Time to Buy China, Copper, the Canadian Dollar and Oil 85 comments
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My last article featured continued caution on equities of all stripes, given the free fall in equity markets world wide for the past year or so. We've all been looking for "the bottom" or at least a tradeable bottom. Patience and cash has been well rewarded, and the US Dollar and US Treasuries have enjoyed striking rallies within the past year as equities both domestic and abroad have fallen historic amounts.
We have noted a recent gradual reversal of this flight to safety, as US interest rates have begun slowly upticking, gold has fallen 10% recently, and certain stock markets appear to have stabilized at lower levels, such as the Chinese market. Other markets such as those in Japan, the US, and many other Western Countries have continued to decline and sink to lows not seen in over a decade.
Certain disconnects seem to be emerging which need a catalyst to spark upward price movements. One clear catalyst this week has been the Chinese Government committing to further fiscal stimulus to stem the slowing of their domestic economy, regardless of export slowdowns to the weakened Western economies.
Indeed, word of such a new stimulus in the works Tuesday night sparked a huge 10% rally in the Shanghai Stock market, in oil, in copper, and lesser rallies in stock markets world wide today. The big winners were those companies and commodities most likely to benefit from increased Chinese demand: iron ore miners like BHP, and RIO, copper miners like FCX, oil and ETFs such as USO, and stock markets such as those in Brazil (EWZ), China (FXI), other BRIC countries, and other resource rich countries like Canada (EWC) and Australia (EWA).
The US Markets' reaction was more muted, weighed down by financial concerns and stocks that continue to deteriorate, and a lack of confidence in the current administration to stop making things worse with policies antithetical to the very investor class needed to resume spending and investment to stimulate US economic growth. Although I day traded SPY for a small gain given the highly oversold nature of the US equity markets, I felt no confidence in making it even an over night holding.
On the other hand, there is data to suggest copper inventories have been falling, as have oil inventories, which could be supportive of their prices, companies which produce them, and countries and currencies dependent on stable or rising commodity prices.
Therefore, yesterday I went long FCX, FXI, FXC, and USO. There are clear sell-stop levels on the charts that would indicate such new trades were in error. Other stocks I'm interested in include BHP, PCU, XLE, EWA, EWC, IFN, and especially EWZ. All are either commodity stocks or countries rich in commodities. I'm also interested in the Australian dollar FXA at these levels, although I'm concerned about its banking problems not shared by Canada or China.
Other than being oversold, it's hard to make the case for US equities in general given the overall state of the US economy, the lack of confidence in the US administration, and the lack of a cohesive plan to stabilize the banking sector.
I happened to watch Jim Rogers on Asia's Squawk Box on CNBC last night and he is very bullish on agriculture in the years to come. This keeps me looking at the various agriculture ETFs such as DBA, and companies such as MOS, etc.
Disclosure: Long FXI, FCX, FXC, USO. No shorts.
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This article has 85 comments:
Canada is a huge exporter, especially to the US. About 75% of GDP is exports. I have a hard time seeing Canada do well when its #1 trade partner is facing such a horrendous downturn and world trade flows have collapsed.
The Loonie is also at the edge of the cliff. I am staying clear here, because if we pass $1.30, it would hit $1.40 within a few weeks.
Correct or not, the Loonie is a commodity currency and commodities aren't the place to be in a depression.
The "Stimulus Package" is pretty much useless to the economy, and the new budget presented to Congress is horrible for business.
Jim Rogers also said he doesn't know of a nation that is as anti-capital and anti-business as the US.
Very, very sad!
More seriously, 20 mm unemployed Chinese went to their villages for New Year and aren't coming back to the factories anytime soon. How much meat you think they'll be eating this year? Maybe Jim Rogers knows.
CP
On Mar 05 08:55 AM material guy wrote:
> The Story of Dr. O: long ideas for masochists.
>
> More seriously, 20 mm unemployed Chinese went to their villages for
> New Year and aren't coming back to the factories anytime soon. How
> much meat you think they'll be eating this year? Maybe Jim Rogers
> knows.
Things have changed a bit though, whether because of Chinese buying or Mine closure, London LME copper inventories have stalled/stopped their ascent and are actually going down.
Oil may have hit a bottom. Iran, of all Opec countries to believe, made a comment that a production cut was not in the works which pummeled prices for ..what... a couple of days before popping back up.
The big difference here is that between the drop and pop, WTI which had been trading below Brent by 10% or more now trades at 3% or less.
Since we do not export WTI( to my Knowledge) and Brent is grade equivalent to WTI, one could make the case that the Supply/demand imbalance has finally been rectified. In my opinion.
Ergo, I would start seriously looking for the beneficiaries of stable to higher oil prices....
Tooo many to choose from...but you do have a multitude of ETF/ETNs avaiable.
IMHO
As far as the next 20 years are concerned, if you lose 75% of your capital in six months (which people owning fertilizer stocks have done), you're going to need all of those years to make it back!
On Mar 05 09:06 AM User 338595 wrote:
> I'm sure Jim Rogers has a much better track record then you do !
> If you actually listened to what Jim Rogers said, it's a play for
> the next 20 years, not a trade for 6 months.
As a US expat living in GZ I cannot buy Chinese stocks legally. But I can invest in over 400+ mutual funds which in general will smooth out the ride. No one knows for sure where the bottom is. China stock market started its decline 12 months before the US market. I believe that the Chinese stock market will recover before the US stock market.
Canada itself is not commodities dependent; rather, unusual profits and earnings growth of recent years were commodities dependent. I don't see a collapse in commodities, so much as a loss of credit for the commodity producers. I like gold, oil, timber, and potash during prolonged downturn: good to own, but not good to bet the farm on.
In terms of strategy, Canada's close ties to the U.S. plus Canada's relatively low deficit suggest most of the advantages of North America while avoiding one or two major liabilities. Given Canadian population, I like Canada's pro-immigration sensibility: the U.S. lets in agrarian workers, landscapers, and small scale contractors who fix up our homes; the Canadians let in doctors, engineers, and other professionals by the hundreds of thousands. It will position them remarkably well for the long haul.
On Mar 05 09:20 AM material guy wrote:
> I've read Jim Rogers on and off since "Investment Biker" of 1994.
> His writing gives the impression of a blowhard with little intellectual
> depth. And while he made a great call on China early this decade,
> he appears to have walked into the current downturn totally oblivious.
> Give me Nicholas Taleb any day.
>
> As far as the next 20 years are concerned, if you lose 75% of your
> capital in six months (which people owning fertilizer stocks have
> done), you're going to need all of those years to make it back!<br/>
On Mar 05 08:24 AM IronMeteor wrote:
> The Loonie is a play on the US. Yes, its banks are fine, but who
> cares.
> Canada is a huge exporter, especially to the US. About 75% of GDP
> is exports. I have a hard time seeing Canada do well when its #1
> trade partner is facing such a horrendous downturn and world trade
> flows have collapsed.
>
> The Loonie is also at the edge of the cliff. I am staying clear here,
> because if we pass $1.30, it would hit $1.40 within a few weeks.
>
>
> Correct or not, the Loonie is a commodity currency and commodities
> aren't the place to be in a depression.
>
On Mar 05 09:20 AM material guy wrote:
> I've read Jim Rogers on and off since "Investment Biker" of 1994.
> His writing gives the impression of a blowhard with little intellectual
> depth. And while he made a great call on China early this decade,
> he appears to have walked into the current downturn totally oblivious.
> Give me Nicholas Taleb any day.
>
> As far as the next 20 years are concerned, if you lose 75% of your
> capital in six months (which people owning fertilizer stocks have
> done), you're going to need all of those years to make it back!<br/>
On Mar 05 09:53 AM fran wrote:
> none of us know what or when rogers bought/sold chinese investments.
> all that might be known is what he says today concerning his actions.
> these seem to be heavilly skewed towards AGR, especially farmland
> in brazil/canada.
On Mar 05 09:38 AM User 338595 wrote:
> I don't know what you have been watching, but I recall Jim Rogers
> telling people to short the us markets in Jan of 08, I recall him
> saying fannie/freddie will colapse, to sell the financials (well
> before bear/lehman collapse) and just a few months ago he said us
> treasuries are a bubble waiting to collapse..said to buy tbt.. at
> that time tbt was trading 36, today it's 48..he might not be acurate
> all the time but he's made some great calls too..and if china is
> down 75 % in 20 years i hate to see where the united states is headed
> !! oh wait that's right we are going to spend our way to recovery
> !!!
On Mar 05 09:58 AM User 338595 wrote:
> the point i was trying to make is that people should look at the
> big picture. of course jim rogers made some bad calls, but he also
> made a lot of great one's too. to focus on one call is not fair.
> i don't know of any investor/trader who is always right. all i can
> say from personal trading is that i made money listening to jim rogers.
> more than i can say for anyone else i see on cnbc.
Getting a big call wrong (like he's done on commodities) can offset a lot of good work elsewhere. When you lose that much of your capital, the arithmetic says it takes a loooong time to get back to break-even. On financials and such I prefer to listen to Marc Faber, who hit the TBT trade at the same time.
On Mar 05 09:38 AM User 338595 wrote:
> I don't know what you have been watching, but I recall Jim Rogers
> telling people to short the us markets in Jan of 08, I recall him
> saying fannie/freddie will colapse, to sell the financials (well
> before bear/lehman collapse) and just a few months ago he said us
> treasuries are a bubble waiting to collapse..said to buy tbt.. at
> that time tbt was trading 36, today it's 48..he might not be acurate
> all the time but he's made some great calls too..and if china is
> down 75 % in 20 years i hate to see where the united states is headed
> !! oh wait that's right we are going to spend our way to recovery
> !!!
On Mar 05 09:58 AM User 338595 wrote:
> the point i was trying to make is that people should look at the
> big picture. of course jim rogers made some bad calls, but he also
> made a lot of great one's too. to focus on one call is not fair.
> i don't know of any investor/trader who is always right. all i can
> say from personal trading is that i made money listening to jim rogers.
> more than i can say for anyone else i see on cnbc.
On Mar 05 10:14 AM material guy wrote:
> I'm only talking about Rogers' commodity calls, which I believe have
> been unwaveringly bullish, based on his views on China. He apparently
> bought into the decoupling nonsense being spouted a year ago. When
> you're as arrogant and self-congratulatory as Rogers is in his books,
> its tough to look past big mistakes.
>
> Getting a big call wrong (like he's done on commodities) can offset
> a lot of good work elsewhere. When you lose that much of your capital,
> the arithmetic says it takes a loooong time to get back to break-even.
> On financials and such I prefer to listen to Marc Faber, who hit
> the TBT trade at the same time.
Not a bank but certainly beaten down, Know anything about their Prospects?
The Canadian Federal Government keeps lowering the Bank of Canada intrest rate to keep ontario (big voter support) happy because the bottom line here is that we can not compete with the Lonnie/US dollar equal.
The Bank of Canada rate is now a measly 0.5%.
We probably are at bottom here however when the rally comes on commodities our dollar will climb significantly against the US dollar.
Canada will expierience its first deficit this year in more than a decade.
They have been quietly paying down their debt while the US debt skyrockets.
That beign said, go long term on the Canadian dollar.
Paultaut, thanks for the question. I am not well informed enough to say much, other than that Macquarie's corporate culture is extremely cowboyish and they are Wall St soul mates. A good example of some of the rot that does lurk within the Australian financial sector. (I don't deny finance and property in Australia are overweight and sick, but am still mystified by the author's comment re Aussie banks. No matter - I am mystified by many things.)
On Mar 05 10:50 AM paultaut wrote:
> Wavelenght: How about MIC, Macquarie?
>
> Not a bank but certainly beaten down, Know anything about their Prospects?
On Mar 05 01:03 PM Dr. O wrote:
> Much more interest in Jim Rogers than little 'ole me, as it should
> be!
Going forward, European markets are in a shambles due to the capital situation of European banks now staring at huge losses for Eastern European lending. The US market is also not through dropping as the economy continues to deleverage, and bank losses continue to sap scarce capital.
But China, with its dollar surpluses, and recently announced stimulus plan that rivals the US in size, may be the first country to hit bottom and turn around. Remember, that a couple of years ago, China was hamstrung by the high cost of raw materials around the world. Now the Chinese will be scooping up natural resource bargains for years to come.
I already have exposure to China via a mutual fund but will look to cost average if it starts to show some life. Thanks for the update.
On Mar 05 03:50 PM InvestorCP wrote:
> The Canadian dollar is linked to oil and commodities (metals mostly);
> it will go up and down in conjunction with them. I used to be big
> on China until I read "The World is Curved", and it changed my perspective
> completely. They are the next crash waiting to happen, demographic
> shift that is almost as severe as Japan's, gobbling dollar based
> assets to support their currency peg, finacial policies based on
> keeping the communists in power. The China story will unravel without
> a transition to democracy - let's just hope it waits a few years.
> The oil and metal hard assets are being gobbled up by China, if they
> implode, the commodities and Canadian dollar go with it.
On Mar 05 12:31 PM littlegenius wrote:
> I am a polymer scrap trader. We previously did 80% of our volume
> to China. We bring in plastics, grind or bale them, and then pack
> containers bound for China. Then we get paid via wire. China stopped
> taking anything in September and did not resume until February, when
> not coincidentally the Baltic Dry Index reversed. Prices for plastic
> scrap have jumped twice the past 4 weeks for Chinese buyers. China
> appears to be in recovery to us. We don't care if it is due to inventory
> replenishment. Prices and volume on plastic scrap have been moving
> up quickly. We believe a Chinese reversal has been underway for
> at least a month. Good luck to you all.
large parts of society are left out of the boom..and until these segments are addressed..ie. education, health care (horrible..) the country is on a precipice. Communist party is a joke, the central government has low credibility...(tainted baby formula)...they have lots to fix before they can even become an Italy.
On Mar 05 10:27 AM User 338595 wrote:
> they are more capitalist then we are..they have plenty of issues
> to work out, but they have a high savings rate and run a surplus..more
> then i can say about US..
* With that said, I believe someday there will be a decoupling, just not going to happen anytime soon. And, I do believe there's value in some Chinese stocks. For long term value, 20+ years, perhaps you can buy the ETFs.
* And last but not least, the US economy will not collapse, at least not entirely (but it will be bad). The simple basic fact is, we are the greatest military power. The dollar will continue to be the reserve currency of the world as long as the world is forced to accept it while staring at the barrels of our guns. That is what keeps this economy going. If you think this is coercion and is morally wrong. You're right. It's both and I don't agree with it either. But that's how it works. This is the part guys like Peter Schiff (a very bright, but somewhat naive investor) don't fully get.
Think about it...... you have 11 million people not paying taxes, or for healthcare or car insurance. Draining the US economy by taking home or sending to relatives, likely billions of dollars. Which explains Mexico's porous norther border, while they patrol the hell out of their Southern border with Guatemala.
On Mar 05 09:37 AM donzelion wrote:
> Loonie is intimately linked with the U.S., but the Canadian debt
> obligations are orders of magnitude more manageable. Hence, if you
> like the U.S. economy long-term but worry about U.S. debts, Canada
> ought to look pretty decent in comparison.
>
> Canada itself is not commodities dependent; rather, unusual profits
> and earnings growth of recent years were commodities dependent. I
> don't see a collapse in commodities, so much as a loss of credit
> for the commodity producers. I like gold, oil, timber, and potash
> during prolonged downturn: good to own, but not good to bet the farm
> on.
>
> In terms of strategy, Canada's close ties to the U.S. plus Canada's
> relatively low deficit suggest most of the advantages of North America
> while avoiding one or two major liabilities. Given Canadian population,
> I like Canada's pro-immigration sensibility: the U.S. lets in agrarian
> workers, landscapers, and small scale contractors who fix up our
> homes; the Canadians let in doctors, engineers, and other professionals
> by the hundreds of thousands. It will position them remarkably well
> for the long haul.
but back to USO, wouldn't USO share price finally "catch up" with oil prices once the contango disappears and backwardation takes over...ie. holding the shares until oil hits $100+/barrel wti ?
any comments?
On Mar 05 11:41 AM User 370276 wrote:
> How can anyone recommend USO : oil goes down USO goes down; oil
> goes up USO goes down. The only people making money with USO are
> the fund managers. Hopefully soon there will be commodity-based
> etfs that actually go up when the underlying commodities go up.
The LME Copper not only has stopped its fierce ascent but has shown signs of withdrawals. Meanwhile, the WTI/Brent spread is almost nonexistent.
All in All, I feel that the corner has been turned. The problem with the ETF/ETNs is that they trade like stocks more than what they represent.
DAG and DYY, DXO...spat upon and thrown into a ditch.
all of them are waiting to be reborn.
Having said that, I have reentered the Munibond area with the purchase of 1,000 shares of MHI, $9.19.
Why mention it here? MHI has just increased its payout by 7%. I take the increase to mean that the markets are moving again in the Financial arena. If this area is moving again and with higher yields(ie greater coupons), then, at least to me, it means that deflationary expectations may have turned the corner.
I welcome the discourse.
Canadian dollar is a good long term bet, because it's a petro dollar.
I would also agree that China is another long term play because it's
in the early stages on it's development the same way the US was in
the last century. The US is in deep debt, and can't affort it's health
care, and pension committments in the future. Unless it exports
more goods than it imports, ( not likely ) then the tax rate will
have to rise to fund these programs. The point is that you have to
look at other areas beside the US market.
The only area I'd disagree with the author might be how to make the China play. I don't like ETFs. They decay over time. Some companies in China to look at:
Yanzhou Coal (YZC)
LDK Solar (LDK)
KHD Humboldt (KHD)
Aluminum Corp of China (ACH)
Harbin Electric (HRBN)
I haven't examined the financials of all these companies in full, but they all look intriguing. Solar is scary right now, but LDK has a lot of power in the industry; despite a terrible recent performance, they will probably rebound *ASSUMING* solar itself survives.
Some ways to make a China play without investing in Chinese companies:
ABB Ltd (ABB)
Veolio (VE)
Posco (PKX)
Other steel stocks (X, MT, NUE, RS, etc) --- not sure if all of them have exposure to China, but even if they don't, they might benefit indirectly from increased demand that drives prices back up
... and of course ... Oil! If you believe demand for oil will continue to rise in China, prices will continue to rise.
PS: one fund that I hold and love is Macquarie Power and Infrastructure (MPT.UN), distributing $1.05/yr. on $4.55 (as I write) = 23% yield, with prospects for 2009 looking stable- see their website. Thanks.
On Mar 05 09:34 AM rlirph wrote:
> I agree that China is one of the very few countries that I would
> invest my money. The reason is simple. They are sitting on US$2
> trillion of our money. When that kind of reserves and a household
> saving rate of 40% the government has many options.
>
> As a US expat living in GZ I cannot buy Chinese stocks legally. But
> I can invest in over 400+ mutual funds which in general will smooth
> out the ride. No one knows for sure where the bottom is. China
> stock market started its decline 12 months before the US market.
> I believe that the Chinese stock market will recover before the US
> stock market.
On Mar 05 11:33 AM sensey wrote:
> So we are in agreement that the US administration is purposely trying
> to prevent economic recovery, and therefore it doesn't matter what
> China does? I rather think the opposite is true and sooner or later
> the Obamanauts will feel the heat and their crazy notions will vaporize.
> They need to be reminded who their bosses are...
I beleive this currency is facing an immenent crash.
Japan is deep in debt and faces many problems they simply can not resolve.
yes bet on the yen crashing going forward.
On Mar 05 01:58 PM 367851 wrote:
> Clinton no sooner leaves China and we have this talk of China stimulating.
> China is the new America, flush with cash and its own Marshall Plan.
> We are all going to owe the Chinese one day like the Europeans and
> Japanese owed America after WWII.
America's answer to everything. Yawn.
On Mar 05 09:47 PM mrbill wrote:
> * Looks like we're starting to hear "Decoupling 2.0". Wait for the
> rally, sell, rinse & repeat.
>
> * With that said, I believe someday there will be a decoupling, just
> not going to happen anytime soon. And, I do believe there's value
> in some Chinese stocks. For long term value, 20+ years, perhaps you
> can buy the ETFs.
>
> * And last but not least, the US economy will not collapse, at least
> not entirely (but it will be bad). The simple basic fact is, we are
> the greatest military power. The dollar will continue to be the reserve
> currency of the world as long as the world is forced to accept it
> while staring at the barrels of our guns. That is what keeps this
> economy going. If you think this is coercion and is morally wrong.
> You're right. It's both and I don't agree with it either. But that's
> how it works. This is the part guys like Peter Schiff (a very bright,
> but somewhat naive investor) don't fully get.
Buying good Canadian resource companies can make a lot of sense for a couple of reasons: first, the TSX and TSX-V were hammered beginning in September. Good companies are still selling for market caps at or below their cash in the bank positions. Second, that hammering reflected the decline in commodity prices - if and when they start to go up the Canadian resource sector will lead the bull charge.
There is also the Canadian dollar to consider. It may well be a resource currency; but it is a currency which has been significantly sold. The Canadian government has the lowest debt to GDP ratio in the G7 and this years budget is the first in a decade to go into deficit. A deficit which Canada can afford. Canada does not only have sound banks, it has <u>profitable<... banks. And, finally, Canada has a Conservative government and an Opposition Leader who is demanding that there be a close accounting of where stimulus money is being spend. Political risk is very, very low.
The loonie is likely to emerge from the present crisis as sound as the Swiss franc was in the 1960's.
The Canadian Lonnie (nicknamed after the loon on the back of the coin)
is susceptable to the price of oil and will rally when oil goes up.
Canada has managed their debt much better than their American counterparts and that will also help the Lonnie climb.
At some point without managing debt you simply hit the wall.
Keeping in mind that China holds the most US debt then you should hope that the Chinese do not decide to unload your debt anytime soon.
this would crush the US dollar flatter than a mud hut in a hurricane.
I'm still learning, and looking for more and better information that will permit better trading. As for investing, I'm by nature skeptical, and have sat on cash for years. In fact, I'm so skeptical, that I stopped contributing to an IRA two years ago because I fear that by the time I can withdraw the money without penalty, taxes will be sky high.
I'm even thinking of withdrawing my IRA cash now, paying the penalty and taxes now, and avoiding taxes in the years to come. My financial goal has been to hoard non-retirement cash and keep all assets in retirement accounts as cash.
On Mar 05 04:50 PM Whitehawk wrote:
> Is it really time to buy China? The article is vague on details.
> The anecdote below is helpful, but we'd all like more indicators.
> Won't Chinese exports slow even more to the US or have they bottomed?
>
On Mar 06 03:25 PM littlegenius wrote:
> We think our bottom occurred because of overall lower Chinese production
> and very sharp Chinese inventory balancing. Now the Chinese scrap
> traders are comfortable with their inventory levels and are buying
> again and bidding prices upward. China is recovering quicker than
> the US, because the Chinese government lifted credit restrictions
> on the banks that they put in place a few years ago. The government
> is giving their banks tacit permission to give out bad loans. The
> money is going straight to the factories, unlike our banks who have
> not loosened that much. Also, the Chinese began focusing on selling
> to their neighbors when US orders disappeared in the fall. Our Chinese
> buyers all of a sudden are flush with cash and have resumed their
> visits to our MRF and are wiring money to us again. I don't understand
> all of it, but the money is coming in again and volume and pricing
> have trended well over the last 3 weeks. We think their bottom was
> right before their banks loosened up credit decisions and the effect
> of that occurred a few weeks ago. Their bank managers report to
> the government, not like ours...
>
> On Mar 05 04:50 PM Whitehawk wrote:
Dr. O: In this market, where no one knows where the next Governmental intrusion will take place, we are all learning.
I just hope I've made the right guestimates regarding future income generation, right now I'm using the "shotgun" approach.
This has been the trade everyone has been trying to put on since the summer and it really has not worked. Gold has kept you even, but not much better.
Theses die hard.
To plumstupid:
*
Tacit permission? Oh Really? Citations please. Preferably from someone inside China not some kool-aide drinker on Wall St.
======================...
I can't give you the citation, yet most Chinese banks (the big 5 other than the Taiwan or Hongkong banks) are partially controlled by Chinese government.
Just like the state-owned companies. They do have some public traded companies listed in the exchange--but the best are still owned by the state.
In Chinese market ,some of the companies have big insider owner (more than 15%) and they are allowed to buy the lowest level last year and scoop the gain.
China and America with two different system are quite the same : power =money.
I do think China will show the recovery earlier, but remember they are still dependent on the consumer side in America . They gain on the cheap raw material but should suffer from top line of the pricing since now consumers are more price sensitive. With other labor intensive countries in South Asia, now the labor cost in China is competitive again compared with 2 years ago.Maybe they won't lose or gain much on this export.
As for the infrastructure building in their stimulus plan, it won't benefit America directly. The only thing we can make sure is the price in Walmalt will rise so the inflation is not quite a problem. --That's why they don't want protectionism. It will hurt every player in this global economy.
To pin the hope on another country is not a good idea. We create the problem and we shall solve it or kill it.
Of course compared with American stock market, Chinese's local market (not hang shen) is a better play.
Smart guy, Dr. O.
On Mar 06 02:36 PM Dr. O wrote:
> I'm just an ordinary fellow from the Midwest USA with a keen interest
> in the interplay of stocks, bonds, currencies, and commodities while
> simultaneously trying to factor in domestic and international politics,
> investor psychology, and various other factors.
>
> I'm still learning, and looking for more and better information that
> will permit better trading. As for investing, I'm by nature skeptical,
> and have sat on cash for years. In fact, I'm so skeptical, that I
> stopped contributing to an IRA two years ago because I fear that
> by the time I can withdraw the money without penalty, taxes will
> be sky high.
>
> I'm even thinking of withdrawing my IRA cash now, paying the penalty
> and taxes now, and avoiding taxes in the years to come. My financial
> goal has been to hoard non-retirement cash and keep all assets in
> retirement accounts as cash.
online.wsj.com/article...
www.rgemonitor.com/asi...
chinesepolitics.blogsp.../
On Mar 06 03:29 PM plumstupid wrote:
> Tacit permission? Oh Really? Citations please. Preferably from someone
> inside China not some kool-aide drinker on Wall St.
Chinese stats: Like all Govt. stats there is skepticism. In US here, we have some ability to get to the source of data and cross check and draw our conclusions. We do not have that ability with Chinese numbers (at least me, sitting here). So we have to take Chinese stas with a pinch of salt (not MSG).
Chinese data looks good and the author has presented everything in a cogent convincing manner. But the logic does not sit well with me – China is an export economy, domestic consumption is small – it simply cannot grow when its exports are falling off the cliff (and imports too). All regional (and world) trade data export & import – is showing steep declines. So Chinese simply cannot grow at the pace they used to, even the 8% growth they are championing likely is a political slogan – unlikely achievable. The recent 2nd stimulus fiasco was cruel joke.
Read Nouriel Roubini’s article on Forbes a couple of days ago – he talks about China:
www.forbes.com/2009/03...
Baltic Dry and metal prices have recently rebounded based on Chinese demand. But the fact is all these indexes had an extreme and steep fall – fell 75 – 90% in a few months. So the rebound is very understandable – pendulum swung on the other side too quickly. However as producers have cut back there is steep fall in supply of all commodities- oil, copper, and shipping– so the prices are reacting to that too. Also lot of Chinese purchases are simply building inventory, bottom fishing in the market, not actual consumption. This buildup will quickly end.
Overall I am bearish on the market’s overall, including China. The world is in deep recession unlikely to end any time soon.
Suggest sellout of FXI, definitely S&P.
Thank You SB-Tiger,
You nailed it. There will be no decoupling of China or any other country from America. China knows it is in their best interest and their survival to see America solve its problems. There can be no global recovery without an American recovery. We will have an extended soggy bottom, a long "u" shaped recession.
I thought it was interesting to note that the head of the IEA was touting the low oil prices as good and necessary for the recovery of the global economy:
"The fall in the oil price is set to give a $1,000bn stimulus to oil-
importing countries this year, the head of the International Energy
Agency has said, as he urged oil producers to think about their
"mutual interest" with consumers.
He urged oil-producing countries to recognise that "to stimulate the
importing countries' economies is very important for their future,
too". The IEA has calculated that if oil stays at about $40 a barrel
this year, down from an average of about $100 a barrel last year, it
will be worth $1,000bn to oil-importing countries in increased
spending power. That compares with the US administration's plans for a
$787bn fiscal stimulus."
Conventional investment advice did nothing for us leading up to this meltdown, and in general the commentators and advisors missed this completely (including some very smart people: Eric Sprott of Sprott Funds, Tom Stanley of Resolute Performance Fund, etc.). I'm feeling completely let down and skeptical of the investment community. I do like to follow Peter Schiff, Jim Rogers as their ideas make sense to me.
Someone made money: shorting oil and commodities, long on US dollar, shorting DJIA and TSX, etc. in last 6 months. I'd like to get some professional advice that makes me one of those making that money by making smart aggressive bets (not for the major part of portfolio of course)!
PS- read Nicholas Taleb's "Black Swan" and found it very heavy going. I was hoping for some specifics of how he exposes himself to the huge winning opportunities (and the majority of his portfolio is very safe he says)- the book never contained any specifics. Does anyone know what he invests in?
On Mar 06 02:10 PM Jay Currie wrote:
> Comox, I can't help you on an investment adviser in Vancouver but
> you should be doing your own due diligence in this market. No better
> place to do it than www.stockresearchporta...
>
>
> Buying good Canadian resource companies can make a lot of sense for
> a couple of reasons: first, the TSX and TSX-V were hammered beginning
> in September. Good companies are still selling for market caps at
> or below their cash in the bank positions. Second, that hammering
> reflected the decline in commodity prices - if and when they start
> to go up the Canadian resource sector will lead the bull charge.
>
>
> There is also the Canadian dollar to consider. It may well be a resource
> currency; but it is a currency which has been significantly sold.
> The Canadian government has the lowest debt to GDP ratio in the G7
> and this years budget is the first in a decade to go into deficit.
> A deficit which Canada can afford. Canada does not only have sound
> banks, it has <u>profitable<... banks. And, finally, Canada has a
> Conservative government and an Opposition Leader who is demanding
> that there be a close accounting of where stimulus money is being
> spend. Political risk is very, very low.
>
> The loonie is likely to emerge from the present crisis as sound as
> the Swiss franc was in the 1960's.
On Mar 07 11:36 AM comox wrote:
> Jay- thanks for taking the time to reply. I'm invested in Canadian
> resources now, impatiently waiting for the coming commodity resurgence,
> and still taking some downward hammering. Of course that all hinges
> on this China/US recovery discussion.
> Conventional investment advice did nothing for us leading up to this
> meltdown, and in general the commentators and advisors missed this
> completely (including some very smart people: Eric Sprott of Sprott
> Funds, Tom Stanley of Resolute Performance Fund, etc.). I'm feeling
> completely let down and skeptical of the investment community. I
> do like to follow Peter Schiff, Jim Rogers as their ideas make sense
> to me.
>
> Someone made money: shorting oil and commodities, long on US dollar,
> shorting DJIA and TSX, etc. in last 6 months. I'd like to get some
> professional advice that makes me one of those making that money
> by making smart aggressive bets (not for the major part of portfolio
> of course)!
> PS- read Nicholas Taleb's "Black Swan" and found it very heavy going.
> I was hoping for some specifics of how he exposes himself to the
> huge winning opportunities (and the majority of his portfolio is
> very safe he says)- the book never contained any specifics. Does
> anyone know what he invests in?
Mar 5 by Anthony Faiola
WaPo - As World Trade Plummets, Bustling Ports Stand Idle And Foreign Workers Track Back Home
Singapore
This shimmering city-state was the house globalization built. When world trade boomed, Singapore's seaport at the crossroads of East and West became the Chicago O'Hare of freighters and supertankers. Singapore Airlines took off despite serving a country with no domestic air routes. Nearly everything manufactured here is made for export. One out of every three workers is a foreigner.
But as the world enters a period of deglobalization, Singapore is a window into the reversal of the forces that brought unprecedented global mobility to goods, services, investment and labor. With world trade plummeting for the first time since 1982, the long-bustling port has become a maritime parking lot in recent weeks, with rows of idled freighters from Asia, Europe, the United States, South America, Africa and the Middle East stretching for miles along the coast. "We're running out of space to park them," said Ron Widdows, chief executive of Singapore-based NOL, one of the world's largest container lines.
Thousands of foreign workers, including London School of Economics graduates with six-digit salaries and desperately poor Bangladeshi factory workers, are streaming home as the economy here suffers the worst of the recessions in Southeast Asia. Singapore is an epicenter of what analysts call a new flow of reverse migration away from hard-hit, globalized economies, including Dubai and Britain, that were once beacons for foreign labor. Economists from Credit Suisse predict an exodus of 200,000 foreigners -- or one in every 15 workers here -- by the end of 2010.
Singapore's exports collapsed by a stunning 35 percent in January, mirroring much of the rest of Asia. The export boom here was tied to credit-fueled buying sprees in the United States that stopped abruptly and may take years to return, if ever. Manufacturers are grasping for a Plan B. But none of the options -- mining domestic markets, or trying to tap consumers in still-growing China and India -- offers a truly viable solution. Adding to fears of a years-long depression for exports is a rising tide of trade protectionism in countries including neighboring Indonesia.
The scene in this port city -- along with a glimpse inside two of its reeling neighbors in export-dependent Southeast Asia -- illustrates the ebbing of a golden age of trade, innovation, wealth accumulation and poverty reduction through globalization.
"The collapse of globalization . . . is absolutely possible," said Jeffrey Sachs, a noted American economist. "It happened in the 20th century in the wake of World War I and the Great Depression, and could happen again. Nationalism is rising and our political systems are inward looking, the more so in times of crisis."
However, like many other cautious people, I worry that the U.S. Dollar will resume it's decline against the Swiss Franc, the Aussie, the Loonie, even the Euro.
If this occurs, capital preservation would seemingly require the purchase of currency ETFs like FXF, FXA, FXC, or FXE respectively. I believe they pay a monthly dividend too, based on the interest rates in the particular country.
Wisdom Tree offers currency ETFs for countries like Brazil and India, but the last time I checked dividends based on local interest rates were only paid on a YEARLY basis.
The other logical alternative is hard assets like oil, precious metals, various commodities, etc. Toward that end, for fun, I bought my first 1 oz U.S. platinum coin and my first 1 oz gold Canadian maple leaf at a local coin shop. The mark ups are higher than I'd prefer but I take it such coins are in high demand, particularly, the platinum coins.
You are absolutely right that the collapse left most professional advisers looking foolish. Which is, I think, why sites like this are flourishing.
There are a lot of cheap stocks with good prospects currently trading in Canada. If you pay close attention to cash on hand and the quality of the management you may be able to find real bargains. But do your due diligence, ask questions, phone management: in this environment your own judgment may well be as solid as most professional advisers'.
The Canadian Lonnie has been falling since christmas and it has nothing to do with a plunge in commodity prices.
The Lonnie already was hammered back in september from falling commodity prices.
What is causing the Lonnie to drop lately is the Canadian Federal Governments insistance to continually drop the Bank of Canada prime lending rate presently at 0.5 %.
This is probably as low as they can go with that.
Watch the Lonnie rally hard over the next 18 months while the feds are powerless to stop it.
Yes the Lonnie is commodity driven and the depressed commodity prices are already priced into the Lonnie.
And when commodities do take off they will take the Lonnie with them.
The is PowerShares DB Agriculture Fund (DBA)
25% - Corn
25% - Wheat
25% - Soy beans
25% - Sugar
Where's the rice? I, like the rest of the world eat more rice than either corn or sugar.
I just bought some:
ELEMENTS ETN - Rogers International Commodity Agriculture (RJA)
It is more realistic.
Wheat - 20.06%
Corn - 13.61
Cotton - 11.60
Soybeans - 8.60
Soybean oil - 5.73
Coffee - 5.73
Sugar - 5.73
Live cattle - 5.73
Rubber - 2.87
Lumber - 2.87
Lean Hogs - 2.87
Cocoa - 2.87
Soybean Meal - 2.15
Canola - 1.92
Orange Juice - 1.89
Rice - 1.43
Oats - 1.43
Azuki Beans - 1.43
Barley - 0.77
Creasy Wool - 0.72
Also, please review:
"Six Agricultural ETNs Growing Like Corn"
www.thestreet.com/stor...
Don't forget net trade receipts with that country just to the south. The fall in exports to the U.S. have also caused a drop of Loonie.
On Mar 07 07:01 PM Graham Burge wrote:
> As a Canadian i would like to explain something about the Lonnie.
>
> The Canadian Lonnie has been falling since christmas and it has nothing
> to do with a plunge in commodity prices.
> The Lonnie already was hammered back in september from falling commodity
> prices.
> What is causing the Lonnie to drop lately is the Canadian Federal
> Governments insistance to continually drop the Bank of Canada prime
> lending rate presently at 0.5 %.
> This is probably as low as they can go with that.
> Watch the Lonnie rally hard over the next 18 months while the feds
> are powerless to stop it.
> Yes the Lonnie is commodity driven and the depressed commodity prices
> are already priced into the Lonnie.
> And when commodities do take off they will take the Lonnie with them.
On Mar 06 01:14 AM ScottEX wrote:
> You think about it, 11 million people working for a pittance, to
> build America, and save the wealthy vast amounts of money on the
> work nobody wants to do. How about the 52,000 account at UBS. Do
> you think there might be a little more tax leakage there? Your logic
> is astounding.
On Mar 07 11:36 AM comox wrote:
> Jay- thanks for taking the time to reply. I'm invested in Canadian
> resources now, impatiently waiting for the coming commodity resurgence,
> and still taking some downward hammering. Of course that all hinges
> on this China/US recovery discussion.
> Conventional investment advice did nothing for us leading up to this
> meltdown, and in general the commentators and advisors missed this
> completely (including some very smart people: Eric Sprott of Sprott
> Funds, Tom Stanley of Resolute Performance Fund, etc.). I'm feeling
> completely let down and skeptical of the investment community. I
> do like to follow Peter Schiff, Jim Rogers as their ideas make sense
> to me.
>
> Someone made money: shorting oil and commodities, long on US dollar,
> shorting DJIA and TSX, etc. in last 6 months. I'd like to get some
> professional advice that makes me one of those making that money
> by making smart aggressive bets (not for the major part of portfolio
> of course)!
> PS- read Nicholas Taleb's "Black Swan" and found it very heavy going.
> I was hoping for some specifics of how he exposes himself to the
> huge winning opportunities (and the majority of his portfolio is
> very safe he says)- the book never contained any specifics. Does
> anyone know what he invests in?
I sold out of MPT.UN (on Toronto's TSX) years ago. I'd become unclear if they have too much financial risk. When they just had the Cardinal power generation they were easy to understand, but then...,
For Canadian resource, mid-small cap I really like CLL or Connacher. I happened to go to Business school with one of their VP's, though I have never spoke to him since then. They are a smaller oilsands play that bought their own nat. gas supply and a Montana refinery for their heavy oil. They have cash on hand, loads of reserves, and they consistently develop on time and on budget. I own it. See you in 2010 Vancouver!
On Mar 07 11:36 AM comox wrote:
1. World growth is collapsing. This isn't hyperbole, but a sobering fact. The International Monetary Fund can't downgrade its global growth estimates fast enough as the credit crisis overwhelms economies as diverse as Ireland, Japan, the United Arab Emirates and the US.
Asian governments are increasing spending to soften the blow from falling asset prices, consumer spending and manufacturing. The European Central Bank is struggling to keep up with the region's plunging economy.
The trillions of dollars of wealth being lost as markets plummet are depleting public coffers and damaging consumer psychology. It's not a good environment for any government hoping for a revival in global demand.
2. China's key customer is in hiding, indefinitely. Just when you thought conditions in the $US14 trillion ($22 billion) US economy couldn't get any worse, they ''deteriorated further'' in almost all corners of the country over the last two months, the Federal Reserve said in its regional business survey.
Wang Hanmin, a sales manager at Yixing Bochangyuan Garments Co. in Jiangsu province, spoke for many this week when he said exporters are facing a ''life and death'' crisis. Exporters are so worried that they are calling on the government to weaken the yuan after the biggest slump in overseas sales in more than a decade.
One thing is for sure: The US consumer isn't about to help China out of this dilemma.
3. A lack of tools. It's important to remember that the 4 trillion yuan ($910 billion) spending plan unveiled in November was more spin than reality. Much of it wasn't new, but a tally of existing spending efforts. They were never going to boost a $US3.3 trillion economy anyway.
China's almost $US2 trillion of currency reserves would seem to give the nation considerable policy latitude. Yet China's vast economy lacks the financial infrastructure to get the bang it needs from its stimulus in yuan. Would building more roads, bridges and dams do the trick?
''8% GDP doesn't really tell you anything about job creation,'' says Stephen Green, Shanghai-based head of research for China at Standard Chartered Plc. ''Many of these projects are not particularly job-intensive.''
The spending will help, but such projects didn't propel growth as hoped over the last 30 years. Exports did.
4. All those US Treasuries. Financing loads of new projects could prove dicey, even for cash-rich China. Any move to draw down $US696 billion of US government debt could leave China with major losses and prolong the US recession.
That leaves domestic lending institutions. If China wants to avoid a Japan-like bad-loan crisis, or something far worse, it has to be careful about massive public-works projects with questionable economic benefits.
Of course, there's the ''official'' gross-domestic-product figure, and then there's the real situation in the most populous nation. The double-digit drops in exports among China's biggest trading partners in Asia show how bad things are getting. Offsetting those trends won't be easy and it won't be cheap.
5. Rebalancing takes time. Just as the US needs to become a nation of savers, China needs more consumers. That's a destabilizing, decade-long process that requires the creation of national safety nets and more education and health-care spending.
Reverse migration
Making that transition would be a big enough challenge with a healthy world economy. Doing it while Group of Seven members are in recession and developing Asia is slowing rapidly will prove extraordinarily difficult.
Wen wasn't exaggerating yesterday when he said China faces its ''most difficult'' year of the past 30. How much China's export collapse is hurting can been seen in the 20 million migrant workers who are suddenly unemployed. The risk of social unrest is higher than at any time since 1989, the year of the Tiananmen Square protests.
China's top-down system has worked extraordinarily well in recent years. It's still a stretch to think the country can turn its economy upside down in this ever-worsening environment.
Wen says China needs to ''reverse the economic slide as soon as possible.'' Too bad officials in Beijing think their work is largely done. It's not, no matter what the official spin is.
business.smh.com.au/bu...
On Mar 06 12:11 PM silverfox wrote:
> If you want a play on a currency go short on the japanese yen.<br/>I
> beleive this currency is facing an immenent crash.
> Japan is deep in debt and faces many problems they simply can not
> resolve.
> yes bet on the yen crashing going forward.