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OK, so it's after 3PM eastern, GDX is up over 3%, it's over its EMA(16). That's good, I'm satisfied that you might be able to think at some point in the future about investing in shitty gold miners.
S&P is up far too strongly, same with the NASDAQ - did someone pass out a bowl of crack or something? Copper's up, coal's up, steel's up. China ETFs are up. This all despite $USD and Treasurys not going down by much at all.
So, what? Where's all this money coming from to pile into all the risk assets? Or is it just that last week the hedge funds were all naked short, and now this week the hedge funds are all naked long?
So at the very least this is a bounce out of the oversold mania.
Frankly, I don't think there's a reason for the market to collapse until after the next Greek election. What do you say?
It's a Bounce.
ReplyDeleteOn a slightly different tack, given your relative interest in China, I'm curious what you think of the following ideas/posts:
http://libertyblitzkrieg.com/2012/05/17/china-better-have-a-plan/
Linked in that post is an important background piece on a potential China FX problem:
http://ftalphaville.ft.com/blog/2012/05/16/1002681/why-chinas-rmb-exodus-is-the-story/
The "Liberty Blitzkrieg" guy is a pompous ZeroHedger who parrots whatever talking points he heard today at Ron Paul's armed compound. If I want opinion on China, I'll go to someone from China and in China who sees China every day and knows how China works; I'm not going to listen to some idiot loudmouth self-important American who speaks one language and whose entire experience of the outside world is driving to fucking Juarez for cheap crack.
ReplyDeleteYou wanted my opinion....
Seriously though, it was made painfully evident over the past couple years that Americans have no fucking clue about *Europe*: all they've done is blather on about the stupid fucking fake ideology that the Republicans and Wall Street brainwash them with. So why would anyone in the USA have the slightest clue about China? Especially some dumb-ass blogger?
I won't waste more than 5 seconds on any of those ZeroHedge opinion pieces. And this guy probably writes some of them.
As for the FT... yes, they've had a couple articles on that now. I tend to trust FT on anything to do with bonds, FX, and macro; but frankly I can't understand a thing they're saying. :-) I think the RMB/$ post was in the context of a "request for comment", since for the life of me I can't find a proper conclusion or actionable info.
What does it mean? China can sell USTs to earn $$. But do they have a "gentleman's agreement" with the Fed not to do this?
Alternately, do they decide that now's the time to try to make the Yuan fully convertible? A subsequent article on the topic today seemed to suggest that's an option.
Instead these guys smell some big collapse about to happen. Well, that's nice and all. They're not giving me empirical data to back it up, so I'll just note their opinion for now and move on.
I dunno. What's your take on it?
OK... I looked at the article again, and basically it seems to say "Yuan is going down versus the dollar".
ReplyDeleteSo? Izzat a bad thing for China's economy?
I still don't get what FT's on about.
Tell me how you really feel. :)
ReplyDeleteI'm always poking around looking for different views of China, because frankly, no one seems to know anything whatsoever. All fundamental and technical analysis on China is based on numbers and information that might not even be remotely accurate. It feels like the Soviet Union behind the iron curtain (while operating/interacting with the rest of the world at the same time).
People view a few pics of stock piles of real estate or copper and draw all kinds of conclusions about the fate of 1.4(?) billion people. And as you have mentioned, there's the all important cultural mars/venus thing going on as well.
I'll read anything from anyone if it gives me a different viewpoint RE China, as I don't think anyone has it 'right'. For instance, I found this interesting article on China's rare earth policy (you might be interested). http://www.foreignaffairs.com/articles/137602/damien-ma/china-digs-it?cid=nlc-this_week_on_foreignaffairs_co-042612-china_digs_it_3-042612
I don't think China's govt is as Machiavellian-ly perfect as some claim. I also don't think analysts give enough credence to the importance China's elite place on social stability. I'd guess (but don't know) that China's ruling elite would sacrifice short/medium term economic success in order to keep the populace 'docile' (and yet, as the article above states, they make mistakes in the opposite direction). They've had enough revolution in their recent history to have learned the score. This is the main reason I don't look for a China collapse, although it could appear like 'hard times' from the eyes of the western world of finance.
Thanks for the response.
For the record, you could always read Patrick Chovancec and Andy Xie. They both cover China.
DeleteI'm sure there's even better analysis out there. And yes, China's a closed book with fudged numbers.
As far as rare earths - I don't go there. Nobody gets that they need incredibly complex refining processes, and that a RE "concentrate" is worthless. Anyway, apparently they're restarting some huge RE plant in the US, so that's nice.
For the record, I had the same feeling about the FT article. No conclusions.
ReplyDelete"The more you know, the less you understand" - Tao Te Ching
In sum, my current position on China is as follows: I don't know.
I wish I had something to add, but I just don't.
To quote the great Yogi Berra, “It’s tough to make predictions, especially about the future.”
ReplyDeleteThat said ...
Reports of Chinese steel companies cancel or even turn away shipments of iron -- bearish.
Reports of unsold cars stack up on dealer lots in Beijing, despite discounts, with more discounts predicted, and Honda shut down an auto plant for 16 days -- too much inventory -- bearish
Real estate is awful. http://cbsn.ws/LoYUTI
Manufacturing slowing more than expected -- somewhat bearish.
and yes, those huge stockpiles of metal flowing out into the street.http://bit.ly/K9OkCb Aiiiiii!
On the bullish side, the Chinese government recognizes the problem, and this week, Chinese Premier Wen Jiabao pledged to focus more on bolstering growth. So, we’ll probably see more easy money and stimulus policies from the government. But will it be enough to get China’s economy back in gear? We’ll have to see.
Full disclosure: I am short China using the FXP.
Keep writing -- I love your stuff.
The idea is push people into and out of a whipsaw and get capitulation which allows frontrunning into the June "rip you face off rally" that will come after all the deflation sets in. $USD rally? Check. Commodities down and falling ugly? Check? Scary "run away, Europe end of world story"? Check. QE~ now approved.
ReplyDeleteDerek - you are Gary Tanashian and I claim my 5$.
DeleteI'm an NFTRH subscriber. Just wished I was better able to live through this time. It really sux. Did you see the Bloomberg article about all the copper and coal just laying around? Means we need to buy 30yr safe stuff from our favorite uncle...worst part is that has been the winner for 24+ months...sigh.
Delete