deficit.

Agree with movement to US$. Chinese already holding US$1 Trillion of that!!

How is that possible?. PRC economy is heavily export dependent and its exports have dived by 40% with 10,000 s of factorizes closed down. Millions out of work..Hence the stimulus money flowed into the equity market. Not driven by fundamentals at all. Which means a bubble. Due to poor fiscal foresight while releasing the funds into the market.

No other BRIC nation has this bubble bust danger. Fiscal deficit is inherent in all economies. It is not uncontrollable unless it is far too high in GDP percentage terms. Which none of the other BRIC nations have. Above all they have fair amount of transparency. Hence the official data and figures are believable or at least verifiable.

Why is the PRC holding its reserves in US dollar.?. Why not have it in their own currency ?. Remimbi. No faith ?

Talking of these trillions..FYI. The Japanese Post bank alone has deposits worth 3 trillion dollars. Perhaps this will bring some sobering thought to some people enamored by this Trillion word.
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[longbow]

Ah but you forget - Japan's entire debt is financed by its citizens. As you know these citizens are aging and will be drawing down on savings rapidly. So as you know a hundred billion here and a hundred billion there and soon you are talking real money. Also a billion does not has as much kick in Tokyo then in Beijing. Once that happens, Japan will be selling US Treasuries! On top of that Japan's has no growth! That is why their prop bubble is still one big indigestion. With 8% growth you will pwer through many bubbles.

In 1970, uncle bought terrace house in Singapore (freehold for $23K). His house is worth $1.5M today. That is 65 fold increase. Many would say that is a bubble - heck $23K to $1.5M but I say the rapid growth in Singapore from 1970 to 2010 makes this not a bubble/.

PRC economy is heavily export dependent - but with a huge bias towards cheaper goods. While it will be affected by down turn they will not be hit as badly as the 1st world goods. For every 1 made in Japan Sony OLED TV, Chinese probably sell 200 LCD TV for 1/4 the price. Yes, they will be hit but less so than Japanese/German/US products. When economy turns bad people buy house brands vs name brands - actually helps out OEM mfgs. And I hear that even the cheapo plastic Ganesh dolls hanging on taxi cabs are all made in China.

Read here - http://www.atimes.com/atimes/China_Business/HD22Cb02.html

It is not about no faith in own Yuan. They are trying to tamp down Yuan by buying US$ lah. That is why they have strongest export machine in the world. And of course the US$/Treasury has the largest liquidty - remember - US has largest GDP hence reserve currency. If fact the yuan is so damn strong that the whole world knows that it is unvalued 30 to 50% vs US$!

BTW, Mr Chanos of China Bubble burst fame is betting against China by shorting the economies of Brazil, Chile. He is expecting a Chinese bubble burst to collapse the commodities exporting nations. In short if China sneezes, the rest of BRIC kena penumonia.

It all depends on what is your growth rate. Simplistically, if you are growing at .5% like Japan then a 30% collapse in property will take 50 years to overcome. But if you are growing at 8% then 30% prop drop can be overcomed in 4 years!!! Growth rate makes a big difference.

Now how to maintain growth. Cheap inputs or more productivity. at the rate the Chinese are building roads/powerstations/railways (exceeding many 1st world standards) their productivity growth is going to power them along at 8% for many more years. No point having cheap labor when your cargo is dependent on colonal build infrastructure.

How is that possible?. PRC economy is heavily export dependent and its exports have dived by 40% with 10,000 s of factorizes closed down. Millions out of work..Hence the stimulus money flowed into the equity market. Not driven by fundamentals at all. Which means a bubble. Due to poor fiscal foresight while releasing the funds into the market.

No other BRIC nation has this bubble bust danger. Fiscal deficit is inherent in all economies. It is not uncontrollable unless it is far too high in GDP percentage terms. Which none of the other BRIC nations have. Above all they have fair amount of transparency. Hence the official data and figures are believable or at least verifiable.

Why is the PRC holding its reserves in US dollar.?. Why not have it in their own currency ?. Remimbi. No faith ?

Talking of these trillions..FYI. The Japanese Post bank alone has deposits worth 3 trillion dollars. Perhaps this will bring some sobering thought to some people enamored by this Trillion word.
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[GoFlyKiteNow]

"" BTW, Mr Chanos of China Bubble burst fame is betting against China by shorting the economies of Brazil, Chile. He is expecting a Chinese bubble burst to collapse the commodities exporting nations. In short if China sneezes, the rest of BRIC kena penumonia.""

LOL..Your entire reply above and particularly the above statement is something that is best left as they are..your opinions.!...But how does it address or explain away the main topic that was posted - is beyond my comprehension at least.

When clear facts are put forward to you, you dont address them. China's export machine is totally dependant on wetsern markets. It is the western markets and easy credit that gvae China the oppurtunity to grow and the same dwindling marekts are now taking its toll on China.

China's export market is mass market product volume based. But have not much technical content or excellence, like that of Japan or Germany, whose products are well respected. Whose technology is not matched at all by China in is products.

Even in the cheap mass market like Toys and Tires, there are umpteen doubters now about China quality. Melamine milk powder, fake goods, spurious medicines, IPR theft and piracy of western products and software etc. Thirdly whatever China makes, countries like Vietnam, Mexico, Indonesia can do the same. Last year , China's growth was only 2 %, not 9 % as touted. This year it is bubble growth. Not real growth.

No, the world will not shake if China gets a cold or a hay fever. There are other players ready to dish out all the products that China makes at competitve prices.

As long as China continue to be what it is - a communist nation with a monolithic political party running the nation - no matter how capitalist it can be, it makes not much impact.
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[theDoors]

China is right to have doubts about who will buy all America's debt
Chinese doubts about the value of US Treasury bonds highlight a crucial question: who will buy the estimated $2.7 trillion (£1.9 trillion) to $4.2 trillion of debt expected to be issued over the next two years?
http://www.telegraph.co.uk/finance/...bts-about-who-will-buy-all-Americas-debt.html

By Martin Hutchinson
Published: 12:14PM GMT 13 Feb 2009

 

[theDoors]

China calls time on dollar hegemony
You can date the end of dollar hegemony from China's decision last month to sell its first batch of sovereign bonds in Chinese yuan to foreigners.
http://www.telegraph.co.uk/finance/china-business/6266790/China-calls-time-on-dollar-hegemony.html

By Ambrose Evans-Pritchard
Published: 7:33PM BST 06 Oct 2009