Hi tradestrong,
I have to differ. The dollar is primarily bought because of the deleveraging. Excessive supply of money being drawn out the system has to be bullish for the dollar. Same thing with the yen. Private equity relied on leverage. It is broken now. Repatriation from emerging markets is another reason.
If you look at the Chinese bond market (though a very small one compared to the US, the government didn't have to borrow much), you can see the yield isn't abnormally higher than the US. In fact, 10yr is trading at 3.21, that's 8bps less than the UK, and about 12bps higher than Germany. So in terms of sovereign security it is OK, at least in bonds.
Come back to the demand side of western consumers. Export is falling fast. That is correct. And China has built up over-capacity over the years. But it has been trying to address this problem since 2006-07 by jacking up rates. Unlike the US, there is not a housing bubble in China. If you look at a few big cities yes there is. But if you look at China overall there isn't one. In a lot of places house prices has gone up 50% whereas income has gone up 100%. (Read it somewhere but I don't have the sources, and I made up the numbers but it's something like that)
Domestic demand is still strong. I want to point out that, and a lot of people forget about this, China has a very high savings rate. Demand could quickly pick up when people realizing the money isn't paying them interest in a bank and start spending. When you get 20% growth in vehicle sales, that's hardly a demand shock, yes?
China has its problems but at the end of the day, who am I to say that Chinese market is going to fall? After all our job is to buy what goes up and sell what goes down. So far the market has been cooperative.
The investment bankers who lost money are talking deflation; while people like Soros, Rogers, and John Paulson are talking inflation. I don't generally take advice from people who lose money. There is going to be inflation down the road and it's going to hurt the dollar, whether you like it or not. When? I don't know. I wish I know but I don't.
I have to differ. The dollar is primarily bought because of the deleveraging. Excessive supply of money being drawn out the system has to be bullish for the dollar. Same thing with the yen. Private equity relied on leverage. It is broken now. Repatriation from emerging markets is another reason.
If you look at the Chinese bond market (though a very small one compared to the US, the government didn't have to borrow much), you can see the yield isn't abnormally higher than the US. In fact, 10yr is trading at 3.21, that's 8bps less than the UK, and about 12bps higher than Germany. So in terms of sovereign security it is OK, at least in bonds.
Come back to the demand side of western consumers. Export is falling fast. That is correct. And China has built up over-capacity over the years. But it has been trying to address this problem since 2006-07 by jacking up rates. Unlike the US, there is not a housing bubble in China. If you look at a few big cities yes there is. But if you look at China overall there isn't one. In a lot of places house prices has gone up 50% whereas income has gone up 100%. (Read it somewhere but I don't have the sources, and I made up the numbers but it's something like that)
Domestic demand is still strong. I want to point out that, and a lot of people forget about this, China has a very high savings rate. Demand could quickly pick up when people realizing the money isn't paying them interest in a bank and start spending. When you get 20% growth in vehicle sales, that's hardly a demand shock, yes?
China has its problems but at the end of the day, who am I to say that Chinese market is going to fall? After all our job is to buy what goes up and sell what goes down. So far the market has been cooperative.
The investment bankers who lost money are talking deflation; while people like Soros, Rogers, and John Paulson are talking inflation. I don't generally take advice from people who lose money. There is going to be inflation down the road and it's going to hurt the dollar, whether you like it or not. When? I don't know. I wish I know but I don't.
