# Haunting's economics blog



## haunting (20 June 2008)

...a dinner withChinese Vice Premier Wang Qishan 



> _In contrast to Chinese isolationism, Mr. Qishan noted that whenever China has been open, it has prospered. More than 1,000 years ago, China was an open and active trader. Then the country closed up and became internally focused. At the end of that period, they discovered that the world had passed them by. By opening up, the country's leaders realized that they could benefit from the advances the world had made._




We will be hearing a lot more from Wang now that he has been introduced. Between him and Paulson and all the deals that had been announced that worth tens of billion, what is not clearly reported is this - many are taking the view that Bernanke and Paulson are running out of option to arrest the economic problem facing the USA, that is, the threat of stagflation. Have they ever considered the possibility of the help coming from the Chinese? Yes, how about a Chinese bailing out? With US$1.7 trillion surplus in their coffer, the Chinese are well positioned to extend a helping hand here. If that's not enough, how about adding another trillion from the Middle East Oil cartel?

At this point while the news on the US financial front is bleak, but, ruling them out... I think, is probably not a good idea.


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## haunting (27 June 2008)

Check it out here. Two oil shocks, two recession. This time, it will be quite a miracle if a recession can be avoided. In fact, at this stage, whether there is an official acknowledgment of a recession or not, frankly is not that important. What matters is how soon the USA is able to dig itself out of the hole. Other than a recession, of course there's other worry the world has to contend with, for example, how is the USA going to cut down its debt? How are they going to pay back their debt to the creditors?

How about a devaluation of the US$?


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## haunting (29 May 2009)

Someone else's opinion and I think it makes sense - it will be a battle between the market vs the vested interests and the power that be... who you gonna bet?

_The US does not want confidence in the USD to collapse because it needs to run a budget deficit to compensate the loss of spending from the private sector. Lest the world forgets, it was the pullback in private sector spending from last year’s crisis that led to the world recession and shrinkage in world trade via a global shortage of USD liquidity. Last night, US officials indicated that during US Treasury Secretary Timothy Geithner’s visit to China, he will discuss how to boost China consumer spending and US consumer savings. 

The message will be simple.Threatening the USD will critically undermine the hard fought efforts to stabilize the world from the crisis.

China wants a stable currency for trade and investment purposes. A lower USD would erode the value of its USD assets. On the other hand, a higher USD would lead to a higher trade-weighted exchange rate via currency depreciation in its major trading partners. A higher euro against yuan would also raise complaints from a restive Eurozone. China indicated a couple of days ago that it is tackling trade woes challenging its economy via a stable yuan and boosting trade finance.

Eurozone officials do not want euro to strengthen above 1.40 because appreciation would tighten monetary conditions and offset the hard-fought easing put in place by the ECB. On the other hand, they do not like euro falling below 1.25 either because it could stress Eastern Europe, which in turn, would put strain on western
European banks.

As for Japan, the unwelcome sharp yen appreciation from the unwinding of carry trades during the global crisis has led to economic hardships. All in all, America does not want a USD crisis, Japan does not want more JPY appreciation, and China and Eurozone want stable exchange rates. The only issue now is whether the market is listening._


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## haunting (3 June 2009)

_...the Chinese have a “very sophisticated understanding” of the situation..._ ha!

Report #1

Report #2


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## haunting (3 June 2009)

Like this!

RG's comment "used" to be good. But not now. There's too much looking back without actually and critically analysing the situation back and then.

Back then, there was a global meltdown. 
Back then, there was a credit freeze, all international trades came to a stop still.
Back then, Japan, S. Korea's export plunged by more than 80% and everyone was panicking.

Back then, without the benefit of hindsight, everyone was fearing that was it - the really big****isgonnahitthefan!

That's why RIO made that deal with Chinalco.

That's why the bankers were pressing hard on OZL because back then, risk and capital were at a premium! A PREMIUM!

Without Chinalco's deal, RIO would not have recovered.

Without MM, OZL would have gone under. And most of its investors would have got nothing! Zilch!

Now, almost daily I am reading about craps such as pillaging of OZ land, etc. It's a lot BS and unrealistic rants coming from a bunch of so called "experts" hiding behind national interest telling their average readers China is robbing Australia clean.

It is not true! Without the exports of commodity to China, Australia would have been in deep **** by now. It would have endured two quarterly recessions by now and there is still no end in sight.

Without China's trade, there is nothing to talk about in Oz economy! Get a grip!

China bought up 50.8% of RIO's iron ore last year. If they are pissed off because of the blocking of the deal in the name of national interest (btw it's only 18%, and not a take over) and decided to switch over to Vale as a form of retaliation... watch RIO sink!

And watch Australia sink into recession in the next quarter and possibly many quarters after that.

This is what "national interest" will do for Australia and every Australian.

Get a grip!


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## haunting (4 June 2009)

... Deficits Threaten Financial Stability

_“Unless we demonstrate a strong commitment to fiscal sustainability in the longer term, we will have neither financial stability nor healthy economic growth,” - Federal Reserve Chairman Ben S. Bernanke said large U.S. budget deficits threaten financial stability and the government can’t continue indefinitely to borrow at the current rate to finance the shortfall. _

** coming so soon? Just as I was saying the rising yield spread is a sign that the market is forcing a brake on to his runaway QE train. His next move will determine if the current rallying equity/commodity market would continue. If the Chinese were to play ball, watch the US$ rebound to take away the punch bowl. Interesting time.


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## haunting (5 June 2009)

Long live the deal! More.

Fingers cross now and let's hope someone go tell the Chinese it's all just business and nothing personal. There's no need to retaliate by not buying from RIO, etc. The 195m break fee is not chicken feed by any standard... so, it's all okay, friend again?

...and play nice?


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## haunting (6 June 2009)

As a follow up to my earlier view on the US$/DXY index, here's the chart. What's next?

1) expect a pause after the succession of gaps, but if the rebound were to continue, there's a every chance that the other competing, riskier assets such as equity and commodities will be in for some "adjustment".

2) the local equity market in the last few days kind of remind me of those halcyon days where everyone is feeling and acting like a winner... no shorts, all longs, sure bet and can't lose?

Quite a strong contrarian signal, I reckon.


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## haunting (10 June 2009)

Wither the green shoot?

More than a jilted lover's spat?

...and the heat is on!

_"For Chinalco, the one-time failure in international trade will soon fade. Yet for Rio Tinto, it will take years to overcome the lost honesty and tainted image," it added..._ this quote from Xinhua is troubling. If I am running RIO I won't take that lightly. But since I am not, I will watch with interest on how the Chinese will play out their "revenge of a jilted lover". The show is on, have fun.


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## haunting (11 June 2009)

...the reaction!

_But reports out of China yesterday suggested private Chinese steelmakers have gone against CISA by inking annual contracts with Brazilian iron ore giant Vale. Tying up almost 10 per cent of China's expected imports, Vale has agreed to supply more than 50million tonnes of iron ore in 2009 to more than 38 small Chinese steel mills, according to a report in the Beijing News yesterday..._


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## haunting (11 June 2009)

Chinese lessons for Chinalco...

_...a key reason the Chinalco deal failed was that Chinalco forgot the traditional Chinese way of doing business. When westerners, like myself, begin doing business in China, they are told to let relationships mature and take it step by step. Don’t try and achieve the whole deal in a few meetings..._ 

I hope he is talking sense here, expecting Chinalco to spend 20 b as a white knight giving up what a usual major share holder is entitled to if they were to be any corporation other than Chinese.

In any case, to the Chinese, the RIO board has always had the choice of not shaking hand with Chinalco when the deal was being negotiated at the beginning. Unfortunately they did. And that's why Chinalco is so pissed and is now asking for a RIO board overhaul and is accusing RIO as "dishonourable".

To openly use the word dishonourable in describing RIO's board, I think carries a lot of negative implications. How they will play out only time will tell. I see many are rushing to buy RIO to get into the rights issue of 28.80... well, it sure looks cheap but, here's a scenario/question: let's say RIO/BHP now jointly produces 40% of the iron ores but the Chinese are intentionally cutting back their long term contractual purchases with them, instead they opt for Vale because they see Vale as a more honourable supplier than RIO, what would that do to RIO/BHP? And their stock price?

If the Japanese and S.Korean are unable to absorb all their production, will they be forced to flog it cheap in the spot market?

The Chinese has spent the last few months hoarding all kind of commodities, esp the iron ore. With the steel industry right now facing consolidation, one can expect their future demand for iron ore be much reduced with the purchasing authority more concentrated, making them probably the largest force behind the demand side of the equation, with RIO/BHP the largest force behind the supplier side, who will have more clout in determining future iron ore pricing?

Which side of the contestant has more to lose?

Just wait and see, the next two quarters, dont' be too surprise if you see an Aussie recession coming your way, fast and furious. If I am Krudd, I will definitely reconsider any suggestion of an early election. Most definitely.


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## haunting (12 June 2009)

Talking China...

I only agree with this: _The Chinalco-Rio deal would have been a piece of major integration of our two economies..._ the rest, I am not so sure.

Because?

Because some of the assumptions made is not exactly reflective of what is happening within the Chinese business community as well as within the Chinese leadership.

If you question this observation, you can check out one of the headlines readily available in the NET, like these two:

China ready to cut steel output if ore talks fail

BHP, Rio may face China sanctions on ore deal

They are going for broke and they are not going to play nice, seems to be what is being reported. May be the Chinese are just posturing, who knows?

But there are ways to tell if they really mean business - judge them by their actions.  Watch If they will hold true with their threats by not compromising on the iron ore price discount and their next official reaction to RIO/BHP's venture.

The bad here is this, if and when it becomes "official", they won't be backing down or holding back due to face saving reason. When that happens, it will be a lose-lose situation all round. Bad!


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## haunting (12 June 2009)

China's protests don't add up?

May be I am too cynical to embrace the arguments presented by this expert, it sounded a little too close to high school debate. For example, the argument that the new low cost production would surely mean good cheap supply to China and the other iron ore consumers; and that the premise and promise by RIO/BHP on their honour that they will sell the ore separately, etc... I can almost "visualise" the snickering from the Chinese when they read about this.

I am not sure if he still can remember the rapid rise of iron ore in the previous few years? I can't. I can only remember the last rise was 66% (offer from Vale) while BHP insisted a further 18%(?) to raise it to 84%? Does it sound like with a lower cost, BHP will be more generous this time? Well, never can tell, according to the argument presented, this is a very natural thing to happen and why not? (Let's have a group hug everyone! )

As a result of the steep rise in price, a few small Chinese steel mills were sent to the wall coz frankly not many profit making organisation can survive such vicious price rise consecutively over a few years.

With regard to shipping cost, etc... in the last few months, the Chinese have been spending big buying up cheap second hand ships around the world. If they are still at it, the amount should be exceeding billion by now. They are now a proud owner of not less than 70 over such ships and if I have to guess, these ships will be used to carry  bulk commodities throughout the globe back to China. The point here is this - no one can really rule out they won't be cutting some kind of deal with Vale in retaliation to RIO (not Australia if the hints given were to be credible).

Anyway, to cut it short... I think it is very hard to argue with such logical and sensible arguments since by all accounts, the Chinese have been totally emo and irrational in their behaviour all these while. So let's assume when they come back to their senses, they can see why this RIO/BHP joint venture is a good thing for them.

And that goes for Japan too. Ha!

The score - exper:1, Haunting:0


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## MRC & Co (14 June 2009)

Yes, I have been thinking the same lately.

With a reversal in Treasuries likely on the cards, we may see a flight back into financial assets and a pullback in both equities and commodites this coming wk.   

I will watch closely.


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## haunting (16 June 2009)

... a glimpse at history, still in the making... with a set of new players. Will Bernanke make any difference?


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## haunting (18 June 2009)

The amazing shrinking US$... coming to your neighbourhood soon

_The leaders of Russia and China agreed to expand use of the ruble and yuan in bilateral trade to lessen dependence on the U.S...

Russia, the world’s biggest energy supplier, wants to start selling oil to China in rubles, said Deputy Prime Minister...

Russia’s biggest oil company. Energy sales in rubles are a “strategic” issue for Russia, he said, adding that oil exports to China over the next 20 years will surpass $100 billion. _

That is one way of bypassing the usage of US$ as a medium of exchange and trade. That is also one way of not playing by the US rules and not paying them a "money" tax.

Does Australia have a similar courage to cut a deal with China? And save us some heartburn and some hard earned money?

If!


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## haunting (18 June 2009)

Is IPL still a good bet for long? Read this and find out more....

_Mosaic Co., North America’s second-largest fertilizer maker, slumped the most since March 2 after German rival K+S AG said it expects a “further significant reduction in revenues and earnings” this year, citing continued “extraordinary weak demand” for potash fertilizers.

Mosaic tumbled 9.7 percent to $46.25. Potash Corp. of Saskatchewan Inc., the world’s largest maker of its namesake crop nutrient, slipped 11 percent to $95.59. _

In another news a few weeks back, the Russian supply was reported to be facing poor demand too.

Time for caution with this one, I reckon.


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## haunting (18 June 2009)

The lesson from RIO

What lesson? The only thing that makes sense at the end of this fracas is to take stock of the winners, losers and the bad blood.

So who are the real winners in the Rio-Chinalco fallout? 

In my view, there're only two broad groups - bulk of the Rio share holders from UK, especially the big investment funds. And BHP. These are the real winners.

The losers? 

Not Chinalco exactly but then they can't say they have won either, can they? The got their break fee but not sure if that's enough to pay for the lost pride.

In my view, the real losers are the WA people, the workers made redundant because of the streamlining of the joint operation. And the contractors or subcontractors that provide services and supportive work to both Rio and BHP. 

Taking it further, the loss of revenue in the WA state coffer due to the merger and the welfare unemployment support to this large number of jobless workers is like rubbing salt into wound. It will definitely hurt.

To take it further again, from an Australian "national interest" angle, what do we get as a result?

1) now both the state and federal govt have got a much more powerful commercial entity -  BHP, to deal with. In many way, this has created an entity that is probably as powerful as that of the WA state govt due to its outsize influence on the overall economy. If Marius K goes bonker like Sol T of TLS, god knows how much damage he can do this country?

2) comparing the potential benefits to be gained from the national and state angle, in terms of job employment, tax revenue, etc... it seems at this point, it's better to have Rio to be independent from BHP. Just can't see why this is a good news to Australia and to our national interest. How?

But then I am not an ATO expert. So this is just pure conjecture. 

In any case, it is not case closed yet. Let's wait and see.


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## Sean K (19 June 2009)

I agree short to mid term poo companies are under massive pressure. NUF came out with reduced earnings guidelines a couple of days ago too. 

I've taken a punt that their sell offs have been overdone, and IPLs break up through 2.50 was the first time the market agreed. But, it's failed, so I'm at a bit of a loss at the moment. 

Long term should be ok from these levels. But, there's every chance we could see it halve if the unemployment globally goes ave 12%.


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## haunting (19 June 2009)

From "the sky is falling down and gold is the only sensible investment mob"... and their pearl of wisdom. You should read about it.

... and this cautionary tale on your neighbourhood banks from this gentleman

Excerpts that you should pay more attention on...

_In case you missed it a few months ago we'll say it again: Australia's property boom was bought with borrowed money. Both residential and commercial property values soared with the credit boom. If you think the banks are fine because they don't have a subprime problem, think again. The banks have a property problem, and you can find it on the asset side of the balance sheet.

The banks are rightly worried about having to borrow money in the wholesale market. National Australia Bank's CEO Cameron Clyne says, "We are reliant on the willingness of others to lend to us, domestic demand for credit significantly exceeds our capacity to save."_

And this...

_Of course one of the most stunning predictions this week has been that of NAB chief economist Alan Oster, who believes that house prices will fall 10 per cent (The rate debate, June 16). Given that consumer confidence is rising, it’s not what the market expects to happen.

If Oster is right, then CBA, which loaned heavily on the first home buyers' grants, will be under pressure. Clearly this is not what CBA expects to happen.

By early next year we will know who was right – and the outcome of that difference of opinion is going to play a big role in stock market levels and the share prices of banks in the coming six months._

*** and this is one of the many reasons why I have been nagging all these whilst - in times to come, the only credible source of capitals will be from those creditor nations. Of them, the most relevant and most likely one that will provide the majority FDI into this country is China, with Japan running a second. Between the two, the Chinese are the one with most interest in doing business with us.

Based on the public response to the Rio-Chinalco deal and the way the media and politicians blowing it up into some kind of anti-Chinese imperial invasion in my view - SUCKS! 

If we don't want to do a deal, just take a walk. There is no need to call them names. There is no need to be cocky by accusing them pillaging this land and practising predatory acquisition, etc (can anyone still recall Chinalno was approached by Rio at first and that they were actually paying a large premium to the Rio share price at that point?...)

Look what happen now? The Chinese were feeling so hard done by that they are talking all kinds of threat and are refusing to budge in their iron ore negotiation. That's quite ok since both Rio and BHP can still sell their ore in the spot market. Next, just watch that outlet shrink when their restocking is done, whilst they maintain their squeeze  by prolonging the negotiation... it's almost a sure bet that Rio and possibly BHP will be reporting a less than shining result in their next two quarters. And then you watch their share price getting a wallop. (Those who are rushing into Rio like there's no tomorrow now will probably regret what they are doing)

But that's still not so bad. What is bad is the future, the next few years if/when the global economies really settle down and when everyone can clearly see the US and the EU economies are not recovering with high growth and are going no where, and their banks are barely maintaining their solvency through state help that we, this country, is finding out our acute need of foreign capital and/or foreign direct investment (FDI);  and that the usual old allies and traditional sources of capital from the US+EU are drying up and/or have become so costly that the local banks will have no choice but to slug everyone to pass on their cost to keep their margin... that is when people will begin to see and appreciate what the Chinese money is doing for this country both in terms of keeping the economy going and in avoiding a much larger scale and scope of unemployment.

That's when we will read about Krudd and Swan (if Labor is still in power) talking about good relationship and doing business with China in earnest because by then it will be so obvious to everyone where the money is...

... and let's hope by then, the Chinese and the Chinalco' bosses and backers are not in charge of China and that they have kind of forgotten how we kicked their **** and thumb our nose to them once.

- End of Rant -

ps: if and when you next see the property prices are plunging in your neighbourhood, you should know it's probably time that the flow of "traditional" money is drying up, like the Murray...


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## haunting (19 June 2009)

From memory, IPL seems to have paid a very high price for the current stock of fertiliser. Also I have read the local farmers were complaining about IPL in passing this mistake to them, in the form of high priced "poo''. A 6 cents bounce at the moment.


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## MRC & Co (19 June 2009)

Cheers Haunting, another interesting post.  

Our property market has to be about the only one that hasn't experienced a serious correction to date........


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## haunting (19 June 2009)

Here's how I see it. 3 arrows pointing at 3 sets of red candle showing the "pattern" of selling.

Arrow 1 shows there were two strong red candles due to hard selling.

Arrow 2 shows a very strong red candle indicating there was a strong selling day but the magnitude was declining as shown by the higher low.

Arrow 3 shows the selling has receded with 2 very weak red candles.

What's next?

Possibly a break out of the 81.50 resistance but the real resistance is actually 82.50, that is where we will find out what is the real strength of the US$.

Let's watch.


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## MRC & Co (19 June 2009)

Yes, that is the level I am looking for this bounce to reach.  At 82.50 area I will be looking to re-establish shorts.


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## Sean K (20 June 2009)

The GD sent the market down 90% or so. That's another 50% or so from here I guess. So, if we have some cash, or have enough invested that gives us a good margin lend, it will be an absolutely amazing buying opportunity once the worst case scenarios eventuate. Whoohoo!! Stop painting fear and see the opportunity that this crisis/depression represents. Already some people saw that there was going to be significant bear bounce, which has been a great trading op. Those who were too scared to invest sat on the side and saw their cash earn 2% or so. I was only half invested but still has earnt me more than the average wage. Yes, the economy is ****e, but lets see the opportunity!!! A once in a lifetime opportunity!! Good luck.


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## haunting (22 June 2009)

Tale of the Japanese bond smugglers - too good to give it a miss. Read all about it esp the readers' response...


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## haunting (22 June 2009)

Has China gone too far?... by A.Kohler

_But with any luck China’s fiscal and monetary stimulus will see us through till the rest of the world starts to recover..._

Nice Alan. That's assuming China firstly still play nice with some Aussie miners; secondly they do not feel threatened at all by the merger of the two miners; and thirdly, they are some kind of lame duck which can only swim around in a circle panicking whilst knowing the hunter and his dogs are closing in on it... 

Yes? They are some lame ducks, right?

Gud on ya... I luv your story.

... and your expert view.


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## haunting (23 June 2009)

World Bank, OECD grim; glimmers from Germany, Japan... this piece of news kind of brought up a report I read not too long ago. That is, because of the dying of the US consumption, the export dependent countries such as Japan, Germany... and China will suffer. In another report, from UK as usual, the writer was kind of pointing his finger at China(not sure), Germany and Japan in particular I think, accusing them of... because of their dirty habit of big time saving whilst vigorously exporting to others who couldn't stop consuming, they have now created such a humongous imbalance in the global financial system that these saver nations are now deserving every bit of misery bestowed on them - like collapse in exports and the ensuing crashing of economy due to the large contribution of these exports to the overall economy.

And to top it all, if the consuming nations (read US+UK+friends) were to default on their debt, these saver nations should blame themselves... coz, they are part of the cause of the GFC.

Great argument huh?

Well, I agree firstly with the collapse in exports in these big exporting nations and the ensuing contraction in their respective economy. No argument here.

But accusing them of saving too much and not spending enough? There is a lot of crap there, if not, a very one-eyed argument that could only come from some UK media brain, which typically is very pessimistic and chauvinistic since quite some of them are still living through the Great British Empire withdrawal syndrome as well as the memory of winning the WWII. Naturally the Germans should always be treated with suspicion if not derision... it's the only right thing to do.

Anyway, I got side tracked. I was actually wanting to talk about the "made in China" badge.

From a report not too long ago, it was highlighting the fact that whilst the "West", as usual, it means US+UK are believing the Chinese economy will suffer because of their lack of domestic market and the over dependence on exports, they will not be able to absorb the excess capacity due to the drop of consumption in the West.

This is partially true as reflected in the Chinese economy. But, the report went ahead and pointed out that may be someone should analyse deeper into the Chinese exports because whilst the Chinese is exporting bulk of the export in the made in China badge as in a finished product, many of its key components are made elsewhere. Hence in terms of real percentage of damage, the Chinese did not come off as bad as some of these component makers since the Chinese contribution constituted only a small part (labour mainly)of the overall value of the goods.

A good example the report has given is Ipod (I think) - it is assembled in China as the final product, but the most important and costly component was made elsewhere (Japan, for eg)... etc, hence, it kind of explain why in this world of trades and death to the evil exporters blame game, China doesn't seem to be hurting that much comparing to Japan and Germany.

The report went further to explore the life of such made-in-China goods and surprisingly it observed and concluded that a large number of these goods was actually consumed within China (can't remember the %, but it was something like 40% or 60%...)

That probably explains why China is now the world's largest auto market, I think.


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## haunting (23 June 2009)

Talking gold can be a sensitive subject here because you can never tell if you are in the company of a goldbug... 

But, what the heck, if there's money in it, why not?

Three charts, chart1- 60 min DXY chart, chart2 - Gold futures weekly, chart 3 - Gold daily.

Chart1 shows it takes only relatively small bounce in the US$ to knock the gold down a fair chunk (refer to the gold daily chart). 

Why? Dunno.

But if you buy the suggestion that it's due to safe haven type of flight to safety investment tactic, then, you really need to ask this question on how come gold is not considered as a safe haven this time?

The US$ and US$ based assets are safe haven and gold is not? Funny that... 

In any case DXY and the US$ I suspect will be moving range bound as suggested in one of my earlier post elsewhere. The rationale in this scenario rests entirely on the need to stabilise the US$ and the cost of borrowing just so the US can press on with their QE without showing too much strain causing a wholesale loss of confidence in the US$ and US's ability to rescue its economy from a severe recession.

What better rationale or justification in telling the whole wide world that the US$ and US$ based assets are safe havens.?

Assuming this marketing tactic works and US$ is again believed by the "people" of the world that it is safe and it is worth, say at the current "value" - can you hear the collective sigh of relief from all the vested interests among the big global palyers? The USA is happy again because it can now sell more bonds, the EU is happy because the EUR is dropping and the W.European banks won't have to face up to the pressure of writing off more bad loans in E.Europe; the Japanese are happy coz the Yen is cheap again, and the Chinese, their 760bln US$ asset is safe...

Nice and happy all round. And why not?

But what about gold?

Tough man. If the US$ were to nudge higher, gold I think will drop lower to about 860... yes measured in US$. At the moment, it's still not that obvious and certain that the drop will come as shown by the weekly gold chart - the up trend is still in tact but shaky.

By next week may be we will be able to detect a firmer trend, but meantime, if you are holding gold, or gold stocks... errh, good luck and plenty of it too.


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## haunting (23 June 2009)

This easy money call to attract more gullible money from the investing public... is DISGUSTING to say the least. To recycle an old write up on a day where the market is facing a serious selling off with a real potential of further selling frankly is not forgivable. It's just not good enough. *&^%$!


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## haunting (24 June 2009)

Attack dog retreats on China investment...

Yes, I know I have been on and on and on this China investment for a friggin' long time... I know. And I know not many people like this kind of drivel, but then if you can look further than this petty parochial OZ vs China mentality and see them as our new future financier for our mining industry and jobs and a better economy, then, at a min, there's no need of such stupid maneuvers as described in this news from Swan's department.

Which brings to the question - how much Chinese "true friend" Kevin Rudd meant the last time when he was in Beijing lecturing the Chinese on Tibet? In my eyes, this guy wears a "I'm a Chinese expert" label on is head but in reality and in action, he is behaving like a buffoon when come to dealing with the Chinese - from not wanting to sit near an ex-Chinese ambassador to Oz on TV interview to his proposal of wanting to act as a leader in an Asian-Pacific grouping including China, the USA, Japan, etc... very clownish and very childish.

An expert? Nah!

(...he won't be getting my vote in the next election, I can assure you)

Back to the question of future Chinese investment that potentially could mean many jobs to Aussies, with the current policy not changing and is continually projecting a discriminatory attitude towards the Chinese, I am not so sure if the Chinese will still take it sitting down. And if I read them right, they will hit back, in one way or other.

Just wait and see, esp on how they conclude their deal with RIO, and possibly BHP... this should serve as a litmus test.


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## haunting (24 June 2009)

Read about them expert view on China...

Frankly if they were to spend a bit of time tracing the Chinese cultural traits back to the Pre-Christ era, they probably could see much clearer and understand better.

Here's the biggest clue I hope they can see - the Great Wall of China. You can even see this sucker from the moon.

Why did so many Chinese dynasties through centuries built and extended this wall? Very simple - to keep the barbarians out and to keep the Chinese citizens in.

If someone has been trying so hard to keep others out of their country, would they really want to rule the rest of the world? Which basically mean more headache if you were to think along the line of building another wall? 

Ok, if this doesn't make sense to you... try seeing more objectively from the Chinese angle on how the current Communist ruler in China conduct their affairs. The out cry from the West is they oppress and suppress their own citizens and deny them their freedom, justice and a whole lots of other western ideals... quite true if you are outside looking in and if you are not aware of the Chinese idea of how to keep your dynastic rein running for a thousand years.

Yes, it's quite obvious - the current Chinese communist rulers are doing exactly what the Chinese rulers have been doing in the last 10,000 years... for example, instead of building a physical great wall, they have build a new great firewall to keep their people in, away from all the outside influence, so their dynasty can remain safe.

They are quite good in doing that as they have been doing that for thousands of years.

Do they have time and energy and the ambition to rule the rest of the world and wage wars to conquer new territories?

Look, don't be silly. They rather do business with you than want to run your life. They already have a handful of people to worry about - 1.3bln and counting.

So take my words for it. They don't want to rule the world. They just want to do business with you...


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## haunting (24 June 2009)

Took a punt on the SUN yesterday, it turns out alright. According to their ann. they are rebranding themselves as the new Sun Uni Live or something like that, a shift back to their insurance biz. This probably explains the bounce and if the short term channel is telling anything, is this - some invisible hand doesn't want Sun to move too high, say beyond 7.00 per pop. With today's announcement, it probably makes sense to suspect the sale of their banking arm should be quite near...

Insurance seems to be the new growth sector judging by NAB's gobbling up the Aviva Aussie operation. With rising premium (last checked seems to indicate >10%), Sun without the bank may avoid burning itself out, and may turn out to be not so bad moving forward. But first, there's a need to find out how much they are going to flog their banking division - a good decent price will be a bonus.


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## haunting (25 June 2009)

A follow up... here is a link to Criterion on SUN and insurance in general.


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## haunting (25 June 2009)

China's new Iron find... can't be good news for RIO and BHP. Also in a separate report , Wuhan spokesman was quoted to have said this... _*"Chinalco's failure tells us that we should cooperate with companies that are honest and faithful," *_ - I would take it to reflect how the other Chinese biz people are thinking. Not good at all.


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## haunting (25 June 2009)

_focus will be on Asian equities. If they falter on weak US equities overnight,
they could reduce the appetite for carry trades. In particular, AUD/USD will find it
increasingly difficult to ignore downside risks in Asian equities... against a weak equity background, markets will favour currencies that depend more on domestic demand than exports for growth..._ 'tis others' opinion.

In any case, the arrow seems to be pointing at RBA's hold on the current rate, with US Fed doing nothing with theirs, RBA is running out of option... the rate has to come down - my guess.


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## haunting (25 June 2009)

... the news

_Australian energy retailer, AGL Energy, may be forced to write down assets. Merrill Lynch analysts said that AGL may have to make a total write-down of $A1.3 billion for its Southern Hydro, Powerdirect and Loy Yang A assets. Its stake in Loy Yang could be at risk if lenders will not refinance a $A515 million debt facility due in November 2010._

But... now that it is all out in the open, opportunity could be knocking... soon.


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## haunting (26 June 2009)

FMG is overpriced?

You bet. In fact most iron ore plays by now are beginning to smell stale and it's about time to get off the train. But how many are actually seeing the early alert? Doubt if there's any. In every party, there are always people who would stay to the end and ended up switching off the light. The last one to go usually has this "honour". This time around, there shouldn't be any difference.

The party will not end just like that though... it will drag on for a while. The smaller, more speculative mines will be the ones making big $$$ for the speculators first (like now) but they are the fly traps that will eventually end up killing the most flies - small flies that couldn't resist staying on after getting their fill of the bait... many small speculators will get their hands burned this time by the small mines, which are basically a plot of land in the wild with a lot of dirt and a lot of hot air. And the vendors?  They would tell you they have received many calls from China so they can pass off the deal with potential Chinese interest. Haha... there's a Chinese gold rush on going if you are not aware!

The bigger flies? They will die in the hand in the likes of FMG, which basically doesn't have a lot of substance - an empty vessel if you like - 3 quarters of air and the rest is dirt with iron ore and a lot of debt. Eventually, Tricky Twiggy will be selling his share to the Chinese to pay off his debt, and losing the whole plot in the process. The Chinese simply do not trust him, as they see him to be a very good operator but a cunning one. They don't see a lot of "honour" in him, esp his words. They don't like to do biz with people who don't honour and twist their words.

To the Chinese, your words and hand shake matter more than a piece of paper contract. Much much more. That's why they are furious with RIO, and the local Chinese experts and media brains in Australia, have no idea of what's important and what's not... to the Chinese. It's a perspective thing. But at the end, there's always a price to pay for everything. Just remember that.

So how will the iron ore script plays out? 

Watch the next two quarters first. Keep an eye on RIO's sales vs BHP's sales vs Vale's sales vs Chinese+Japanese demand. And if you like the thrill, check FMG's sales against the big three and feel the chill why someone would want to pay so much for FMG?

By 2015 or earlier, when the new Chinese iron ore find comes into production (and it will be and will be very low cost), it will become obvious to many then why RIO's and BHP's iron ore assets do not worth what you are paying them now. In addition try consider one important factor that help pushed the iron ore price to last year's high -  BHP's hand in buying up all shippers from S.America to Asia to press for the last 15%.

The Chinese are trying hard to reverse that but they are still disorganised at this stage, hence they are unable to bargain more effectively. But they will regroup - if there were to be a next round of negotiation - it won't be this easy for BHP and RIO. If the Chinese can't get what they want this round, they will get it in the next round. It's just a matter of time, or a matter of how the cycle turns.

The rust is setting in, but then 2015 is still a long way to go... do you care? Do I care?

Nah... unless you are the long term buy and hold type.


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## haunting (27 June 2009)

Here is a telling tale...


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## Sean K (27 June 2009)

While there's going to be a medium term blip in the market and oversupply/stockpile of IO, in 10 years time the tables will be turned once again and the demand from Chindia with xxxxx million peasants moving to cities and buying cars will probably mean there's not enough IO on the planet to appease them. Short term, I agree, longer term (not that much really) commodities will be even hotter. 2c


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## haunting (27 June 2009)

When GE speaks, Americans better listen... worth a read.



> _"While some of America's competitors were throttling up on manufacturing and R&D, we de-emphasized technology," he said. "Our economy tilted instead toward the quicker profits of financial services."_




Spot on! The primitive driving force behind capitalism is human greed... and when the primary driver behind a nation's economy is made up solely on human ingenuity and greed, the march to economic doom is almost assured. Even for a super power.

The worst part of this gigantic mistake by the Americans is the loss of their US$ hegemony. Without the US$ as a chain to bind the rest of the trading/financial world under their control, they have practically given up their leadership in the global financial system and set the rest of the trading nations free to challenge their US master.

By the time the USA has recovered from this disaster in a few years' time, the world will never be the same again. At least not the world the Americans had been living in the last 50 years.


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## haunting (27 June 2009)

I hope you are right...Here  is a report to support your view.

For long term IO play, larger IO export volume may be.  Higher price? Don't think so... at least not in the next few years. Unless inflation/hyper-inflation kicks in much earlier than I thought. But then I have a suspicion China will not be paying US$ for our IO. It would be some other currency and possibly RMB.


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## haunting (27 June 2009)

The return of 'Mrs Watanabe'



> _TOKYO - Mrs Watanabe, the market's metaphor for Japan's housewife yen speculators, has come back to life. A star of the yen trade's golden days from 2000 until mid-2007, she suffered big losses in the financial turmoil over the past few years. But like a phoenix - or a zombie - she is rising from the ashes as market stability increases risk appetites and yen-selling positions pile up...
> ...
> Yen sales by Japanese individual investors against the Australian and New Zealand dollars rose to their highest in almost nine months this week, according to data from the Tokyo Financial Exchange (TFX). Net long positions held by individual investors on the Southern Hemisphere currencies reached 127,752 contracts on June 23, the highest since October 3, the data from Japan's largest financial futures market showed. Long positions are bets that a currency will rise.
> 
> Most notably, net long positions on the Australian dollar against the yen rose to 97,643 contracts among retail investors on June 23, the highest since August 29, returning to record-high levels similar to those before the collapse of Lehman Brothers in September 2008, data also showed... _




** for as long as RBA and NZCB are keeping a relatively high interest rate, these proverbial ladies will be piling on their bets until... something breaks. What and how will be the holy grail for this round, I guess.


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## haunting (27 June 2009)

Here is another write-up on why the Chinese butt deserves to be kicked - like it or not, the Chinese should swallow what Australia has dished out...

Fair point and no argument on this. It's just this minor point I have been raising all these while - if and when China decides not to deal with RIO and channel all their purchases to Vale; or  simply, reduces RIO's share of the iron ore they buy normally, I guess we will have no choice but to swallow what they dish out to us.

Whilst it is fair that Rio has the right not to sell to Chinalco, or choose whom it likes to deal with. It would be equally fair to assume the Chinese has their right in dealing with someone they feel comfortable with.

Let's hope they won't go that far, but if/should they do, I guess someone over here will have to learn to swallow like the Chinese. But I won't be surprise by then I will read a whole lot of different slant from the local media brains.

It really bugs me to learn this is how we deal with our biggest customer where the stake is so high and the real benefactors of the RIO/Chinalco "no-deal" are really the big UK funds and overseas investors; whilst the real casualties are the local mining contractors/sub-contractors/workers and the regional govt. 

I think its a high price to pay, esp considering the damage to the goodwill between the two countries. Let's hope no one here will live to regret this "right call".


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## haunting (29 June 2009)

Nigel No Friend... from FNArena

Whenever FMG popped up as a topic in the media, I would almost never failed to think of this quote from Ab.Lincoln...

_You can fool some of the people all of the time, and all of the people some of the time, but you can not fool all of the people all of the time._

Such negative reaction! ... gotta say there's a cognitive bias in me somewhere when come to this Nigel.


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## haunting (29 June 2009)

Here is a good write up on an interview. Worth a read as it has touched on many issues raised by many people in this forum.

While you are reading, keep this mind though... economists have this tendency to look back and then talked themselves into some kind of pessimistic lunatics that if you are not careful you might just be converted into one yourself. So, always remind yourself of this "danger" whilst you are seeking knowledge and wisdom from people who are brilliant in hindsight analyses.

Always remember the main objective of your quest of knowledge - it's supposed to provide you with an understanding that would allow you to develop an edge in your market venture be it trading or investing. Your activity time frame may be very different from theirs, as in this case, Dr. Hunt's point of view could very well mean 20 years, if not, many years before he would say with confidence of what has happened...

As an investor, you are not interested in what has happened, rather you are interested in what is happening now and what is likely to happen from now, with respect to what has happened in the recent  past. It probably makes more sense and more profitable to you if you can look back, learn from the past and adapt that knowledge into some kind of wisdom or foresight that would allow you to develop a plan for your market venture - this, to me, is the primary reason why you bother to dabble into this dismal science.

Adaptability, flexibility, common sense and contrarian perception are some of the basic attributes I believe crucial to survive and to prosper from the market. The ability to spot a market weakness and to exploit what it has provided, is the primary goal of any market participant. It's the action that counts, the rest... are just words, as  in this blog.

Here are the main points...
_



			* The US is in a period of debt deflation that may take up to 15 to 20 years to normalise
    * The S&P is at risk of some 'false dawns'
    * There will be a major shift in US consumer behaviour as savings start to rise and people live more within their means
    * He describes the US stimulus in its current form as a grab bag of political promises and says it may be doing even more damage
    * Diversified equity portfolio models may not work in the debt deflation environment
		
Click to expand...


_
Here are some random thoughts in reaction to the above main points:

1) if the global economy were to decouple, and the US economy has become less influential, does the above points still carry that much weight? In other words, would the global economy still this US-Centric?

2) if the US$ were to lose its hegemony, will what is happening in the USA still exerts that much impact to an economy such as Australia?

3) if the US$ were to be replaced with a "global currency" built on a basket of the current major currencies (EUR, US$, YEN, RMB for eg), would the US financial stability still play this crucial a role in the stability of the global financial system as well as the global economy?

4) with this major shift in the US consumer behaviour, is it time to consider the relevance of the argument of global economy's dependence of US consumer recovery? Is it time to move on?

5) saving, in general is deflationary, whilst the US economy may be going through a deflationary period, say up to 15 years (pick any number), what does that mean considering the monetary inflationary effect of the current QE exercise? Which will prevail? Deflation or inflation at the end?

6) more... like these which I generally find issues with them economists...

a) most economists' view are US-centric and they rely too much on hindsight which as usual is US-centric - but at this juncture, since the GFC, it is very clear with evidence  that there's a break down in the US-centric, US-focussed global financial and economic system. The QE and the runaway printing of the US$ and the runaway deficits in the USA are both unprecedented - how could they relied what is in the past mainly and based on that observation to assume the future of without taking into consideration of what has changed?

The rise of China was never in the past equation. But they are now, esp considering their large holding of US debt.

The USA taking a QE move in such scale and scope has never happened before. The synchronised crash of both US+EU economies in this scope and scale is also quite unprecedented. Whilst other economies such as the Chinese' are showing growth and strength - they may yet proved to be the ultimate change agents to this US-centric world... this, I doubt has been taken into consideration by many economists.

How valid are their views if the Chinese influence in the US$, bonds, interest rate and international trades are totally left out of their considerations?

Is there a paradigm shift happening right before their eyes and they are not seeing it?

If there is a paradigm shift, if it is happening, then how much is this shift, I guess, is the key to the future, and possibly a whole lots of fortune awaiting those who can think of the box.

Can you?


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## haunting (29 June 2009)

The supply side has increased whilst the demand side has slowed... just read another media brain (from UK as usual) is saying that the Asian economies (other than China) whilst are busily exporting to China and avoiding a prolonged recession, but eventually, the final finished goods that are produced in China would have to go elsewhere - and other than US as the final and ultimate consumer, where else can the Chinese export to? Surely this would mean the growth in China is not sustainable?

Could be. Would be. Might be... who knows? But if he were to compare the decline in the Chinese economy vs that of the Japanese, he would have noticed the substantial difference between the two - there is a marked difference between the type of goods being exported to the USA. The Japanese' are mostly high valued, hitech, luxury goods whilst the Chinese' are mainly low end, if not, essential goods and/or food that the Americans could do without. This probably explains why the Japanese economy suffers that much more than the Chinese. But this probably also explains in a way the Americans, like it or not, they can't do away with Chinese exports absolutely...

So to answer to that media brain's negative slant I guess, he is partially right, but I won't be surprise once the consumer spending in the US were to pick up, the Chinese exports into that country will be correspondingly increased.

Unless the USA begins to raise their protection barrier to keep the Chinese exports out and opt for the higher cost locally produced goods or produce.

...and raise the spectre of a trade war with China.


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## haunting (29 June 2009)

Here is a good one to provide more "colour" to the current economic landscape.


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## haunting (29 June 2009)

More dismal analysis...

_



			"But whatever the exact figures are, the bottom line is that consumption accounted for 70 per cent of US GDP, or about 14 or so per cent of global GDP.

"So if that US consumer stops consuming, that could be a major whole in global demand.

"And to go back to the effectiveness of China's fiscal stimulus, there is a risk that Chinese investment might actually increase production and in the absence of global and domestic demand, might actually exacerbate some of the overcapacities we have in the global economy, which could lead us further into deflation."
		
Click to expand...


_
** do you believe the US consumers as a whole will stop consuming?  How much would you assume in order to emphasise a point for your overall argument? 

How objective is that assessment, the US consumer as a whole will stop consuming? It is not quite realistic to assume both the US+EU would reduce their imports totally in this case. Yes, it's true that the Chinese demand will never replace the combined demand of both the US+EU, but making the assumption that the demand will completely stopped is nonetheless disingenuous.

The pick up in the Chinese domestic demand will never save the global economy anyway. The Chinese demand has been brought up time and time again not because it really matters but because it serves a dismal purpose coz it sounds convincing and logical.

I can play along this line of argument by arguing that the Chinese domestic demand whilst will not replace the combined demand of both the US+EU, nevertheless it suffices to provide a cushion to China and the rest of the Asian neighbours and the commodity countries such as Australia a breathing space to tide over the recession. It is sufficient to generate enough growth for this part of the world and the regional economy to break away from the recessionary impact of the advanced economies, thereby paving the road for the eventual recovery.

In short, the Chinese demand and growth engine might just be sufficient to effect a decoupling of the global economy, allowing this regional a chance to breakaway from the advanced economies. How about that?

In any case there has been a whole lots of upgrade in Chinese GDP growth from the World Bank to the OECD recently, so let's just wait and see if the Chinese econ is that fragile as she is saying.


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## haunting (30 June 2009)

Chinese whisper and so he says...



> _In my second incident, last week the Chinese were stating in the various metal bulletins that they were going to stop strategic stockpiling of copper, aluminium and other minerals. In Eureka Report I alerted readers that there could be a short term metal price correction if China actually plays that game..._




** hmmm, hmmm... there could be a short term metal price correction? Only short term?

I am not that sure if that will turn out to be just a short term maneuver in this metal game with some of the recent Chinese initiatives. Of these, the most important being their purchase of bulk ships in the second hand market. With that number of ships, they have practically removed a transportation price premium from the S.American iron ore; and in retrospect, Marius K's tact in buying up all shipping capacity to push for the last 15% has done tremendous harm to the Australian iron ore sector because he has practically singlehandedly taught the Chinese a lesson and highlighted one of their vulnerabilities.

Now that the Chinese have learned from the lesson and have covered their base by owning their own fleet of ships, there goes a strong negotiation point on the Aussie ore advantage of low shipping cost comparing with the Brazilian's.

Secondly, the recent restocking of most base metals, esp iron ore although has helped pushing up the price but I believe its strategic value is the one that is being overlooked by the Aussie miners - the Chinese have bought themselves a strong lead time/buffer to play an attrition game - whoever blink first lose, or whoever need the cashflow for on going operation will crack under the pressure first.

Of the three BHP, RIO and Vale, I think RIO is the most vulnerable and without the big long term contracts to provide a regular stream of cash flow, I can't see how it can operate effectively. On top of that, it still carries a large debt in its book. The possibility of it buckles first frankly is high.  As pointed out earlier, those who are paying a premium to get into the rights issue will be crying all the way to bed, and not to the bank.

Thirdly, from the way the CISA is pushing its case, it seems to be getting top level support from the Chinese leadership, it won't be a surprise to see it fixing up those non-cooperative steel mills who have broken rank earlier. More than likely there will be another round of shake up and shake out. Longer term, this can't be good for the suppliers when they have a unified voice.

With all the above developments and after spending billions covering all or most bases, I am not sure if the Chinese are just planning for short term only...  if the above Chinese expert is still believing that is a short term maneuver, well, let's just wait and see.


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## haunting (30 June 2009)

A follow up news item from Bloomberg

_



			“We have a number of contracts that when they get to June 30 there is the potentiality for those agreements falling away and then moving to spot,” Sam Walsh, chief executive officer of the London-based company’s iron ore unit, said on May 26. “I don’t think that would be a good thing for either iron ore producers or steel producers but that’s the reality.”
		
Click to expand...


_


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## MRC & Co (30 June 2009)

Cheers for the comments.  Some food for thought on the deflationary topic.


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## haunting (1 July 2009)

Here's the tale...

_



			Money is leaking instead into Shanghai's stock casino, or being used to keep bankrupt builders on life support. It is doing little to help lift the world economy out of slump.
...
If the world's biggest surplus state ($US400 billion) is too structurally deformed to help offset demand shock as Western debtors retrench, we are trapped in a long deflation slump.
		
Click to expand...


_
** the hope and  expectation that a Chinese superman would fly in and help the rest of the advanced nations to avoid a painful recession seems to be quite ingrained within the psyche of western media brain. I am not sure if this is how the Chinese leadership is seeing their role in the global arena.

The old foggies in the Chinese communist politburo may be old and not talking much, that don't mean they are all senile. You can bet they have been briefed at least of this fact, that is, the total Chinese domestic consumption would never replace the combined consumption of both the US+EU, there's not a shred of hope that the China would lead the world recovery through her consumption and spending. It's simply not realistic (laughable actually) to expect that.

In addition, I am not sure if the Chinese are that keen to overhaul their internal welfare system and open up her domestic market for the advanced nations just so they can avoid the necessary recessionary adjustment in each respective economy. QE has never been a long term solution. It was just a short term move to arrest the credit freeze and restore confidence back into the banking system. Now that it has done its trick, it's about time QE to be phased out just so the threat of inflation/hyperinflation can be contained before it gets out of hand. But based on BIS reported caution yesterday, it seems there's great doubt if the advanced nations would be able to do what is required of them.

So here's the situation, accordingly the Chinese domestic structure is too deformed to save the west whilst the west is too lame to help themselves out of the hole - what's the future gonna be?

Deflation in the west and inflation in the East?

If what is reported regarding the abuse of the Chinese stimulus is true, god helps Australia because the question of where's the next two quarters' commodity demand is coming from if the past few months' demand are just speculators betting with Chinese stimulus money and there's no genuine fundamental demand... now I am waiting to see how RIO is going to report its outlook and then I would like to check again if it has made the "right call".


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## haunting (1 July 2009)

Read all about it here.



> _Short-term prospects for global mining companies are bleak, as rising costs eat into profit margins already depressed by the recession, according to a report by PricewaterhouseCoopers (PwC).
> 
> "There is no doubt that the industry is facing a tough road ahead," said Steve Ralbovsky, the professional services firm's U.S. mining industry expert.
> 
> ...




** one of the major reasons why GM went to the wall was because of its high cost, deal it has done with the union back in the 60s. Now that it has reborn as a new entity, I am not sure how many of the old employees are still working for the company. ??

May be there is a moral in the GM's story for the mining companies and the mining unions over here? It's better to compromise than going for broke?

Sometimes taking a step backward could mean a much wider sky and a much deeper ocean for the warring parties. Instead of a deadlock, it's become a whole new ball game with the prospect of a win-win outcome than a complete LOSE-LOSE failure.

The iron ore negotiation is in such a situation - without the long term contract with the Chinese, it will be very difficult for RIO to plan, budget and operate efficiently. Without a certainty in cash flow and with a large debt, I don't think it is a desirable position to be in. A complete breakdown in the contractual dealing would mean exactly that. To make it worse,  with every supplier start selling into the spot market - just imagine what it will do to the spot price? 

Unless they can hold back, but for how long? The Chinese has been spending big in the last few months stocking up preparing for this moment... can the suppliers outlast the Chinese reserves?

According to the latest news, the Chinese are compromising - they are now demanding a 33-40% cut instead of the 40-45%, I reckon it's about time someone start sitting down and reappraise the whole mess and start working out a win-win solution instead of holding fast for a disaster.

In any case, if this PWC report and the expert knows what he is talking about, here's a question - why the heck investors in ASX are still this gung ho about all these miners? In a separate report, Morgan Stanley was saying they are expecting a 12% cut in mining capex this year. This seems to rhyme with the PWC report... 

Personally, I have a projection on the XMJ index (and some of its component stocks), it is pointing to a possible 18-20% drop from the current level. Not sure if anyone cares, but I reckon it will be fun to watch when it happens. Let's wait.


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## haunting (2 July 2009)

...otherwise there won't be so many threads on what why how TA or FA works or doesn't work. It's quite clear (to me anyway) that self doubts are creeping in when people suddenly realise they are not winning, or not winning that easily any more. And they react with their old habit of asking the most basic and fundamental question of whether the "tool" they have chosen is still working or not...

Most people find it hard to accept the market moves in ebb and flow, the low is never far away behind a high... and that its impossible for a market to remain at a "high" all the time because without a market low there wouldn't be any opportunity to "buy low", and without a market high, there wouldn't be any opportunity for those who have "bought low" earlier to "sell high" to lock in their profit. This observation is actually quite obvious and simple and yet surprisingly not many can "see" it and make full use of the opportunity provided.

The time to go long is at a market low. The time to go short (or do nuthin' if you are a one-way streeter)  is at a market top... but if you are not sure, wait for the market to show you it's in a low or at a high. But until then, it's no point trying to "force" it, or force yourself, or force a change in your belief or in your tool.

The market has reached a critical juncture both TA and FA wise. It needs time to digest the confluence of data before deciding if it will continue its rise or make a retreat. This is the "thinking" behind the big money and the market movers. For small fries? The best thing they can do is to wait for the big fellas make their moves first. There's no need to "rush".

Be patient... and time will tell. Be flexible and adaptive to allow yourself to "flow" with the big fellas, it's no point fighting them. Be perceptive of the change and if you can exercise your common sense - believe in yourself and your own observation.

While I wait, here are some interesting reads, it may help or may not help, it all depends on your attitude. If you want proof, there's none. But if you are willing to understand (and accept) what is described and adapt or incorporate the idea into your trading, who knows, it might work for you too.

Exploit your competitive advantages

Dialing down the aggression

Moving aggressively in financials and real estate



> _ Risk control
> 
> Before I go any further, the primary objective of the proactive strategies that I offer is risk control. Without risk control, the returns of the strategies we use could never be realized. Please review my performance for details. The only reason our strategies perform as well as they do is that we focus on controlling our risk first.
> 
> ...




ps: if you find this post damn patronising, it is, and my apology here coz I am reacting badly to those silly discussions on whether what works or what doesn't... I am sure they know there's a search facility provided in this forum.


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## haunting (3 July 2009)

Keating urges positive China stance



> _The former prime minister Paul Keating has warned against Australia taking a defensive stance towards China.
> 
> Mr Keating has taken a swipe at the Federal Government, saying its defence white paper makes ambivalent references about China.
> 
> ...




** PK is the man with real guts when he was the Treasurer, the PM and now in speaking up what is really important for Australia. Not too long ago (about 1 year ago) Krudd has proposed APAC to the Asia-Pacific region but the plan was shot down by the USA. The reason was simple - there's no way China will want to continue serving as a client state to the USA at these days and age. 

Japan may want to be one and doesn't mind. S.Korea may want to be one.  Australia? Seems to be fighting/wanting to be somebody's lapdog, from not wanting to live independently as a Republic to wanting to be the Far East Sheriff of the USA... it's not so bad if in bad times, the US and the UK would look after us. But fact and reality are when the UK decided to devalue their currency, they did it without giving Australia a chance. When USA was negotiating in WTO, and FTA with Australia, they hardly gave a damn to Australia's well being. It's all about their own self/national interest. The thought of Australia being their good mate never seems to matter a bit... silly? Blind? Dunno... I just hope one day Australia can see herself clearly in a mirror and decide once and for all, the first and foremost endeavour as a people and a country is to look after her own self interest first.


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## haunting (3 July 2009)

What a mockery!

If you have time, go check back a month or two and read about those people who were hiding behind their "national interest" cries in the Rio-Chinalco deal. Can't blame my cynicism here. And can't blame me for bringing this up again because these people when come to putting their (shallow and empty?) words into deed, they are grossly falling short!

... by 7,865,410 counts!


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## haunting (5 July 2009)

Prelude to Vietnam...

The Dirty Brigade


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## haunting (6 July 2009)

Read this and find out...



> _These points were well expressed last week by the general manager of the Bank for International Settlements, Jaime Caruana, as he launched the institution's annual report.
> 
> "The path to a self-sustaining recovery is narrow and fraught with risks. This is true regardless of short-term prospects, even if we take the 'green shoots' of recovery at face value.
> 
> ...




If you can't see the big deal, here're some numbers...



> _...growth in credit to business has collapsed from $143 billion in the year to March 2008, to just $15bn over the past 12 months.
> 
> ...since last November, the total debt outstanding to business has fallen by $20bn
> 
> ...




** assuming there's not much change coming our way, and assuming most of the traditional sources of capital are drying up (which they are)... ask who is going to provide finance or buy up all those distraught comm properties? Have a guess.

Assuming Australia doesn't like to deal with the SWF (which tend to pay a higher premium with an investment focus) and turn her back to them, ask again what will happen to these properties? Sold at a dirt cheap price to some hedge funds from the traditional allies? And further see their next move of job culling and dismemberment of these properties with no regard to impact to the local economies?

... just wait and see.


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## haunting (6 July 2009)

A follow up on IPL - low at 2.24 today, any short term bounce from here will be a sell, otherwise, you are looking at 1.98-2.00 next down and then further drop to 1.75. If there's a cut loss level, it should have been exercised by now.


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## haunting (7 July 2009)

Insight: Reservations about the dollar



> _New global economic trends are changing the costs and benefits of having a reserve currency. In coming years, all countries may have to fight over a shrinking global savings pool as baby boomers retire. This will increase the desire to enjoy the “exorbitant privilege” accruing to the issuer of the global reserve currency. But joining the club is not free. Reserve currency issuers may need to supply large quantities of their currencies, with the concomitant risk of running potentially large current account deficits. They will also surrender a loss of competitiveness to the US by allowing a significant appreciation of their currencies against the dollar..._




** just like to point out this fact that most of the current global economic leaders are facing the same "sunset" dilemma not unlike that of the Japanese' - an aging population and a rapidly shrinking economy. 

Unless these countries begin to provide free viagara pill to their populace, it's unlikely to see the trend alter in any meaningful way. The alternative is through immigration which probably is not the most desirable option by any measure... not when you are running a democratic system and you rely on popular votes to keep you in power.

The end is nigh for some, there's no running away.

... and there's a simple way to measure the shifting trend, you can start by keeping track of a nation's currency value and its purchasing power.


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## haunting (8 July 2009)

How annoying... 

BHP stock price has lost more than 20% since its peak in early June, now it's not that big a loss at this point yet, but if it begins to lose another 20% or so in the next two quarters, that will begin to hurt, esp for those who bought in during its run up from May to June.

Will that happen? I mean BHP losing another 20% from the current 31+? I dunno really but frankly by it losing another 20% would only translate to this - it has taken a round trip back to its Dec low last year. No big deal since in this game, there will always be winners and losers. It will be tough for some but easy money for the other.

Such is life!

But could BHP really drop back that low? Well, here's the bit about economy vs the market, you see. The economy is not the market and the market is not the economy... but sometimes they overlapped. And the connecting glue is? Money! Or liquidity. The market is about fast money whilst the economy is about making real money. Fast money runs fast hence the market is always running ahead of the economy, does it explain the intricacy?

So BHP at 31 is what the market has ordered - the smart money and big instos are doing what they are required to do, they discount its stock price back to be closer to its economic reality. The question here is simply this - does 31.00 reflect economic reality of BHP money making prowess?

Dunno really, coz different people have difference perception. They have this freedom to choose what they want to believe in, esp  the stock market. If it's hard to convince others that the market is due for a drop because of economic reality, it's equally hard to tell them the correction may have more to run.

...just watch, more stop loss will be hit. Soon. But do you have to wait for it to happen before you pull the plug? Sometimes you don't, really if you try looking ahead with some other trick than just plain TA... trick like FA or big picture view to gauge the bigger trend that is happening way above your universe. The trick is to discern what is important and what is not... but then again, it will be hard to convince others of things they have not tried before.

Just like the grand old Pope at one time... those who tried to show him the earth is actually round were persecuted.

See? Living a flat earth is that much easier to explain so many things people don't understand... that makes life that much easier,


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## haunting (10 July 2009)

Interesting read - click me!



> _Beijing's main interest in Latin America has been guaranteeing access to the region's raw materials ”” principally oil, iron ore, soybeans and copper ”” to fuel its continued rapid growth. For many countries, there's a downside in the China trade, through which cheap imports have displaced local textiles.
> 
> China's growing role has alarmed policymakers in Washington. However, China has been careful not to establish a military presence in the region, since doing so would antagonize Washington. The U.S. has considered Latin America to be in its sphere of influence since the Monroe Doctrine of 1823.
> 
> ...





** I don't want much, of the 140b worth of trades, I am quite sure Australia would be able to fulfill at least 50% of them - all it needs is rather simple - "talk less do more"!


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## Sean K (10 July 2009)

During APEC, held in Lima a few months ago, there were 140 Chinese as part of their delegation....lol


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## haunting (10 July 2009)

I can imagine - 10 are there for the conference. The rest are there checking out the local "dimsim" or "yamcha"


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## haunting (10 July 2009)

Read it here... click me.



> _First we must understand Chinese culture when it comes to relationship building, or guanxi (pronounced gwan-shee). Having guanxi is utterly essential to doing business in China. There are many definitions of guanxi, but it would best be described as ‘connections’ and ‘relationships’.
> 
> Building relationships in China is a time-consuming process and not easy, especially as a foreigner. But once you do build your guanxi, it comes with a level of loyalty and camaraderie that will support you in tough times... _




Isabelle missed two of the most aspects of Chinese guanxi, and I don't blame her. They are called TRUST, and its cousin, HONOUR.

Yes, guanxi is actually quite basic. To enforce "trust" between two business parties in the Western world, we rely on laws and a paper contract, spelling out in detail about what why where when who should/must/will/shall do this or that, etc...

Over here, to enforce a paper contract, you rely on the whole legal system, court, judges, lawyers, police, accountants, etc... a whole plethora of state apparatus and trained professionals. 

Over there in China, where such legal system is lacking and the "concept" of Western law is still alien to most people, how do you expect the Chinese to conduct business among themselves or with a foreign business party? 

That's when trust and honour become important.

That's where guanxi comes in. The longer is the guanxi between two business partners, the deeper is their understand of each other and hence the stronger is the trust and honour linking them together. 

It takes time to build guanxi because it takes time to get to know a person, or a business partner... it takes time or event to build up trust.

Event? Yes, sometimes an event or a sincere gesture from one party to another could build trust.

To illustrate in a negative way - the recent Rio's abandoning Chinalco in the last hour and then signing up with BHP almost immediately was a complete "backhander" to their guanxi. It's a treacherous killer move, and Rio's management could assume from then on any deal they sign with the Chinese, that piece of paper contract would be treated with "contempt" - if the Chinese could get away from it, they would.

How hard would that be if the Chinese really return a backhander to Rio? Well, just try imagine Rio going to a Chinese court to sue for their piece of silver...

Trust - a simple yet very powerful word... without which, it would be almost impossible for a business to operate in China. Right now, Rio I believe is falling into that pit - it has dishonoured its reputation and has lost the trust of a very important member in the inner circle of the Chinese leadership.

Just think about this - Rio sold 58% of their iron ore to China last year and is planning to expand their iron ore production next year... hoping to sell more to the Chinese!

... now tell me why the investors are so "bull" on Rio and its management?


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## MRC & Co (10 July 2009)

At the same time, the Chinese need to learn to do business in a Western way.

They need the West as much as the West needs them.


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## haunting (10 July 2009)

True to an extent. But in this context, the elephant is the Chinese demand/market, not Rio's supply. As pointed out earlier - China can live without Australia, but Australia can't live without China. This is a very unpleasant thought  that many people in this country find hard to accept. Harder to accept still is China has a market system that is a hybrid of "capitalism" and "communism", one where the rule of laws is not the ultimate deciding factor.

But market freedom will always apply when come to international trades - Rio doesn't have to sell to the Chinese market if it doesn't want to. 

Fact of life.


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## haunting (12 July 2009)

OZ vs China...



> _The issue had to be dealt with in a sensitive yet strenuous way, he said, because the Australia-China relationship was an important one.
> 
> "We're friends but we're friends that tell each other what we think and what's on our mind at any particular time.'' _




Is this how friends treat each other?



> _Mr Crean met Sha Hailin, deputy secretary-general of the Shanghai Government, yesterday after trying but failing to meet more senior officials.
> 
> "In the Shanghai Government you have the mayor of Shanghai, eight vice-mayors, one assistant mayor and then below that you have 11 deputy secretary-generals," said a Shanghai diplomat. "Mr Sha is number five in the hierarchy of deputy secretary-generals."
> 
> Those 16 officials are, in turn, outranked by the top 16 in the Shanghai Communist Party._




** been saying for a long time... never never let "faces" be torn coz mending face could take a long time. Your really do not want to speak what is in your mind even when you are talking to your "true friend"... not in the public and not in international diplomacy. Saving face is very important in China and any good and decent advice should be done in private and not in a "lecture". Krudd scored big in the international arena with his talk of human rights on the Chinese expense and now the Chinese is returning the favour...

There is a clear breach of protocol in how Crean is being treated in China as the Chinese official is way too low ranking to his - and this is the Chinese way of "diplomacy".  All action, no words. Subtle but effective... the best Krudd can do now is not to get involved personally. That will be asking for humiliation. He should know better.

And with that, the usual diplomatic channel will fall back to the usual "formality"... where the govt will learn it through the Chinese news source. 

The way moving forward? May be through a third party, like the Singapore govt or some other "Asian friend" to smooth out the strained relationship... by looking around and doing a quick count, I am not sure if there are still many "true Asian friends" around wanting to take up this role for Australia.


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## haunting (13 July 2009)

Forget about Stern Hu, he is just a small potato... this is what will raise the heat. Wait for it.

Keep those dates and timeline in your diary. Meantime, don't expect the iron ore market to be active. Over there, the Chinese steel sector/market will be going through a shake up and shake out, with CISA banging heads to take down every rogue and delinquent traders... by the time they finished, they would be ready for next round of negotiation. And by that time, the spot market would be quite "dead" too - when no one dares to step out of line.

What left will be the "going broke" scenario - the contract negotiation between the biggest supplier vs the biggest consumer... with serious consequences. If there's a dead lock like this year, attrition will be the name of the game; by then, just use your imagination and visualise what it would mean to China, the consumer and Australia the producer.


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## haunting (13 July 2009)

Chinese business in chains

** it's all over the place, everyone is feeling "hot" with the Stern Hu incident. I even read about this piece on Heavenly signs why China should take note - reflects a lot of the local sentiment but losing a bit on journalistic ethos. Will all these help? Dunno, but it sure helps to put a lot of pressure on the govt of the day. Krudd and his govt will be put under extreme pressure....

But will it really help matter? Will it help to bring Stern Hu out of the lockup? Will China give a damn? Frankly, doubt it. What they are dealing with is an internal corruption matter with nation wide investigation into the iron ore purchase by some big steel mills which in turn resell to smaller steel mills at 40% or more profit. And where do these big steel mills get their supplies from? The investigation is on going and it seems all three big suppliers will get a look into.

Stern Hu's arrest? Well put it simply, if the Chinese doesn't have enough evidence, they won't act so recklessly.

Here's just a simple observation - if the Chinese doesn't have something more credible than just steel mill visit, they wouldn't coin their President' name as the person behind the arrest. If this matter were to go all the way to the top, I doubt if what the Chinese have is just something flimsy.

For a start, having an internal memo/minute of CISA's strategy in negotiation would be bordering to "trade/stater secret" - at this point, no one knows what evidence the Chinese have. The local media responses and reactions at best, all are speculations and emotional outbursts, depending on what one wants to believe... sure, we can always fall back to claim that China should/must show cause in this case etc... they will, but in due time - until they have gone through the whole investigation process.

Meantime, here's a good writeup on what went wrong...

ps: will China's business dealing with the rest of the world be affected? Well, there's this thing "immoral" about the capitalist system, is the unsatiable human desire for profit - as long as there's money to be made in China, the profit seekers will turn up in throngs - these people will find some excuses to overlook or justify their presence over there. Let's not get over melodramtic over all these media brains' claim.


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## haunting (13 July 2009)

Oops! Can't post chart in comment field (any chance this option be turned on so follow up charts can be posted, Mr. Admin?)

... well, let's just put it simply that it looks cheaper at 29.00.


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## haunting (13 July 2009)

Robert McNamara Described as the “Architect” of Vietnam War - by Bill Bonner. Read it here.

...thought the closing line is all about what's wrong with the current US-centric view of the world.



> _Sometimes it is the brain that fails. Sometimes, it is something else._




** ever wonder what is that "something else"?

It's the heart that is missing! 
Plus lacking commonsense. 
Plus failing to recognise their cognitive biases, and biases inherent in other culture. 
Plus the failure to recognise and appreciate the cultural differences between different countries and different races and these cultures are demanding changes unique to their circumstances.
Plus the wrong belief in American might and abuse of their position as the sole super power...

But most important of all, their inability to perceive change, esp fundamental changes happening in the other side of the globe, and take the necessary adaptive actions.

Hence lies the root of the problem - McNamara has failed. Greenspan has failed. Paulson has failed. And now Tim Geithner and Bernanke? 

What is their chance?

They are repeating McNamara, Greenspan and Paulson's failed approaches - they have failed to observe with their heart, with commonsense and are clouding their judgement with the American brand of arrogance - nothing has changed hence they should expect nothing changes in their result.

Let's wait...their last silver bullet has been fired, and it's in mid flight, they are not sure if it has hit or missed as they couldn't see the target, it's shrouded in pitch black fog...

... all they can do is hope and pray.

The sad thing is by the time they know of the result, it's too late. It usually is...

Tragic.


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## haunting (14 July 2009)

Hu is G.Rudd?

** all wild speculation here.  

But it sure is timely and urgent for Greg to make this move.  A very Chinese approach, gotta say. This shows Krudd does know a thing or two on how the Chinese operate. There is no better person than your own brother to carry whatever message you want to convey as the brotherly relationship demonstrates guanxi and trust to the Chinese counter party clearly. The implicit message to the Chinese would be this - you can tell Greg what is in your mind (what do you want?) directly and frankly and you can trust that it will reach my ears only and no one else...

It's show time.


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## haunting (14 July 2009)

Dreaming of a seat in the Security Council?

Wow! And Doh! 

...if this is the ambition and plan, then why published that defence white paper? Don't they know China holds veto power in UN? Surely they know better it's much easier to have China on their side as China commands a sizeable African "allies" and would mobilise them for the Aussie cause?

What the...!


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## haunting (14 July 2009)

The Chinese Brick wall...



> _Australians doing business in China suggest that prime ministerial references to his prowess at Mandarin and his understanding of China are widely regarded as unbecoming boastfulness by the Chinese. At the same time, Canberra's all too evident apprehension about the level of Chinese investment in Australian resources and about the potential Chinese military threat have resonated loudly. That's even without silly snubs like trying to change seating arrangements to avoid Rudd sitting next to the Chinese ambassador in London.
> 
> *None of this explains, let alone justifies, the provocative act of the Chinese in detaining four Rio Tinto employees, including a senior Australian executive.* But it may help explain why Beijing has been so dismissive of the Australian reaction and sensitivities to the extent there was no prior warning or attempt to deal with the matter through back channels... _




** I believe the bold print emphasises the very important point the local media is not addressing, or rather, a point of view they prefer not to accept as credible or valid, that is, the Chinese is treating Hu and his stuffs and the arresting of quite a few high level purchasing GMs from various steel mills as an internal corruption case. It seems the level of corruption in the steel industry has reached a stage where the top level of officialdom has to be called in to provide the necessary authority to cow the regional officials into cooperation.

Right at the beginning the Chinese foreign spokesman Qin Gang has been saying this matter is very much a state matter and has suggested to Australia not to politicise it as it wouldn't do Australia any good...

Now I am not sure if anyone has really listened then or is paying attention now, if the investigation were to reveal with evidence that Hu has played a role in this case... would this still consider a "provocative" act against Australia?

Would it make matter unnecessarily complicated between the two governments?


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## haunting (14 July 2009)

Rudd may contact China?

** well, who is he gonna call? President Hu? I doubt he would get through.... PM Wen? He is not in charge in this matter. So who is he going to call? 

Humiliation is waiting for him. But if he doesn't make the call, worse may happen... for example, try contemplating the possibility of China cutting back their commodity purchases from Australia. This is a very real possibility and it would depend a lot on how RIO/BHP's merger being handled by the Australian government. The Chinese retaliation in this case could potentially change the whole election landscape in the forth coming election.

An exaggeration? Possibly, but it sure would give Malcolm Turnbull a big free pass, say if the Australian balance of payment by then is in rapid decline into the negative. Could the Labor govt take such a risk? Would they want to take such a risk?

I can almost see Malcolm's sly smile on his face... what a godsend!



> _“I did not expect that China would react so harshly,” Roger Groebli, head of market analysis at LGT Capital Management, said in Hong Kong. “China has a serious interest to take stakes in Australian mining companies, therefore this discussion might set the hurdles a bit higher. I rate this as a drag for stock prices as well as investor confidence.” _




** Roger might not have expected this... but he shouldn't be that surprised because the relationship between China and Australia was already in downward slide since Krudd gave his human rights speech in China. Since then, the deterioration has been accelerating from the defence white paper to the various FIRB decision clearly showing a discriminatory bias against the Chinese enterprises. 

Yes, I am aware of the point that most Chinese enterprises are state owned, but in the Chinese eyes, corporations like Chinalco and Minmetal are as "independent" as they can possibly be by the Chinese standard, and to keep their approach as professional as possible - they both engaged Investment advisors from the West and follow their advices to the dot; and yet they were ruled as unacceptable... if you believe the Chinese are not upset about these, you haven't been paying attention.

... and so here we are - sh** has really hit the fan and the heat and risk are rising by the day; you can call them any name you like but please learn this lesson - don't screw with your biggest customer. It could bakfire...


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## haunting (14 July 2009)

China reviews iron ore import licences

** this should give cause for concern here because of its impact - the house cleaning and head kicking would eventually remove those rogue and uncooperative license holders. The remainder will be so cowed that they probably would not dare to sign up any deal without the aokay from CISA.

Can see its implication or not? It means if the big three suppliers were to pull a stunt like this year by signing up with the Japanese first and if the Chinese were to hold out for more discount, they won't be able to off load their ore in the spot market that easily and push up the spot price. It won't be easy without the "unofficial" Chinese participation. That would also mean there will be plenty of pressure on' the big three suppliers to maintain a consistent production and sales while the negotiation is ongoing...

The longer the impasse the worse will be the numbers for everyone, including the Chinese steel mills. It will be a battle of will and reserves, the attrition will surely wear down the party with the weakest financial reserves. And here's where "hell" will set in for the big three unless they can sign up some big enough contracts with the non-Chinese steel producers - the Chinese has almost unlimited capital resources with US$1.7 trn stashing in the background and cheap bank loans to tide over the hard time...

What's the chance for the big three to score BIG in the next round of iron ore price talk? 

Going for broke could have a very devastating impact on all parties. It will  almost guarantee a lose-lose outcome with the eventual winner walking off limping whilst the losers lying dead or broke... and this just involves iron ore market only. The Chinese has yet extend that to their copper and coal imports. 

Let's hope they won't really go all out for broke with Rio/BHP and they will leave the coal and copper market alone... but if they are really this pissed with Rio/BHP and are hell bent to go for broke , the economic impact would be really devastating for this country and not just these two companies.

.. let's just hope Krudd knows what he needs to do next, but for those Rio/BHP merger proponents I think they should seriously sit down and work out the numbers and the cause/effect and cost/benefit of the whole scheme.

I hope they will take into account and plan on how to deal with a mad elephant charging at them...

But on second thought... this is a free country and no one can really tell Rio/BHP what to do, so regardless the project will be pushed on and surely it must be fun I guess - you don't easily get to tame a mad elephant in anyone's life time. On top of that, it's been all agreed that the deal was a right call... so, what? I worry?

Never!


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## haunting (15 July 2009)

Mixed messages on China leave Kevin Rudd exposed - Paul Kelly

** this is the most balance and rational commentary I have read thus far in the Stern Hu fiasco. Comparing with the others, esp those from the Biz Spectators which are written with vested interests (in my view), Paul Kelly clearly spells out the core issues Australia has with China. Worth a read.



> _Australia is in unprecedented territory. For the first time in our history our main trading partner is not a strategic ally and not a rule of law democratic state. This is a fundamental change in our national existence. It is a long-run transformation and will demand a more sophisticated Australian diplomacy.
> ...
> It is equally futile to think Australia should retreat from China because it is an authoritarian state. That was not John Howard's policy. It is not the attitude of a sensible Australian government. Our involvement with China will only intensify. What is required is an unsentimental pursuit of the national interest, dismissal of any illusion about a special friendship yet a prudent drive to deepen relations and practical co-operation. That means working through tensions such as the Hu detention._




** there is no reason why Australia cannot work with China and make China a strategic partner in the economic arena. Can't see why not if the Australian govt is pragmatic enough and has the foresight to note Australia's economic future is closely tied in with China's ascendancy in economic power. 

Even China's long time enemy, Japan recognises this necessity and is pragmatic enough to adapt to the new economic environment. So is the USA. To date, not one high ranking American officer has stepped onto the Chinese soil and lectured the Chinese on their human right policy. Instead, in the last few months three of their ranking officers - Clinton, Pelosi and Geithner were in China mending fences, talking goodwill. Even the most outspoken of the three, Pelosi who has a record of anti-Chinese speeches did not touch on the sensitive Chinese subject but instead was concentrating on climate issue. 

That is the stark reality facing the "free world" - there is an elephant in the room and it's better to deal with it in a friendly way than the other way round coz the cost of mishandling the beast would be disastrous.

Now, ask why would Australia choose a tack that is putting itself in the harm's way? There is simply no reason for Australia to adopt such a policy. It's working against our self/national interest and our future generation's interest.


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## haunting (15 July 2009)

Here is a solution to the GFC... read about it!



> _The trouble is that Americans can’t spend. They have to save. The combination of a catastrophic decline in wealth and a sudden bulge in retirements gives America the profile of Japan during the lost decade of the 1990s. The Keynesian approach is a one-country model, which states that if the population wants to save rather than spend, the government should spend for them. America appears to be getting away with this because the dollar is a reserve currency and the world has to hold dollars ”” but the grumbling overseas might lead to the rest of the world ditching the dollar eventually, making the US like like Britain in the 1960s and 1970s.
> 
> The Keynesian stimulus isn’t working very well, as the miserable employment data tells us, and the stock market clearly doesn’t believe Obama’s demurral that it will work later in the year. There’s already talk about another stimulus package. FInanced by whom, and how? The deficit is already approaching $2 trillion.
> 
> If we follow Robert Mundell and throw out the single-country model of the Keynesians, it is obvious that Americans can save in another fashion, that is, by exporting. China’s underdeveloped interior is potentially the world’s biggest export market, flanked by similar markts in Asia and elsewhere in the developing world. The transition would still be painful, and the frictions considerable, but America could reorient itself to th global market. There would be a recovery. As matters stand we face a lost decade..._




** make sense? A little too Utopian and based on the responses to the blog, already objections are building... not many people are capable of thinking and reacting sensibly when they are confronting with an overwhelming problem. Fear, pride and ego would make sure they missed the big picture and the inevitable future.

The paradigm shift that has been set in motion will not change until and unless the forces effecting the change are altered. At this rate, and by repeating their past erroneous actions, they are ensuring their own misfortune.


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## haunting (17 July 2009)

I am feeling flabbergasted... Krudd is doing everything wrong at this point. There's now every chance that Stern Hu will be incarcerated for a long time with this Chinese reaction.

1) Instead of seeking help from a "friend" of China and going the quiet softly "Chinese" approach, Krudd instead went to the USA, asking them for help to pile on more pressure on China. And Smith did one better to raise the matter further afield, he repeated the same "noise" (according to the Chinese) in Egypt. 

Judging by the Chinese reaction, does anyone think this tack has worked? Did China react as if they are taking note of the "international pressure"? Not really, not how I see it anyway. It only serves to toughen up the Chinese stance, pushing them to make it unequivocally clear to the world that when come to matter involving their "sovereign judiciary independence", they won't be pushed around.

This is 2009 and not the 1980, for goodness sake... can someone tell Krudd or the USA please?

2) Even on moral ground... still remember the former defence minister, Fitzgibbons? Anyone? He walked from his post, and his sin was? Yes, he accepted some free gifts and free trips and the people here didn't like it.

Over in China, Stern Hu and his staffs were caught engaging in activities that are deemed too unacceptable even by the Chinese standard, why should/would the reaction be any difference here?

Let's be fair dinkum about this whole saga.

Playing tough against China is not going to work. For that matter, this is the second time the Chinese are giving a similar warning, that the the actions thus far from the Aussie govt are working against  "Australia's interest". I think Krudd should take note and change tack.



> _Mr Qin said Australia's remarks "cannot change the objective facts, nor can it have influence on the relevant Chinese authorities which are dealing with the case according to our law".
> 
> But he also underlined the perilous nature of China's legal system, treating as fact the allegations levelled against Mr Hu and his three staff. "The actions of the Rio Tinto staff have caused losses to China and China's interests," he said. "I believe Stern Hu and Rio Tinto are fully aware of this."
> 
> Mr Qin warned that Australian advocacy for Mr Hu would backfire. "We're firmly opposed to anyone deliberately stirring up this matter," he said. "This is not in accordance with the interests of the Australian side."_




Link here.


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## haunting (17 July 2009)

He further says... if you screw with a screw, be prepared when it screws you back...

 Oops! My bad. This is crude. Of course he dind't say such thing.

But he did say quite a few things:



> _    * China's period as student is over and now they want to be an equal partner
> * China's assertion that Hu Jintao did not personally approve the arrest of Stern Hu is an important signal from China and leaves the door open for discussion
> * The Stern Hu incident is a China/Australia matter and isn't even registering in the top items in US and Chinese news
> * He concedes China may be trying to send messages to other, larger trading partners, such as the US
> * The state-owned enterprises will continue to be very aggressive, with the backing of the Chinese government._




** but his view is not what I want to talk about, it's the interviewers, these big time journos and their attitude and their questions and their "still living in the 80s" kind of view of the world that is troubling me.

Because they are supposed to be very smart and experienced people, the media brains, and yet they seemed to be interested only in negative news about China, and got really disappointed when they were told there ain't anything really bad is gonna happened to China and that the USA ain't gonna be the #1 any more... to really get these folks to be a little open minded and yet with a title such as this "Full Marx for China" that one can detect the diehard nature of these brains.

.. to maintain an open mind and comment objectively seem to be a big ask from these people in this site. Where's the journalistic training they so pride themselves on?


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## haunting (18 July 2009)

Hu row a small bump in China journey



> _THE detention of Stern Hu has brought into question a lot of assumptions regarding our trade relationship with China. Many see the arrest of Hu as retaliation for Rio's rejection of the Chinalco offer, as well as a reaction to Australian Government dealings more generally with Chinese investment in Australia. Some question whether the Australia-China relationship will be permanently damaged by this affair.
> 
> In my view this affair will turn out to be a small bump on the long road to China's full integration into the world economy through trade and investment. Part of that will be a continuing fruitful and prosperous trade and investment relationship with Australia.
> 
> ...


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## haunting (18 July 2009)

Worth a read, click me!



> _The iron ore trade became a national humiliation for China. Chu Tian wrote on the front page of this week's Chinese Melbourne Daily: "First, Australia played China as a monkey [on the Chinalco investment]. Second, when iron ore prices boomed, it clasped China's neck and took a big bite." Australia, Chu said, failed to give a hint of concession, and events unfolded inevitably.
> 
> Chu said China's hardline actions will be seen in Beijing to have collateral benefits.
> 
> "The Government's detention of Hu and the other three is more for deterrence and warning than for punishment," he wrote. "This is killing four birds with one stone: Kevin Rudd, Rio, the overseas Chinese who betray China's interests, and senior executives at state-owned enterprises."_




** thought this observation is quite spot on. Frankly this is just the beginning of more changes to come in China, vis-a-vis their various commodity market. Iron ore is just one of the metals that is in a "mess" from the Chinese context.  The others like copper, zinc, nickel, etc are probably in a bigger mess. Once the Chinese has tidied up the iron ore market, I won't be surprised at all to read about their next move onto the other metal markets, with copper within their aim.

All these changes will be on their way without a doubt, which brings up the question of BHP/RIO's recent position - they should expect the Chinese is watching them in every move and they should expect the Chinese retaliation. For those who are still living in the past, as reflected by the many many news/market journos and their rear-mirrored-views, big cyclical profits as in the past 4 years will be a thing of the past.

The major factor behind a runaway rise in commodity is the gross imbalance between its supply and demand, coupled with acute timing factor, the spike in price should be treated as an exception instead of treating it as a rule. The super cycle will continue with a gradual consistent rise instead of a parabolic acceleration. 

The last 5 years probably is a good example of why a parabolic rise is not desirable as it clearly illustrates the pain introduced as a result of the bursting of the bubble. Right now the job loss rate is closer to 8% than the reported 6% in my view. With potentially more to come if the global economy does not recover in time.

It's much better to see a consistent rise of 10-15% per year for the next 10 years instead of 50% in the next 5 years follow by -50% or more in the next 5 - it's just too painful for everyone.

Going for broke or going for a winner take all strategy in my view is the worst of all possible strategies BHP/Rio could take. Cornering the market would only invite the Chinese retaliation and pushing them harder to seek alternatives. It will never bring back a lot of dole for Australia because any huge short term gain will eventually be eroded or evened out in the long run, once the Chinese have tidied up their house and brought forth their new production (the recent new IO find in Northern China is rumoured to be ready for production in 2015). - that's when BHP/Rio are likely to face the possibility of being a loser and losing all their advantages - with a disastrous outcome for Australia, and bad news for everyone.

That's one future outcome I am fearing, but then, and as usual, no one really cares a hood since it is so far and too far ahead. Who really cares if there's 5 years of good time ahead?

We can't be worse off than the American, can we? 

...so far they have already spent and sold their next couple of generations' total income and saving and that don't seem to bother them one bit. Why would we here be bothered by something that has yet happened?

Let's party!


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## haunting (21 July 2009)

The cracks in China's success need global glue



> _ANU economics professor Ross Garnaut told the forum that China's fiscal stimulus had boosted the economy by 3 per cent, but its monetary expansion via bank credit had provided a 10 per cent boost.
> 
> "There was a lot of pent-up investment demand, which came roaring back."
> 
> ...




"Monopolisation" - I bet not many will agree with Prof G, and if you don't believe me, just check out the Aussie media.. almost 80-90% of them journos are talking as if China is the greatest enemy of Australia of all time without giving a second thought that this "evil nation" provides bulk of the "income" to this country. This is probably one country in this world that treats its biggest customer with contempt and constantly wanting to denigrate their system, their leaders and their people, based on impression one gets the media, of course.

Is Australia digging its own grave? Probably not because China is pragmatic enough, and there're enough people in Australia sensible enough to know cooperation is way better than confrontation. In a confrontation between China and Australia economically, the result is quite obvious, Australia will walk off second best.

If you find this hard to believe or accept, just ask yourself this simple question - is your customer always right? It's that simple!

Until and unless Australia or the big miners like Rio/BHP start to accept there's a need to cooperate with China, there's a need to work out a solution that provides some kind of Win-Win outcome, Australia is and will always be facing the threat of losing its biggest customer and by default plunging its economy into a serious recession.

This is the reality. Chauvinistic talks such as those you read in this forum will never carry the day. It's bread and butter every one wants. It's your/our children we care about and their future we want to ensure and this could only come about with a good trade relationship with China. One that builds on cooperation instead of confrontation.

If you find it hard to accept what China has done with the IO negotiation, let me explains - it boils down to this - Rio/BHP wants to continue their dominance in the IO trades to China and they want to continue their last 4 years' dream run with IO price rising by 40-50% on an annual basis. Hence they are doing everything within their disposal to "win" the price negotiation.

The Chinese, after 4 years of runaway IO prices (and with other commodities) with a resultant inflation rate nearing 8%, they are fearful of such history repeating because that effectively will put their economy backward, ruining their stimulus plan.

The conflict is this simple and before you accuse me of being bias, take a moment to think, to consider the whole situation because this is what the Chinese are thinking and they are acting on their fear and their thought. You disagree? Fine, make a lot of noise and go tell the Chinese to FO but it won't make the matter go away. The Aussie economy is still in a dire straits and it needs the Chinese market. And it needs the Chinese market in the next 20 or 30 years because the only growing market for commodities right now is China. Until India is ready, Australia doesn't have a choice but to learn to deal with China, no matter how "sh**" she feels.

Get a grip with reality. China is like an elephant to Australia. For that matter, it is an elephant to every country in this world, including the USA, Russia and UK or EU. It needs to be handled with care and the only way to get the better out of it is through cooperation and not confrontation. Use your wits and not your brawn and learn to play a game that will make sure there's a Win-Win outcome and not one that is Win-Lose, it is an impossibility for Australia to be the ultimate winner in an economic contest with China. The best we can get out of it is a hopeful Win-Win where both sides are feeling they are winning and are actually benefiting from the exchange.


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## haunting (23 July 2009)

A follow up on the economic front...

** just think this way, 2008 probably is the peak year of the commodity super cycle, one can relate that to climbing a mountain - after reaching the summit, there's only one way to go - down. The question remains is how much "down". If China is still the saviour to this lucky country and if she could still live up to her name, let's hope the downward decent would stop at one third, or to half way, giving Australia economy a good chance to "outperform" the rest of the Anglo Saxon economies in the next 20, or even 50 years.


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## haunting (23 July 2009)

Foreign companies bribe their way into China... more

** realistically and pragmatically speaking, bribe is like the grease that keeps the machinery functioning smoothly, without which, to get business done could be extremely slow and painful. The trick here is not to get caught... but, after saying all these, that does not mean I am "promoting" or condoning corrupt business practices. :

Generally one can regard corruption in a developing country as a reflection/result of the low/poor remuneration the local government is paying their civil servants. It's very hard for the govt officials who are earning a pittance to process or approve contracts with value up to millions or billions whilst their efforts and contributions are not recognised or rewarded.  Repeat this tens or hundreds of time, it becomes a big ask to demand such mere mortals to rise above their normal call of duty - not many can refuse the temptation of getting their "fair share" of the cake... don't believe me? Just ask those few Qland policemen!

Back in the 70's the Senior Minister of the Current Singapore govt, Harry KY Lee was wise enough to make a move to tackle the corruption (and brain drain to the private sector) in his govt - he raised the pay of all the civil servants, including the govt functional ministers to a pay level equivalent to the private sector and topped it by a further 15% (I think), depending on individual qualification and experience... with the genius of that single stroke, corruption was almost eradicated in Singapore over night. 

As of today, Singapore is one of the "cleanest" govt in the world, due to the highly paid civil servant and a very severe punishment awaiting those who are tempted.

Until China can afford what the Singapore govt has done years ago and until they have reshaped their judiciary system, those foreign business entities who are seeking fortunes in China will have to learn to survive the corrupt jungle over there. For any company that is operating in China, let's be frank, if you hear them telling you they are all above board and are totally innocent... well, let's just put it another way - do you believe it - if a fly tells you it doesn't really like the taste of "****"?

Sorry for the crudeness, but frankly, I much prefer to listen to an "honest corrupt business man forced by the situation" than an outright liar.

There's another news I read from Singapore, it seems if Stern Hu were found to be involved in corrupt practices in China, some US enforcement organisation may want to, or have to investigate Rio's business practice in China. Don't know how much or how valid is this view, but,  the news was quoting the recent corruption case of Siemens in China.

Here are some links, better still, you do your own google search...

Siemens to pay $100 mln to fight corruption as part of World Bank settlement 

Germany’s Siemens to pay euro75M to combat corruption


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## haunting (25 July 2009)

Aussie Pete is living a very interesting life and through him, you can get a glimpse of life and living in the other part of the world... 

Stumbled on his blog this morning, gotta say there's much to learn from him, especially from his blog on cross cultural experience.

Check him out here, here and here.


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## haunting (27 July 2009)

Kicking Out Rio: China's Killer Strategy in Breaking the Iron Miners' Collusion 

Trace back to my other blog on Rio

** The Europeans conquered and colonised the Far East and the New World through a very simple strategy - divide and conquer to weaken the native resistance to their rules. Now it seems the same strategy is being suggested to the Chinese, ie, divide and conquer the IO producers, with the "under-class" target firmly aiming in Rio's direction...

... I guess Rio should expect this since even a simpleton such as moi can see it coming long time ago. Luckily this kind of talk is still in its infancy, there's still time provided someone, or Rio, starts taking action to remedy the deteriorating relationship before it gets completely out of hand. 

The bottom line is quite clear here... and it's not the time to play tough guy. Sanity should prevail... not ego.


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## haunting (28 July 2009)

Private sector investment set to fall, expert says



> _Access Economics' latest investment monitor says the value of projects underway or in planning in the June quarter was more than $230 billion.
> 
> That is a rise of $6.9 billion on the previous quarter but a reduction of $12.2 billion over the past year._




** from memory, Morgan Stanley is expecting a 12% fall in capex this year, not sure if they have revised their numbers. In any case, there's a solution and it lies in the Chinese Sovereign Wealth Funds (SWF), which are currently being instructed to "go out", invest and prosper. That's a global move by the Chinese govt to "hedge" their exposure to the US$ and it's real money, that is, if you don't mind to receive some "useless" US$ from them. By today's rate, it's worth about AUD1.215...

So again, it boils down to this very unpleasant thought for Australia - money, jobs, prosperity and a good life vs principles, ideology, loyalty and eating less... at some point every Australian will have to decide on this, in the next two elections I reckon.


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## haunting (28 July 2009)

Loan losses on US commercial property rise toward record levels

** WDC came to my mind almost immediately, I reckon there is more write off to come, in addition to raise more capital.

In a different tangent, this news is probably one of the clearest signals the market needs to know - that the banks are not out of the sin bin yet. Once the current rush for their "cheap equity" is over, be prepared for the mad rush to the other direction when sanity returns. How much the market is willing to give back will set up the foundation for the year end second wave of rally, if there's one. jmv.


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## haunting (29 July 2009)

pointed questions in private...

I promise, I promise...

** a glimpse of future?



> _President Barack Obama opened Monday's discussions by declaring that the United States sought a new era of "cooperation, not confrontation" with China and that management of the U.S.-China relationship would be a major factor in defining the history of the 21st century.
> ...
> ...to reassure China that the U.S. will not let deficits or inflation jeopardize the value of Chinese investments.
> ...
> ...




** the underlined texts I think they do mean something. The US will ease QE once their econ is stabilised, but without an objective or clarification on what they meant by a stabilised economy... but this soothing sound is probably all they can give. On the other hand, the Chinese are telling the American what they are going to do, they are going to measure the American's  "soothing sound" by an objective measure - they want to see a declining fiscal deficit.

From Bloomberg report...



> _The U.S. will ensure a “sustainable” deficit by 2013, Geithner said...
> ...
> Obama said in a speech opening the meetings he wants to engage China in cooperation on a range of issues, beyond acting together to stimulate a global economic recovery.
> 
> “We must also be united in preventing Iran from acquiring a nuclear weapon,” Obama said. He cited nuclear proliferation, terrorism, piracy, global pandemics, climate change and civil war as other common threats facing the two countries. In her sessions, Clinton addressed both the Iranian and North Korean nuclear programs.  _




** not so sure about the Iran nuclear program because this is not in China's interest and they need Iran to be on their side. In addition, it's the Russian that is helping Iran in their nuclear ambition, not China, can't see how the Chinese can help unless the US wants China to stop trading with Iran.

... and 2013! Yes man, that's gonna take that long for the US and the world to recover, I think it's reasonable. But I personally would cut that short by one year, make it 2012 just so I can run one year ahead of everyone... to give meself a 12-mth handicap.


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## haunting (29 July 2009)

Read about it.. click me!



> _Australia's foreign investment regime has a national interest test -- in fact that is its only test. Foreign investment applications must be approved unless they are found to be contrary to the national interest, and that decision is the responsibility of the federal treasurer. The FIRB makes recommendations but it is only an advisory body, and treasurers can, and have in the past, gone against recommendations of the board.
> 
> The foreign investment legislation contains no definition of the national interest. It is whatever the treasurer of the day decides it is on applications before him.
> 
> That can lead to contradictory decisions, creating uncertainty among overseas investors..._




** it is more than a necessity to review FIRB because in the next few years, bulk of the FDI coming into this country, especially in the mining sector will be from the Chinese SWF, which is seen by a large section of the Australian population to be a direct arm of the Chinese state and by this definition and fear, any Australian assets sold would translate into selling out Australian interest to the China... this will be a political nightmare for both major parties because without the Chinese FDI/SWF, the mining sector will be taking a big hit, especially in the low end of the sector where funds are likely to become expensive or "extinct" - the impact on job will make a big dent on the national economy, that's a guarantee.

The earlier they begin work on FIRB rules, the more transparent they make it to outside interest, the better. It's in Australia's interest to get this done expediently as time is running out fast, and when all the signs are indicating the global econ recovery will not happen just yet, and with a budget deficit of 200b starting down the current govt, I am quite sure they want and need all the help they could get to alleviate this financial burden asap... before the next election!


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## haunting (29 July 2009)

China packs its bags...



> _As Australians we pride ourselves in not being racist, but the Chinese say we are racist – and when it comes to visa requirements there is no other way to describe us. I understand that Australia does not want to be flooded with millions of illegal migrants who come here as tourists, but we are dealing with an enormous market and a country that is going to play a much larger role in world affairs.
> 
> The visa requirements for Chinese tourists need to be revised and made much simpler. Not only will that make it easier for the Chinese to come here, but it will show them what Australia is all about.
> 
> Remember that behind the Obama doctrine, there is a swing of power to China. We simply can’t afford to have racist anti-Chinese tourist policies. The world has changed..._




** just in case you don't see how tourism will help the Aussie economy - back in the 90s, Hong Kong went through one of it's most horrid economic downturn due to many factors, with the returning of power/rule to China from the British being one of the major ones. The properties were going through a big time slump and with the Asian contagion rampaging through the Asian region, the HKers were feeling totally helpless in dealing with the slump... until China came along and decided to loosen its gate, allowing a flood of Chinese tourists pouring into HK, gobbling up all the luxurious goods they could get their hands on and saved the HK economy in the process.

If you think this is just a one off, well, let's watch Taiwan... China is doing a HK stunt for the Taiwanese economy right now. Taiwan's economy has been in the doldrums since the GFC and with the US pulling back its consumption of Taiwan's hi-tech goods, the Taiwanese economy has been struggling and life to an extent has become quite hard in the island... until they have elected a new President who is more China friendly and changes the whole political atmosphere between the two rivals. As a goodwill gesture, China has decided to help Taiwan out as she has done for HK, firstly by relaxing the travelling restriction between the two countries and secondly allowing Chinese companies to invest in Taiwan... the manoeuvre is still on going, so it's hard to tell if this will be as successful as what they had done back in the 90s, but already there are signs that the Taiwanese economy is recovering and is gaining momentum...

... now back to Australia, and over to everyone - are the Chinese tourists a good thing or bad? Your call.


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## haunting (29 July 2009)

China's illusory power



> _Of course, China could dump those dollars on world currency markets, but the resulting adjustments in currency values would be much more damaging to China’s export economy than any consequences felt in the US. That damage to China’s export economy would cause unemployment and likely social unrest of a scope and duration the Communist Party could not tolerate.
> 
> It would be better for China to cooperate with the United States and undertake an orderly revaluation of the yuan to a level that eliminates its trade surplus over a period of three years. That would be plenty of time for everyone to adjust.
> 
> In the end, China only has the leverage President Obama gives it._




** this the usual problem I have with the US-centric comments like this - they still think the US is in charged of the situation and is fully in control. The fact and reality speak much louder than all these chauvinistic opinions - if the US is still as strong as this professor has premised, the US will not go through so much trouble placating the Chinese through talks involving so many high ranking officials from the administration. 

A few years ago, what he is seeing now would definitely not happen. It would be a totally non-negotiable and a total dictation from the US to the Chinese... can people be this blind and not see who things had changed since?

If the Chinese were to dump their US$ holding, he can bet  this would happen - a complete chaos in the US system. There will be social chaos as well as a complete collapse of the banking system overnight, with hyper-inflation running out of hand rendering all forms of trade within the USA unmanageable - something like what Zimbabwe has been through not too long ago where the US$ value would probably  decline by the hour or even minute...

To the Chinese, their debt would  be honoured by the USA and not all will be lost. They will take a big haircut on their US$ based assets but I can assure the good old professor that the Chinese will not suffer as much as the Americans... because they have a totalitarian system - it's much easier for the Chinese to manage and control a complete and total social upheaval. 

I would rephrase the following for him: "It would be better for the United States to cooperate with China..." and "the US$ only has the leverage the Chinese give them, and without the Chinese goodwill, the US economic recovery will be a long drawn out and painful experience for every American...".


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## haunting (30 July 2009)

Watch the development in this one because "they" are asking the govt to bail them out.

** the Aussie version of TALF - do you/we want to go down the American path?

No friggin' way!


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## haunting (1 August 2009)

Read all about the bad **** here, click me!



> _ The first 12 months of the U.S. recession saw the economy shrink more than twice as much as previously estimated, reflecting even bigger declines in consumer spending and housing, revised figures showed.
> 
> The world’s largest economy contracted 1.9 percent from the fourth quarter of 2007 to the last three months of 2008, compared with the 0.8 percent drop previously on the books, the Commerce Department said today in Washington.
> 
> “The current downturn beginning in 2008 is more pronounced,” ..._




** nothing much to add, except this contrarian thought - if "they" got it so wrong and for so long, just ask yourself why do you continue believing them?

Which brings up the second question, the current media brains have been calling the Chinese' bluffs by saying their stats and numbers are not credible, etc... the "truth" in all these accusations, for all you know, is probably more credible than these accusing brains want to believe because of their own cognitive bias.

In other words, the growth and the pace of economic recovery in China as well as in the whole Asian region could be much higher and faster than the "west" wants to admit or accept.

Which again brings up another question, why do you want to guide your investment time frame based on what is happening over in the USA? For that matter, their economic recovery, whilst is good, what's that got to do with the Aussie econ recovery?

Already there are so many "authorities" and figures and numbers have been telling you that the Aussie fortune does not rest with the west but instead it's decided by people in some other part of the world; people Australia has problem identified with... more.


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## haunting (2 August 2009)

Thought this is an interesting view he'd expressed last year and in an interview yesterday he responded to the interviewer that he has not changed this view... go find out more if you are curious.

1)  
2) His homepage

3) One of his research paper

4) His Wiki Profile


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## haunting (3 August 2009)

"Buy on rumour sell on fact"
"Buy on confession sell on actual report"
"Buy low sell high"
"Sell high buy low"
"Buy on fear sell on exuberance"
"Buy when everyone is arguing on their trading merits, sell when everyone is arguing on their trading merits again and twice as hard"
"Buy when the forum participation is low, sell when it is active"
"Sell when everyone is happy to show their trading scores, buy when everyone is cursing and bitching about everyone in this forum"
"Buy when the analysts are not saying anything sell when analysts are recommending buy"
"Buy when the banks are saying they are losing money, sell when the banks are saying they are still losing but not that bad"

*"Buy the first pullback from a new high, sell the first pullback from the new low"*


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## haunting (3 August 2009)

Once a rotten system, always a rotten system...



> _The Fed has emerged as one of Wall Street’s biggest customers during the financial crisis, buying massive amounts of securities to help stabilise the markets. In some cases, such as the market for mortgage-backed securities, the Fed buys more bonds than any other party.
> 
> However, the Fed is not a typical market player. In the interests of transparency, it often announces its intention to buy particular securities in advance. A former Fed official said this strategy enables banks to sell these securities to the Fed at an inflated price..._




** firstly let us all feel sorry for the American tax payers; secondly let us all feel sorry for ourselves for being caught up in an exploitative corrupt system that has made everyone outside the USA to pay for their debts and help keeping their greedy investment bankers alive just so they can continue sucking the life out of everyone... even after they have been exposed!

*&^%$$%#@@)&&*()!!!

ps: get a grip, it's the US$ hegemony that is plaguing the world finance and it's the investment bankers that are corrupting and exploiting the financial system built on this fiat currency.


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## haunting (9 August 2009)

** from WSJ: net lingo, some are new to moi... also other reference sites to make you more learned are: 

http://netlingo.com/
http://dtxtr.com/
http://www.urbandictionary.com/



> _
> Say What?
> 
> A sampling of some popular shorthand texting terms.
> ...


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## haunting (10 August 2009)

A fifth of European Union will be Muslim by 2050

** this is food for thought for those who care... 

By 2050, the southern part of the USA would have a Hispanic population that is large enough to change the political scene in states such as Texas. The conservative Hispanic Catholic Christians will be major political change agent to the outcome of their Presidential election. There is every chance that one of them will be made the President of the USA... now that will really piss some conservative Republicans off.

More importantly, the probability of seeing the USA breaking apart, not unlike what has happened to the USSR, will be increased at least many folds. If and when that happens, what will the world look like?

My conjectures...

1) EU will become very unstable because of this large underclass muslim population, I won't be surprised at all if it breaks apart like the USA. Based on the current birth rate among the muslims and if they were to maintain that growth, by 2100, they will become the most productive group of people in EU, that is, based on the assumption that younger people are more productive economically. 

BY 2100, an Islamic Europe?  Wish I can live that long to see that! (as an observer and nothing else, jic)

2) The USA... still remember the red and blue states? Well, the north will be the Blue whilst the South will be the Red. There is every chance that California will breakaway from both the Red and the Blue... and I won't rule out the possibility that California will merge with Mexico to form a new country - Mexifornia? Or Calixco? Luv this!

3) India and China will dominate the world commerce and there is every chance they will play the roles of the USA and USSR back in the cold war period. Their reign won't last though because of the rise of Islam, especially in Central Asia. This will likely see the Western part of China breaking away from the Chinese Republic. Likewise the northern part of India will probably suffer the same fate.

4) Australia? What can I say? Let's be nice to each other...


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## haunting (10 August 2009)

FNArena Rudi's view...



> _There are many misgivings and false truths about financial markets. One of these is that investors should "buy low and sell high". Wrong. If you try to buy low in this type of market you risk ending up with a loser stock, while all the rest is running away from you. The correct mindset, and I am borrowing this from US trader Dennis Gartman (publisher of The Gartman Letter), is to "buy high and sell higher"._




** iI would take Rudi's view as a good contrarian signal for market sentiment...

Attached are three charts - one of XJO, just to show where one should "buy low sell high" and where one should "buy high sell higher" and where one should be sweeping your profit off the table before others help themselves to it... but as usual, don't take my words for it, do your own analysis.

I am expecting the market to pull back, esp  from stock fundamental angle: a)  many stocks are reaching very inflated level that is "inducive" for profit taking; b) the weakening economic fundamental moving into the next two quarters; c) the overseas (read USA) market influence on ASX, esp when their market fundamentals are much weaker than ASX's; d) China's impending plan to constrict lending to control bubbly assets; e) large number of stocks are due for ex-divi soon, that will apply pressure on the index value; f)  the basis of the current rally - the XMJ sector is showing weakening momentum;  and the XXJ sector is showing a highly overbought state and is susceptible to profit taking, once the major leaders have gone ex-divi... this time, it's a fight between liquidity+market sentiment vs stock+economic fundamentals - my bet is on the latter.


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## haunting (11 August 2009)

Taliban Now Winning 

** as an invading force, no matter how many soldiers are sent by Nato, they will not win. As far as I can see, it's a Vietnam rehash. The outcome is almost certain - Nato will raise the white flag and withdraw eventually, it's just a matter of time and it's a matter on how - to save face.

According to the great Chinese strategist, Sun Tze, to win a war, a general would need three "things" to be on his side: Weather/climate, terrain, people - local people's cooperation and his soldiers' morale, believing they are fighting a just and fair war and it is winnable...

Right now, Nato doesn't have any of the three elements on their side - there's no way they can win! Can't see how and with what? For what?


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## haunting (11 August 2009)

Westfield Said to Get $1.4 Billion for Loan After Courting Asia

** expected something like this to happen, and mark my words, this little trickle will turn into a torrent once the rest of the cash starved companies in ASX become aware of this "mountain" of cash awaiting them...

Will they care if some of these cash come from a SWF? Hohoho! (sorry, I am just too cynical to buy into this BS of SWF and state owned corporations will rob us clean...)

Let me put it simply - if the Aussie firms are still acting "precious", just watch what the Canadian, the Latin Americans and the Africans would do next, and mind you, by the time the whole stampede is over, don't feel bad if there is none left for the Aussies...

Hard to believe? Just note how much WDC is willing to pay - 







> _The loan will cost 240 basis points more than Libor, compared with 35 basis points over Libor it is paying for the existing loan, one of the people familiar with the matter said today. A basis point is 0.01 percentage point.
> 
> In a forward start loan, lenders to an existing credit agreement commit to provide financing to replace loans as they mature for increased fees...Westfield is seeking to extend the credit line, which matures in January 2011, by 18 months..._




** is Frank Lowy crazy or just plain smart? I would go for the latter... and my bet is by 2011, those who are trying to borrow anything greater than 1 billion by then will have to beg (if he can find someone who is willing to lend); if not, will have to pay a much higher price than what Frank is paying now.

And mind you, by then, many of the mines that are not for sale and are out of bound to the Chinese now will be begging for the Chinese to take them over... if the Chinese decides to cool down their economy by more than 2 quarters! There won't be a boom without the Chinese stimulus and there won't be a boom in commodity if the Chinese are convinced this country doesn't really want their investment.

How important are they really? Well, there's a report saying China's IO import went gangbuster in June, Volume up 5% at all time high (I think), spot price at a premium... but is there any one really paying attention? 

Who are the real benefactors of this IO boom? Is BHP laughing all the way to the bank? Is Rio rejoicing?

Dunno, but we can wait. If they don't tell us this time, they will, in the next one...


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## haunting (12 August 2009)

Umbrella up against liquidity downpour



> _CHINESE policymakers are tightening the credit taps to avoid banking problems, asset bubbles and inflation, amid the first signs of deceleration in China's resurgent economy.
> 
> Data yesterday showed a sharp decline in new bank lending in July while growth in industrial production was slower than expected and investment decelerated from its breakneck pace.
> 
> China's flood of liquidity - bank lending rose 201 per cent in the first half of the year from a year earlier, to 7.4 trillion yuan - has generated strong imports, which have helped sustain regional economies including Australia, South Korea and Singapore..._




** here's one signal people should take notice, next we want to know what's the flow on effect to the  Aussie miners' bottom line...


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## haunting (13 August 2009)

> _REERs and current accounts see USD undervalued vs EUR and JPY
> Historically, currency interventions by the G3 countries – US, Europe and Japan –
> have followed one key pattern: they were aimed at correcting major misalignments
> in real effective exchange rates (REERs). Put simply, intervention supported the
> ...




** one possible reason why EUR is holding well at this level is the market belief that the Chinese are shifting part of their investment from US$ to EUR as a form of diversification.



> _The favorite currency for carry trade is the Australian dollar (AUD). Before this
> crisis, the AUD’s bounce from its bottom has traditionally followed a modest
> appreciation path. The rise we have seen this year is abnormally strong. Based
> on its close of 0.8370 on August 7th, AUD/USD is some 17-25% above the 0.67-
> 0.71 range seen in past rebound cycles._


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## MRC & Co (13 August 2009)

Add in US now has positive interest rate differentials out of all 3.


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## haunting (14 August 2009)

Google is trialling its new search engine HERE - it's a Speedy Gonzales alright. Great if you are in a hurry...


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## haunting (17 August 2009)

Krudd, a great leader?

**   find this amusing... truly great leaders are willing to do the necessary, the unpopular with foresight and vision. So far, I don't see any...

Comparing with Hawke and Keating, I think it's an insult to both of them and their achievements.


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## haunting (20 August 2009)

China's Australian blind spot - by Robert Gottlibsen



> _Let's hope the Australian business community is starting to comprehend the far reaching implications of HSBC's latest research, which shows that the chart of the value of the Australian dollar is a mirror image of Chinese electricity production. As I explained yesterday, that means the Chinese can invest in Australia and Australians in China without a currency risk..._




** AUD is a commodity currency and commodities = China... it's only natural to see the direct relationship established somewhat. But beyond direct commodity supply-demand, there's a more speculative relationship, as in JPYAUD carry trades... take a look at the attached chart and see how closely the currency pair is tracking the Shanghai index.

My suspicion at this point is simply this - in time to come, with the Chinese' conscious and deliberate effort to divest their exposure in the US$ by shifting their investment into other fixed assets such as commodities, real properties, etc... at some point, the US$ grip in the global economy will loosen resulting in  further depreciation in the US$, partly due to excessive supply of the US$ due to QE and partly due to a drop in demand with the Chinese shifting their investment into non US$ based assets.

At that point the US would have no choice but to depreciate their currency (like Zimbabwe did) to reduce the runaway inflation. (The current short "termish" deflationary pressure would not stop the inflation genie if the Feds were to fail in reining in their QE by the end of this year. jmv)

When that happens, I would expect the AUD to jump in sync with the RMB... once again proving to everyone what a lucky country Australia is! 

But before we reach that stage, can someone please tell Krudd and his gang to stop screwing around with the Chinese please?


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## haunting (20 August 2009)

Dollar rally may be Shanghaied


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## haunting (21 August 2009)

Check them out: here.


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## haunting (21 August 2009)

This report seems to support some of the views expressed earlier...



> _“The question is not whether the dollar will weaken over time, but how it will weaken,” said El-Erian, a former deputy director of the International Monetary Fund whose firm runs the world’s largest bond fund. “The real risk is that you will get a disorderly decline.”
> ...
> While the U.S. economy is picking up, the recovery is being driven by inventory rebuilding and Obama’s record $787 billion fiscal stimulus, Olivier Blanchard, chief IMF economist, suggested in a paper released by the Washington-based lender on Aug. 18. Neither will last, he added.
> 
> ...




** if the US$ were to drop lower from the current level, I would take that to mean the "cooperation among the central banks" to keep a "stable" US$ for the common good of recovery has broken down. Also the recent issuance of TIPS, as pointed out in this report, would serve as an early indication and warning on a devaluing US$ in a longer time frame.


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## haunting (24 August 2009)

Aussie Options Turn Bearish as Rate-Rise Odds Drop

** worth a read and remember this - a herd is formed when there're enough people believing and sharing the same information, like a snow ball rolling downhill, it will gather momentum and mass... 



> _“China since the start of this month has indicated that government-backed projects will probably be fewer than in the first half and that the robust lending numbers are showing signs of slowing,” said Philip Wee, senior currency economist at DBS Group Holdings Ltd., Southeast Asia’s biggest regional bank, in a Bloomberg Television interview. “The market needs a stable U.S. and a growing China to take risk.”
> 
> New York-based Citigroup recommended selling the Aussie against Japan’s currency on Aug. 19 on expectations it would slide toward 70 yen. The exchange rate ended last week at 78.79 yen.
> 
> “We’ve probably built in so much positive news that the risk of disappointment is high,” said Henrik Pedersen, the London-based chief investment officer at Pareto Investment Management Ltd., which oversees $41 billion. “We’ll buy some protection through options. There’s some risk of a reversal.” _




** one who lives by the sword shall die by the sword... the AUD shall swim and sink with the Chinese market I reckon. Next is to watch if the US$ is still retaining its safe haven status within the investing communities. At this point, the chart and short term trend is going against the above market expectations.


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## haunting (25 August 2009)

Questions raised over Goldman research policy



> _Goldman Sachs Group Inc. regularly provides its top clients with stock-trading tips that differ from the firm's published research reports, The Wall Street Journal reported on Monday._




The WSJ report...

Goldman's Trading Tips Reward Its Biggest Clients



> _The firm asked important clients for suggestions. One idea that took hold was giving certain customers and traders more access to stock tips.
> 
> The idea was controversial with some Goldman research staffers. "I am not sure we should be giving recommendations that go against our research," ..._




** I am willing to bet there's not much difference in "them" practices over here. These bastards are real blood suckers if you don't mind my language!


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## haunting (25 August 2009)

Here is a good comment by DBS on currencies...



> _Stock markets are unable to shake off worries that they may have run up too much
> too quickly during this recovery from crisis. In China, investors fret that the
> government may need to rein in robust lending and introduce measures to address
> potential problem loans at banks. In the major economies such as the US and
> ...




** one way to gauge if these worries are real, one can keep an eye on the volatility of the equity market plus the currency pair movement such as JPY/AUD... my bet is they will both be volatile for a while until these worries/uncertainties are resolved. If the outcome is negative, expect a plunge from the current level.


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## haunting (26 August 2009)

Dollar Will Continue to Decline, Yuan May Gain, Strategists Say 



> _“I look at the euro and I say the worries about the deficit and U.S. debt are mirrored in Europe,” Patterson said. “The euro doesn’t have the same reserve currency support that the dollar has. For a short-term trade, it’s fine. For a long- term diversification tool, I’d stay away from it.”
> ...
> 
> “Asia is at a tipping point where you’ll see a transition from export-led growth to domestic-demand growth,” Standard Chartered’s Henderson said. “We’ve already seen the first stage with a huge focus on domestic demand, a huge focus on consumption. The next stage is surely a move away from a cheap currency policy toward stronger trade-weighted currency appreciation in order to dampen consumer cots.” _


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## haunting (27 August 2009)

As Budget Deficit Grows, So Do Doubts on Dollar



> _Now, though, major investors like Berkshire Hathaway Inc. Chairman Warren Buffett and bond investment firm Pimco fear the government's fiscal and monetary stimulus programs could end up fueling inflation in coming years and hammering the dollar. Higher inflation eats up the returns of bond investments that provide a fixed interest income, making them less attractive to investors. Less demand for U.S. bonds could mean a weaker dollar.
> 
> Mr. Buffett, for example, worries that U.S. policy makers will fail to move decisively to curtail the nation's ballooning net debt, expected by some to rise to more than 75% of annual economic output by 2013. Instead, policy makers might tolerate higher inflation, which makes existing debts more manageable but would hurt the U.S.'s creditors, including China and Japan. In this scenario, investors would demand much higher interest when lending to the U.S. government, raising its borrowing costs and making further budget deficits harder to finance at a time when an aging population will sharply boost the costs of social security and government-sponsored health care._




** to arrest the fear of inflation, the US govt increases their issuance of TIPS, just so the Chinese can stop worrying about the inflation ginny. This shows how desperate the US needs the foreign buying of their "useless" US$.

** in a different tangent, just in case you don't notice this - the US equity market rally, whilst many believe is due to the recovery from recession, but if you were to dig deeper you would have noted this - it was driven inversely by the depreciating US$. In other words, as and when the US$ drop in value, the US$ based assets are becoming cheaper and are attracting more foreign buyers. The cheaper the US$ the higher the US equity index would move. But if you were to discount the index by the corresponding depreciation rates (or if you can work out the real value of the US$), the index would be looking flat line... 

Alternatively, if the US$ were to rebound strongly from the current level, and if this observation holds, then, you should see the US equity taking a tumble. However, a qualification has to be made here - short "termish", this "theory" may not be obvious, just like "trend" and "pattern", you need time and a fair amount of data to confirm this observation. 

(As usual, I could be wrong, so caveat emptor here)


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## haunting (27 August 2009)

America's mortgage meltdown



> _The sharp fall in house prices that followed dramatically reduced household wealth, leading to lower consumer spending and a fall in gross domestic product. By now, wealth in the form of owner-occupied housing is down about 30 per cent, equivalent to a loss of more than $US6 trillion ($A7.2 trillion) of household wealth.
> 
> The fall in house prices also led to a sharp rise in mortgage defaults and foreclosures, increasing the supply of houses on the market and causing further price falls. As a result, a third of all American home owners with mortgages are already ''underwater'' - their mortgage debt exceeding the value of the house. For a sixth of the homes, the debt is 20 per cent higher than the price of the house.
> 
> ...




** and here's a follow up report...

July Home Sales and Goods Orders Jump...



> _Home sales increased 9.6 percent in July, the most in four years, to a 433,000 annual pace, figures from the Commerce Department showed today in Washington. Another report from the department indicated bookings for durable goods climbed 4.9 percent, also exceeding forecasts and the most since July 2007..._




** draw your own conclusion! I would take a wait and see attitude in this one because home sales volume increases doesn't mean there's a consistent house price recovery over there. More will be revealed in due time I reckon.


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## haunting (27 August 2009)

Here's a very interesting table published by DBS. Although it centres around the Asian countries, still there's enough other info to make it worthwhile for an analysis...

1) for China, note the US+EU still contributed to about a quarter of China's exports, almost halved compare to Pre-GFC's level, but still substantial. My read from here is this - at its lowest and worst moment, both these regions US+EU were still in need of Chinese imports. They couldn't do without them Chinese goods. Which is a good news to China and to the Asian countries that supply intermediate goods to China. It is also a good news for Australia that supplies the raw materials to China.

2) for the rest of the Asian countries, this table shows the declining influence of the US economic power, replacing by China.  Between EU and the US, EU is doing better in both HK and S.Korea - quite revealing from the super power's angle.

3) HK's 48% increase should be discounted due to "entrepot" effect (for China). This means China's 62.4% increase could be higher...

4) more... when time allows.


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## haunting (1 September 2009)

GM to form China venture, invest $293 million

** as if to augment the argument on zombie suppliers in the US, this GM move will be a thing to come as more and more big manufacturers shift their production offshore driven by cost as well as capital resources, plus the lack of local small to medium suppliers as a result of the meltdown.I

In this case, it is quite natural for GM to expand their parts production in China to provide their other US brands...

They said the market moves like a Titanic, once set on a course, it would take a lot to turn it around. But comparing with a whole economy and its eco system, the market movement is like a small pea, it ain't nothing comparing with the movement of an economy... from now on, the Americans could/would spend the next 20 years fighting to turn their Titanic heading back home, but if history is a good guide, and if the once Great British Empire is a good example, the USA and her associate client nations will become the next Commonwealth, a legacy of a once great power...


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