Thursday Links

As far as you being in Beijing right now and my credentials on “things” Asian; I’ve spent the majority of my career from 1989 to the present investing in Asia. That’s all I do. i lived in Hong Kong for 3 years and have more credible sources than I can count over there; many to whom I speak with nightly.

You may not be seeing the forest for the trees. This is what happened over there on the way up in 197-1999 when the Asian markets really just followed the US up. Asian markets followed the US market down here but they overrreact more…best examples being China and Vietnam. The markets in Asia, especially China stocks, will always be viewed as an “option” on the US and they have been behaving that way positively for the past 4 weeks or so.

People have to get away from the idea that low rates are a bad thing!!!!!

Dave what happens if China decides it would rather invest its money in China rather than buying Treasuries? I’m writing this sitting in Beijing, this is the reality. There are a lot of issues here in China right now. The US cannot continue to borrow and spend more indefinitely. In fact, isn’t that exactly the problem that led to the current crisis. In terms of your specific points:

1. “Flight to safety” – many observers think that the flight to Treasuries is about as smart as the investment in the Triple A securitized mortgages. The US government is starting to put itself in exactly the same position the NY city government put itself back in the 70s, but who will bail out the Fed? The rating agencies have already said they may need to reconsider their ratings on US Treasuries. Imagine what happens if they downgrade them.

2. “Confidence in the Feds ability to service its debt – yeah well, there was also a lot of confidence in Bear, Lehman and Merrill, until there wasn’t anymore. Once that confidence evaporated, it went pretty damn quickly.

3. “Lower interest rates” – less than 0? Are you kidding me? People are paying the Fed right now to hold onto to their money in short term securities.

4. “A continued increase in China’s export growth and need to put that money to work.” It’s a close call as to which of your arguments are the most ridiculous. I can tell you that the Chinese government is seriously worried about riots getting out of hand (they’ve already started) in the factory cities as unemployment goes through the roof.

Never in the history of mankind have we had a situation where the developed nation depended on the developing nation to fuel it’s lifestyle by borrowing increasingly. We are in unchartered territory and no one can predict the future but I am flabergasted by your arguments.

The downward movement in yields across the whole yield curve, resulting from the huge amount of purchases of treasuries from both within the US and outside, indicate a number of things:
1. Flight to safety vs. anything else out there.
2.Confidence in the Treasury’s ability to service the debt.
3. Expectations of lower interest rates looking all the way out to 30 years
4.A continued increase in China’s export growth and need to put that money to work.

I didn’t say that you didn’t understand it Brooklynnative.

“Do you even understand that China continues to add to their Treasury holdings??? Read the story thoroughly.”

Jeez Dave, this is what the article says:

“Fitch Ratings, the credit rating agency, forecasts that China’s foreign reserves will increase by $177 billion this year — a large number, but down sharply from an estimated $415 billion last year.”

Do you not understand that the American need to borrow is about to increase exponentially with Obama’s plan to respond to credit crisis and the biggest lender to us is DECREASING its lending an on annum basis? The implications are terrible and your rose colored glasses appear to be blinding you to the full ramifications.