Showing posts with label China. Show all posts
Showing posts with label China. Show all posts
Tuesday, 30 August 2011
Thursday, 23 June 2011
induction
I get the feeling the market is already thinking about QE3 in a big way, and for some is acting as an insurance policy on their long equities/commodities/risky asset positions. Clearly this must be building valuations.
The more interesting point however are the second order effects of any potential QE3, and a question of its scale. IF it happens, and that is a very big if, it will be under some serious political flak, and as such its only worth then bothering doing if its a meaningful size, but clearly not going to be truly shocking and awe size.
QE2 had very wide reaching side effects; stock prices rallied hard, but more importantly, do did commodity prices, and food in particular. Another round of QE will put huge pressure on China, exporting inflation from the US to China in a big way. China will have to tighten, but even then, the political pressure from higher commod prices and higher food prices will have to lead to one of three outcomes;
1) substantial revaluation of the RMB
OR
2) excessive monetary and fiscal tightening within China
OR
3) revolution
(2) seems the most likely, but that is like somebody pulling very hard on the handbrake for the resource economies like Australia.
I am short $audusd, and doing a lot of work on Australian banks, and highly leveraged companies looking very actively for good short opportunities.
The more interesting point however are the second order effects of any potential QE3, and a question of its scale. IF it happens, and that is a very big if, it will be under some serious political flak, and as such its only worth then bothering doing if its a meaningful size, but clearly not going to be truly shocking and awe size.
QE2 had very wide reaching side effects; stock prices rallied hard, but more importantly, do did commodity prices, and food in particular. Another round of QE will put huge pressure on China, exporting inflation from the US to China in a big way. China will have to tighten, but even then, the political pressure from higher commod prices and higher food prices will have to lead to one of three outcomes;
1) substantial revaluation of the RMB
OR
2) excessive monetary and fiscal tightening within China
OR
3) revolution
(2) seems the most likely, but that is like somebody pulling very hard on the handbrake for the resource economies like Australia.
I am short $audusd, and doing a lot of work on Australian banks, and highly leveraged companies looking very actively for good short opportunities.
Friday, 3 June 2011
another potential chinese fraud;
http://www.muddywatersresearch.com/wp-content/uploads/2011/06/MW_TRE_060211.pdf
without commenting on the company in particular, its another example of a potential fraud. It was striking reading an FT alphaville article quoting a Chinese 'expert' saying that he saw long term problems for China, medium term problems, but had faith in the government to engineer a soft landing. There has been an enormous shift in media and 'expert' thinking that has blind faith in the Chinese government and the Chinese development model.
US officials have decades of experience and collective wisdom managing a market economy, one which is smaller, has more transparent and reliable data, yet one would be called mad if one were to place that level of faith in the US government to guarantee a soft landing. Or even more absurdly, that the Fed could fine tune the economy by setting interest rates to the nearest 0.01% (Chinese base rate is the absurdly precise 6.31%), when the Fed has to move in 25bp increments at least.
Fraud typically really starts to accumulate in the late stages of a bubble....
without commenting on the company in particular, its another example of a potential fraud. It was striking reading an FT alphaville article quoting a Chinese 'expert' saying that he saw long term problems for China, medium term problems, but had faith in the government to engineer a soft landing. There has been an enormous shift in media and 'expert' thinking that has blind faith in the Chinese government and the Chinese development model.
US officials have decades of experience and collective wisdom managing a market economy, one which is smaller, has more transparent and reliable data, yet one would be called mad if one were to place that level of faith in the US government to guarantee a soft landing. Or even more absurdly, that the Fed could fine tune the economy by setting interest rates to the nearest 0.01% (Chinese base rate is the absurdly precise 6.31%), when the Fed has to move in 25bp increments at least.
Fraud typically really starts to accumulate in the late stages of a bubble....
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