Geithner to Get a Spanking in China

By John Schloegel

Treasury Secretary Timothy Geithner is in the midst of his visit to China.

This does not necessarily mean the currency crisis will be at fever pitch. We’ve already had a large move in a matter of days in key currency and interest rate levels. His well-covered visit may bring a “sell the news” mood for traders keenly watching the interaction between China and the U.S. The reality is that China calls the shots. The US does not.

For now, the vicious move is over. Trading in hard assets has been furious. Commodity prices, from ags to oil to metals, have been on a tear. This is a crowded trade in the short term. Yes, large budget deficits, out-of-control spending, and banana republic-like tactics have pushed the US Dollar over the edge. Commodity and Treasury prices now reflect those factors. For those interested in the intermediate to longer-term view, I suggest you wait for the dust to settle before loading additional anti-dollar plays. When Chinese officials pummel Secretary Geithner and the market sells off, it will be safer to re-establish your core positions. It may also make the administration wish they had sent the t-bond salesman-in-chief instead.

We still favor the following securities and would be a buyer on pullbacks: Market Vectors-RVE Hard Assets Producers (HAP), iShares Silver (SLV), Marvet Vectors Nuclear Energy ETF (NLR), PowerShares DB US Dollar Index Bearish Fund (UDN), CurrencyShares Australian Dollar Trust (FXA), iShares COMEX Gold Trust (IAU), Goldcorp (GG), PowerShares DB Agriculture Fund (DBA), PowerShares DB Commodity Index Fund (DBC), and Fronteer Development (FRG).

Take advantage of the recent surge to stand down, and feel good about your portfolio. Nothing goes straight up. Any sector or security can decline ten percent in a blink. With markets in a lather, the prudent trader knows to be cautious. There will be a time to join the fun; it’s just not now. Good Luck.

Disclosure: long many of the securities mentioned

Comments

[dybydx:]

reminds me of a skit on one of those night time comedy shows..

"last week, the stock market took a plunge.... especially hard hit? EVERYTHING! Bad news for anyone who invested in SOMETHING. the one safe haven? NOTHING! if you invested in NOTHING, cause u think NOTHING will do well in the future, good call!"

Jun 01 11:01 AM

[carey_jim:]

I propose a ban on Chinese restaurants until this currency mess gets under control.

Jun 01 11:40 AM

[RiskReturnO...:]

Finally, DBA is getting some primetime coverage. As I've advocated since the low $20's, DBA is best reflation trade going into the US summer season (Winter in Australia and Argentina). Now, the media has finally started to focus on US hurricane forecast. Volume is increasing and 2-3x recent average; very bullish for DBA until $30-$35. Watch China economic figures, T-Bill yield, and weak $ trend as continued support for DBA into June-July.

Jun 01 03:09 PM

[optionsgirl:]

I think this Bloomberg article sums up why the grains complex has moved the most in seven months, in a nutshell:

www.bloomberg.com/apps...

Jun 01 03:48 PM

[HaavBline:]

Why limit your totalitarian idea at banning Chinese restrurants? There are so much policy flexibility if US turn totalitarian.


On Jun 01 11:40 AM carey_jim wrote:

> I propose a ban on Chinese restaurants until this currency mess gets
> under control.

Jun 02 02:04 AM