Morning Note, Copper, China
As mentioned yesterday, I believe the CRB index must hold the 200 level (and I believe it will) in order to give the rest of the market a fighting chance to recover.
Maybe it was comments from a Chinese official today that said their economy will grow 8% this year but commodities are bouncing with copper in particular at a one month high. We have to highly doubt an 8% figure but maybe it implies that China will do and spend everything possible in order to get to that 8% level.
The RB of Australia unexpectedly kept rates unch at 3.25% as they believe the current level in conjunction with “substantial fiscal initiatives… will provide significant support to domestic demand over the period ahead.”
What does Bernanke think about having the same monetary policy as Japan and sees what other central bankers are doing on the other hand? With our govt’s response in all areas to our crisis, I was hoping history would have taught more.
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March 3rd, 2009 at 9:38 am
What does Bernanke think about having the same monetary policy as Japan and sees what other central bankers are doing on the other hand? With our govt’s response in all areas to our crisis, I was hoping history would have taught more.
—
You could explain this better, Barry. I think in the past you’ve posted that you don’t like the tinfoil hat/goldbug crowd, and I agree. Do you think that the Fed should be more obsessive about inflation, even at the cost of a depression that nobody will be able to pretend is just a “bad recession?” I hope that’s not your position, because I see it as one for lunatics, old fossils, and semi-morons.
March 3rd, 2009 at 9:50 am
Interesting comment from Nate Silver @ fivethirtyeight on the markets guyrations.
http://www.fivethirtyeight.com/search/label/econometrics
March 3rd, 2009 at 9:51 am
Er,,,should have gyrations instead of guyrations…..HMMMMMMM gotta think about that
March 3rd, 2009 at 9:53 am
tCA – thank you for your earlier explanation re taxation and small business. Basically, you confirmed that I don’t have much to worry about. I have no problem with small business owners that make 250K+ paying a bit more in taxes. A 39.6% top rate didn’t seem to dissuade internet entrepreneurs in the 90′s.
March 3rd, 2009 at 9:53 am
frank, you will have a chance to see the lunatics, once plan after plan fails and we end up taking the BIG DIP, regardless. Buy Gold, Silver, and Booze.
March 3rd, 2009 at 9:56 am
BR said
What does Bernanke think about having the same monetary policy as Japan and sees what other central bankers are doing on the other hand? With our govt’s response in all areas to our crisis, I was hoping history would have taught more.
reply:
First, I’m not especially familiar with Japan, except to know their stock market and economy is inscrutable and will cause you pain and expense if you try to understand it or try to make money from either.
So far, the US hasn’t tried to institute a carry trade. I’m not saying they won’t, but it’s not here yet and probably won’t arrive. Secondly, Japan has numerous structural and cultural barriers to entry and barriers to efficiency. I’ve tried to learn about them in detail, but threw my hands up shortly after starting. They are also inscrutable and totally in conflict with a free market economy. The Japanese market will be a dog for decades more. Their balance sheet recession is only coincidental to ours, not a model of what will happen to the US. Japan is and always will be a mess. They are not and never will be a model for the US economy.
March 3rd, 2009 at 9:58 am
“Where is the post title and who the hell is Peter Boockvar? Are you trying to pull another bait-and-switch, Republican Ritholtz?”
_____________________
He’s the equity strategist at Miller Tabak. Barry has quoted him before.
March 3rd, 2009 at 9:58 am
JustinTheSkeptic Said:
March 3rd, 2009 at 9:53 am
frank, you will have a chance to see the lunatics, once plan after plan fails and we end up taking the BIG DIP, regardless. Buy Gold, Silver, and Booze.
comment:
Or just booze.
March 3rd, 2009 at 10:03 am
gimme another drink bartenderrrr………Just…………put it on the tab.
March 3rd, 2009 at 10:07 am
dead hobo, you are not “especially familiar with Japan”, yet you have the confidence to say “the Japanese market will be a dog for decades more”. LOL. Is it any wonder America is in trouble?
Americans don’t seem to realize that the Japanese and the Chinese are the dextrose bottle keeping the American economy alive. The moment those damned Japs and Chinks stop propping up our currency and stop loaning us allowance money to maintain our consumption-without-production habit, it will be chaos on our streets. Eat it.
And oh, by the way, it’s not Republican Ritholtz posting, but his ghost writer Peter Boockvar.
March 3rd, 2009 at 10:14 am
CNBC,
Then put a few bucks into the Japanese market and ride a roller coaster. It will go up sharply when no other market does. Then it will fall when no other market is. Mostly it will do nothing when other markets are doing something. The Japanese Central Bank might even loan you the money to make the investment. If in doubt, ask a Saleryman for advice.
March 3rd, 2009 at 10:15 am
CNBC,
Thanks for pointing that out. Totally missed that it wasn’t Barry!
March 3rd, 2009 at 10:24 am
The Chinese will have to sell dollars (among other currencies) to buy Yuan, to pay for their stimulus program. They have in excess of $1 trillion in foreign reserves. It should make their currency appreciate, which will act to ameliorate any stimulative effects of the spending, and runs the risk of severely devaluing their foreign reserves.
What a catch-22 this deleveraging presents to the world. China’s 8% growth expectation is about as laughable as AIG’s return to profitability.
March 3rd, 2009 at 10:29 am
Going Japanese= government support of zombie banks.
I thought Bernanke was supposed to be the ideal Fed chief due to his extensive knowledge about the depression. Maybe they should substitute him for someone who has great knowledge in the Swedish banking crisis, may I suggest the US become the 2nd country that has a foreigner as the head of the federal bank? Pick a Swede, they know how to clean things up.
March 3rd, 2009 at 10:31 am
Curmudgeon says: “The Chinese will have to sell dollars (among other currencies) to buy Yuan, to pay for their stimulus program. They have in excess of $1 trillion in foreign reserves.”
I’m not sure that in the current situation they have to worry about sterilization of their spending. Thir currency is already up more than 20% since the float. Last thing they want to do is accentuate that trend. They don’t have to sell any dollars to print yuan.
March 3rd, 2009 at 10:38 am
“They don’t have to sell any dollars to print yuan.”
Agreed. But then they run the risk of devaluation leading to inflation. They really are, like the US and the rest of the world, in a catch-22, so far as being able to control real outcomes through currency manipulations is concerned.
March 3rd, 2009 at 10:45 am
Re: Yuan
The Chinese currency is undervalued which has caused inflation in the past. They can afford to print money and just let the currency float up to avoid inflation.
March 3rd, 2009 at 11:05 am
“The Chinese currency is undervalued which has caused inflation in the past. They can afford to print money and just let the currency float up to avoid inflation.”
Then you’re back to devaluation of their foreign reserves, and their export-based economy suffers at the increased value of the Yuan.
March 3rd, 2009 at 11:46 am
I’m not sure I would put a lot weight on Copper being at “one month high”. If you stand back at look at the 1 year chart it looks like a market that has fallen hard and is simply chopping in a flat channel (“flatlining”). It’s sort of like the “Baltic Freight Index”….people were getting excited about the 100% rally in the index…not giving the context that it had fallen 90%. When a hard asset like a ship falls 90%, there’s basically no place to go but bounce a little bit. Afterall, shipowners can just idle capacity. It doesn’t necessarily mean that “things are picking up.”
I guess the point is that commodities may “stabilize” after their death dives, but it doesn’t mean that “demand is picking up.” It may just mean supply is tightening up a little.
In regard to Central Banks and the decisions they’re making…not sure I would give a lot weight to what other Central banks are doing. Wasn’t it a mere 8 months ago that the ECB was fretting over inflation and HIKED rates right into the teeth of an obvious recession/depression?
March 3rd, 2009 at 12:38 pm
Australia, with its Mandarin speaking PM, has firmly hitched its wagon to China. Demand is holding and they may not fall into recession let alone “depression.” Unlike the 80s or even 90s we are not the only game in town now. There is a giant correction underway in global trade. When it’s over Asia-EU trade and intra-Asia trade will be bigger and more valuable then then the Asia-West Coast USA pattern of the soon to be past. Does the Japan experience apply to the USA? I agree with other posters that it is not an adequate comparison. Japan remains a very closed environment – far more so than China, btw. Japan has probably reached the limit of development. It is truly anachronistic (hence its charm – to some).
March 3rd, 2009 at 1:35 pm
sinomania, i could not agree more.
“From a long-term perspective, the prospect of China becoming the world’s largest
economy, and India the third largest, within the next 10-15 years, represents a
return to the order which has prevailed throughout most of human history.
According to calculations by Angus Maddison5, from at least the beginning of the
common era until the early 19th century, China and India accounted for around
half of global GDP (see Chart 1). For much of this period China and India were
intact polities, had the world’s largest populations and were technological leaders”
China and India in the World Economy, Paper presented to the International Conference of Commercial Bank Economists, 7 July 2005
http://www.anz.com/documents/economics/ICCBEChinaIndia.pdf
March 3rd, 2009 at 3:38 pm
the weak.. become the strong… and the strong become weak…
(history repeats itself… again and again…)
the east is the new west… let’s learn Mandarin… soon.
March 3rd, 2009 at 4:13 pm
karen,
bought lots of fxi yesterday.
March 3rd, 2009 at 4:28 pm
ben, hope that works for you : ) i didn’t add to my fxi but restarted my favorite indian play, ibn.
March 3rd, 2009 at 5:28 pm
karen,
I’ve never owned any India or even looked at them just like a I never owned any China before recently. Maybe I will take a look.