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Hong Kong, China, And The Nightmare Of Forex Piles

Apr. 14, 2018 8:07 AM ETUUP, UDN, CYB, CNY, USDU, FXCH11 Comments
Jeffrey Snider profile picture
Jeffrey Snider

Very early on in the turn, I mean very early, you could already tell there were substantial problems underneath. By the time CNY started lower, against all expectations, there had already been serious signs of trouble in China for months by then. In that initial seemingly minor drop in early 2014, the PBOC's actions belied a stable system. If you knew what to look for, you could see a central bank struggling very hard to maintain order rather than the capable and accomplished technocratic institution as it was always described (and somehow still is).

Chinese officials would go through several additional programs throughout the rest of 2014 (I won't list them here) to try to rescue first their monetary paradigm and second their economy thereafter. Obviously, this flew directly in the face of conventional wisdom which holds that the amount of "reserves" on hand act as insurance against just this sort of thing. The larger the pile of them, as China held the largest in the world, then the more of a guarantee.

Yeah, no.

It's a difficult concept to grasp because the way that convention is written seems perfectly logical and intuitive. But that's not how these things go. The more "reserves" you have it instead suggests just how much of a potentially massive problem you could run into beyond your grasp, not an unassailable solution.

About a year after I wrote that initial assessment, by March 2015 CNY hadn't really progressed all that much farther downward. It didn't at least on that basis appear as if things could get so far out of hand. Still, there were only growing signs of the same big negatives. In what sure seems in hindsight a last-ditch effort, from that point forward for a length of almost 5 months the PBOC enforced

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Jeffrey Snider profile picture
As Head of Global Investment Research for Alhambra Investment Partners, Jeff spearheads the investment research efforts while providing close contact to Alhambra’s client base. Jeff joined Atlantic Capital Management, Inc., in Buffalo, NY, as an intern while completing studies at Canisius College. After graduating in 1996 with a Bachelor’s degree in Finance, Jeff took over the operations of that firm while adding to the portfolio management and stock research process. In 2000, Jeff moved to West Palm Beach to join Tom Nolan with Atlantic Capital Management of Florida, Inc. During the early part of the 2000′s he began to develop the research capability that ACM is known for. As part of the portfolio management team, Jeff was an integral part in growing ACM and building the comprehensive research/management services, and then turning that investment research into outstanding investment performance. As part of that research effort, Jeff authored and published numerous in-depth investment reports that ran contrary to established opinion. In the nearly year and a half run-up to the panic in 2008, Jeff analyzed and reported on the deteriorating state of the economy and markets. In early 2009, while conventional wisdom focused on near-perpetual gloom, his next series of reports provided insight into the formative ending process of the economic contraction and a comprehensive review of factors that were leading to the market’s resurrection. In 2012, after the merger between ACM and Alhambra Investment Partners, Jeff came on board Alhambra as Head of Global Investment Research. Currently, Jeff is published nationally at RealClearMarkets, ZeroHedge, Minyanville and Yahoo!Finance. Jeff holds a FINRA Series 65 Investment Advisor License.

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