User 143167

Dollar-Equity Correlation: Roubini's Got It Wrong (Again)

There is huge leverage going on this year, not through the brokers marginal accounts, but from the government, and I am not just talking about the US government. Every government is trying to load private debts on their own balance sheet and finance that with new bills printed (which are debts).

As a whole, there is HUGE releveraging in the world now, not deleveraging.

The Dollar's Decline is Slowing Down

So stupid. As far as I know, the country with its people holding most of the dollar assets are the US. If the dollar becomes worthless, it will be the American people who get hurt most.

Negative Interest Rates Aren't a Solution to the Crisis

If the Fed officially carries out a negative interest rate policy, the 0% real yield gold will be over $3000 in a blink of eye.

Valuations Ahead, Not Behind

$74 on 2010 is too good to be true. The highest S&P500 earnings were around $90, with 35 from the financials and 55 from others. The financials will have only half of their best earnings in 2010, that is $18, so the non-financial earnings have to be $56 to make it $74, which means the non-financial operating earnings will make a historical new high in 2010! Day dreaming!

Low Inflation Concerns to Serve as a Launching Pad for Stocks

The headline CPI at the year end with current oil price unchanged will be 3%. If the Fed does not do anything, the negative real yield will soon make itself into an asset bubble and inflation by releveraging.

Writing CDS on U.S. Government Debt: What's the Point?

No, it is not speculating. The US government debt CDS is priced in Euro. Its meaning is quite clear, even though the government can always avoid a default by monetarizing its debts, its currency will have to devaluate as a result. If the government thinks the risk of the consequency of a currency plunge is larger than a debt default, it may eventually choose to default (like Russians did in 1998). Either way, you get protected by CDS contracts denominated in a foreign reserve currency like Euro.

Bears Might Miss a Remarkable Recovery

If your argument about disinflation helping purchasing power is true, you should see the US consumers' purchasing power at its peak in depression, didn't you?

Oil Spike Drags Market Along

The drop of crude inventory of 8.4mm barrels was only due to a drop of crude oil imports of exactly 8.4mm barrels last week. That means the final demand for oil was basically unchanged. However, the stupidity of the market always amazes me as people simply attribute the drop to the rising demand.

Jeremy Grantham on Speculative Rallies, Fair Value and Overheating in China

The Chinese GDP numbers are for real, mostly. The problem is that GDP does not represent wealth formation. The way China builds up its GDP by fixed asset investment is to " build one road, destroy it, repair it, then destroy it again, and finally build it again". This will boost the GDP numbers, but not good in wealth formation.

A big portion of China's GDP are ineffective and just serve to create jobs. The alternative is to build a 100million army to employ all those jobless workers, but that will upset the western world. Therefore, 8% growth is a MINIMUM in China to keep unemployment from rising in the next decade, after that, Chinese population peaks and the economic growth will slow down naturally.

'The Fed's Exit Strategy': Duh

Bernanke is avoiding the hardest question, what will he do if both unemployment and inflation rates are high, a.k.a stagflation scenario, which is a checkmate to him.

So his strategy is simple avoiding talking about it. Otherwise, the Fed will have no problem to drain the liquidity if the economy and employment are strong.

This Economy Is Getting Uglier

If China's economy goes up by 14%, you will have a stagflation.

Yes, I know you guys think that call is crazy. But look out, China has HUGE room to leverage up its system. They just did not do that. As now they are in the panic mode, everything could happen.

Count the M2 in China, it is 52trillion RMB!, equivalent to $7.5trillion. What is the M2 in America? $8trillion, no bigger margin there. And you think the RMB is way undervalued? Wow, those money will blow the world if they throw them out. Watch out!

Interview with Nariman Behravesh: The Big Declines Are Over

The Global Insight is that we can inflate our way to prosperity.

Lessons on a Busted Move in Bonds

All the reasons the author referred to are actually positively intercorrelated. That means with one gone, everything will vanish together. Therefore this is nothing fundamental, but all about sentiment and momentum which are usually fragile.

Why High Inflation Will Not Take Hold

You neglected three important points:
1, IT development makes people in modern society obtain information much much faster they did in the past. So inflation expectation could actually move back and be priced in much quicker too. This increases the volatility of almost every asset prices, so it will pass onto CPI, PPI much quicker too.
2, Commodities nowadays become a popular choice of asset that most of the retail investors could access to. That was not the case in the past.
3, D&S is much less impacted by the US economy going forward due to globalization and the rise of EM economies.

U.S. Trade Deficit Narrows: Which Country Is Hit Hardest?

When the economy tumbles, it is getting even harder to rid the cheap imports from China.