Monday March 27, 2006 - 11:22:59 GMT
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Black Swan Capital - www.blackswantrading.com
Be careful what you wish for...
‚ÄúIf you don't know where you're going, you'll end up somewhere else.‚ÄĚ
Be careful what you wish for, it may come true.
From the BBC online:
‚ÄúThe People's Bank of China predicts that the nation's economy will expand by 9.2% in the first quarter of 2006, falling to 8.7% in the fourth.
‚ÄúChina's economic boom is being led by a surge in exports.
‚ÄúAt the same time, Beijing is putting more efforts into increasing domestic consumer demand.
‚ÄúA growing middle class has developed in the main eastern cities, but the challenge for the Chinese government is to expand this new wealth across more of the vast country.‚ÄĚ
Former US Treasury secretary and still president of Harvard, Larry Summers, quoted in the Journal:
‚ÄúIn remarks prepared for delivery in Mumbai, India, Mr. Summers said China, Taiwan, Russia, Thailand, India and other countries with significant reserves should consider ‚Äėmore aggressive investment -- either in support of imports that have a high social return or in a much richer menu of international assets.‚Äô‚ÄĚ [Our emphasis]
And of course we have US senators and the Treasury pressuring China to open their market (despite the excuses; it‚Äôs still ‚ÄúCommunist‚ÄĚ China with closed markets) and let the currency seek its place in the world of free-float.
Let‚Äôs say Mr. Bernanke raises interest rates again, as expected. And let‚Äôs say a bunch of people in the market still believe the yield curve means something‚ÄĒand is pointing to recession ahead. And let‚Äôs say the US gets what it‚Äôs whishing for, a revaluation of the yuan. They may get even more than that if a yuan revaluation sets the stage for China, Taiwan, Russia, Thailand, and India to take some of Larry Summers advice and reallocate some reserves out of Treasuries into seemingly more efficient uses.
This we think is the scenario that could lead to a leg-down in the buck. And it seems the yen would be the way to play it‚Ä¶
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