The Great Revalue of Yuan, and the Great Devalue of Dollar ..

Hi Everyone,


We at another great cross road, where will go from here, recovery or double dip... Alot of bad news start to roll out to the market ...

So are we in correction in the stock market or this is a double dip in the stock market? Only time will have the actual answer.

From my view, I think we are in the proccess of another slow dip in the economy, this dip will not be a fast dip like 2008 but is be a slow and choppy dip and might last until 2012 ... there will be rebound along the waybut the trend will be debt deflation which is quite gloomy when come to consumption in US economy ...

Before going forward, I am not an economist, and my highest education is only high school, so you all in risk in reading my blog , please used your own judgment from here .....

Due to the expansion in credit in government , private sector and the public sector, the current crisis ignite due to over extend of credit expansion and it is coming to end which create asset bubble. The right way to correct this mistake is to wind down credit in all sector, cut spending and repay debt until it come to a sustain level.

Depression is where we fixed problem, that is why we will have deflation during depression. Reducing debt(credit deflation)which will lead to deflation and saving which will automatically make value of money increase in term of value of product.

Anyway, the US government have so far did not fixed any problem in the economy, what they call "remedy" is actually a poison relieve aid which give a false feeling "feel good" but that is not cure it will bring greater problem from time to come ...

The "feel good" pill is waning and look like we might start the double dip sooner then expectation ..


Ok let jump into juice ...

After Trillions of dollar of stimulus , we are on the way back to 2008 but at slow pact. Everyone said the Yuan revalue is the cure the world recovery, how can every economist come this conclusion...what people say is that when yuan gain strength the purchase power for the chinese increase which will result greater consumption... now everyone have to be careful when going forward with this idea.

Yuan revalue, will lead to fast inflation and at the same fast devalue of major currency, the yen,euro and dollar. In this scenario I see the increase purchase of China but at the same time decrease purchase power for major economy.So it is like double edge sword

Inflation together with Higher rate for Bond.

For time to come the Treasury will have to rise and I think the treasury is in it final phrase of it rally cause it is not sustainable cause it just not sustainable for the government to expand deflicit without limit soon all this will have to end.

Starting a Deficit is easy but ending it is like killing you alive it is always a hard choice for government to reduce deficit.

By the year 2011 - 2012, the government will have problem in refinancing the deficit as the treasury will have to raise due to abundant supply treasury and higher risk for accumulating treasury.

It will not be a pretty picture when that time arrive when the government still accumlate deflicit and at the same refinancing their debt which will result more treasury auction.

We will have more and more treasury auction and at rapid pact then 2009. So i am not a bull in treasury no matter what the market say, the higher it go the more i am going short it.

The Dollar will decrease in value at the rapid pact from now on, you can look at dollar when compare to value of Gold and silver, and dollar to oil . IT is getting more expensive to buy gold or oil in dollar or in any currency.

So we have inflation in US in rapid pact from here. The chinese revalue yuan and the raise wages in chinese will have great impact inflation especially the soft commoditites like grain, cotton coffee, etc. They will travel more so the oil consumption will raise.

Why this soft commodities, because the Low wage earner will have more purchasing power, but that does not mean they can effort to buy brand items..this will eventually happen but not at rapid like US would like to see. They will eat better food wear better cloth, drink more expensive drink eat better restaurant.. but that does not mean they can efford to buy house or car with US$200 -250 dollar wages per month, they will from time to come, but the chinese have a habit of saving to buy and not borrow to buy .... so it will alot of frustration to lot of economist.

The Chinese government is trying to control house bubble, I said not it is a bubble, I think the chinese just want to control the speculator so as not to make house unaffordable to raising chinese.. which will be good for the Chjina economy go forward. But for now it will create an hiccup in the economy growth.

At the sametime the consumer in US will have to pay a higher product cost for thing make in china or from other part of the world, but dose not mean it is cheaper to make thing in USA or the jon will start to shift come to USA, it might happen in the distant future but not this year or next years or the next five.. so the consumer in USA will likely to be able to spend lesser and lesser from now on.

The China is changing dollar peg policy to a basket policy,this will not have much impact to Yuan value but it will have greater impact on dollar accumulating pact and they will be more diversify when ome to their reserve.

By buying lesser dollar with Yuan, it will low dollar which in reutn the chinese have less dollar to buy the treasury which will result in raise Treasury yield for time to come.

So it is great likely that this raise yield in treasury, devalue of dollar and faster inflation at the sametime raise tax ... did i say raise tax? YEAH!! raise tax ...Recall bush's tax cut ... yeah this is coming to end, this will have great great impact on consumer althought it will have positive in tax collection and the local government will have to raise tax or collect more fee from US citizen, It will reduce the gobernment pressure and some monthly deflicit but evenrtually the governemnt will find lesser and lesser tax collection as the consumer purchase is greatly reduce from the above event.

which the market in the bullish economist will jump out of all the rabbit to said it is the recovery with the tax collection ... Which I am expecting will have short impact in the market, but I will leave that topic for the future ..

With the dollar devlaue.

I believe every government and central bank around is aware that the dollar is under long term devaluation and I think alot of central bank have and will start to releease more dollar from their collection and this will intensitfy with Yuan win policy ... so I beileve we might witness a fast appreciate of inflation...

Ok, ... will be back for more

Obama and USA hidden fear start to re-emerge... this time is the reverse thrust ...

Hi everyone,

this week I am in writing mood and have a few interesting thought and would like to share with you guy..


The economy as we go from here will choppy down trend .

The Mexico gulf oil spill is the biggest blow to obama simulates planned and thing will get worsae from here after a honey mood rebound in the world market ..

I do understand the economy data from here will be still look ok but I anticipate that thing will start to change from next month onward.

Let jump into my thought on the economy as a big picture.

Why do I start to become bearish from here.

1) The inventories re-stock phrase coming to end.
now the re-stock inventoies is due to previous government sitmulas package on car "cash for Clunk" the housing credit and another sitmulas which result in short term consumption as the result the inventory is quickly depleted. All this program including QE is coming to end or have end, so all the rosy picture is coming home to roast and economy should be back where it right belong which is fixing the problem with a correction.


2)the obama house credit and benefit and job benefit is getting exhuast and coming to end too.. I beleive some of this will become foreclose problem... so the picture in the housing is not looking good.

3) the censure temperoary employment is coming to end too ... this is a short boost to the job market and will have great effect when thisis coming to end ...

4) The whole world is start to rolled back the sitmulas measure to stream down inflation. Europe start, the korea and everyone is starting to rise interest or control groeth... only USA did not have that planned in the mind yet.

5) Mexico oil spill, will be a major and contributor to pr-long trade deficit anf jobless for time to come and I think it will be more serious then everyone anticipated. althought the clean up job also result in some employment but it will not be a quality pay...What I worry is the chain reaction from this event..

6) Fannie Mae and Feddie Mac, this is two insitute is gewtting out of hand with bad debt and will going to cost more problem in the housing market rather then fixed the real problem.now this mortage gaint . I have found this interesting article the link is here http://www.nytimes.com/2010/06/20/business/20foreclose.html?pagewanted=2&src=busln

of all the employment I think both Fannie and Feddie is also another government puppet to create job in maintaining the foreclosure house .. The End result will more tax prayer money and loses. Which no wonder both need a fast injection from the government, cash is running fast ...


============

US recovering with oil spill ? huh? eh? Not so fast ...

Hi eveyone one,

I have being travelling and try to take some to update this which I think it is important for everyone to take note of

Bp oil spill is world disaster . It will impact alot of thing job, food and energy.

Obama have freeze all of short drilling. ( This part is already 3 week late but i will put this view for future flash back.)

For job part:
there will alot of people out of job for quite sometime and should not bold well for the job figure in US the next few quater.
(Like the media have reported, business in beach, resturant, hotel and alot of service and oil fishery industry around gulf of mexico will be greatly effect. I think you can name it all there) There will be hang over effect in the economy

For food and fishery
Food chain will be effected and I thik this will also effect the world climate which i think we will extreme weather throught USA or North america in the next few quarter, we will have food supply problem.

And there is Hoof-and-mouth disease out break in Japan...http://www.upi.com/Business_News/2010/06/10/Hoof-and-mouth-disease-spreads-in-Japan/UPI-15781276222027/

The hog is already in tight supply and I think we should brace for a nice run soon.


About USA recovery, eh?
There is a;ot of noise that the economy is recovering, so it is real? Well i betting the best run US stock market have already done for now , so I will on the short side of the market... Allen but not for Dax, recall the past news letter, which i wrotethat i am very bullish in euro exporting economy like Dax, due to the weakeness in Euro, the weakness in Euro come in a great timing for Europe while the world economy is re-stocking inventories and expanding infastructure . so the dax should be doing good for a while longerbut not for debt ridden economy like PIIGS ... now the Ireland is doing so I think the recovery in ireland will good and sustainable one, everyone should look to invest in this economy for long term play.

But not for USA, what i see the situation getting worse, the economy will immediately collasp without the government life line, and what is making me pessimistic is US consumer having credit expanding, instead of contracting...

So we now have consumer resume consuming credit and the government extending borrowing well.... this is very very bad. and if the corporate bond market revive, I am brace for the Armageddon scenario in US economy in the next 2-4 year from now

In Japan, there is high saving in consumer and japan is still having surplus, while the government borrow heavily from the world so I think overall the economy is still manageable but i did not mean it is good for Japan, I think Japan will soon face greece like crisis but right now the so the debt problem in japan is still manageable.

The us economy is 70% service industries, which mean is realable heavily on consumer service consumption which I see this is evaporating fast which we seeing why the jobless claim is still at this high 450,000 per week .... I don't think i see a recovery here.

Corporation continue to shedded of job while avaibale position is scare. and I don';t think the real umemployment in US is only 9.6% , I have being doing the math, the number don't fit. I think the unemployment should be about 15-20% but anyway, we will use the "official" so the market will " feel good ."

Since 70% of US economy is about service, so i think we will before the sefvice revive, we will need to see, the jobless claim turn negative with continue decline in number and new job added to the economy which i think we will still quite far from that situation. Where we are heading now is quite dangerous ... so I am bracing for a new crisis which should occure in the next 3 quarter from now ....


So how do i planning to manage my port folio.

For Gold, I will be dip buyer, my accumulate target is US$1190 - US$1210, I love all the short seller, they just give me opportunity to buy the gold at cheaper level, which i believe it is cheap when compare the gold price which should at higher level in the time to come, I will take the deliver of the contract I am buying now... paper gold is just fiat currency .

For oil, the price at this level is of courese reason and I think US$70.00 should be a good entry point and 75 - 78 should be a good target for selling short term play.

for longer term play, I think US$68 - 80 should be a good range for 2-3 month holding


For S&P
I think my target of enter short US$1090 - US$1100,

short term play in S&P
Enter short at 1090 - 1100 range (or maybe 1086 if you don't a few point lose) and take profit about 1050 - 1060

for longer target well i think 800 point should be target, souind like impossible but I think this is a conservation target i have in mind.

Soft commoditites.
With so many uncertainty in the environment and climate, and the supply is at a tight range, so I think this a be a dip buy... I am now paying attention to hog,

I am buying into the dip.

That should cover for now.

Have a good trade and good luck everyone




I will be back for more....