Asia Pacific: Tighten Capital Controls, Please
Andy Xie (Hong Kong)
morganstanley.com
<Mish: That guy is useless.>
Russ: Couldn't disagree more, surprise, surprise. One of the most lucid commentaries I've seen yet on the US-China train wreck/crack-up boom.
For those who have a clue, tatoo this comment from Xie on your forehead. Only disagree with the "yet to show", as it's showing up in spades for anybody who cares to look,
"The cycle will end with either the Fed reversing its policy — we saw a glimpse of this in its decision last week — or a financial accident from the high leverage that has been built up in high-risk assets everywhere in the world. History would not be kind to the Fed; its accommodation and even encouragement of speculative excesses would be viewed as the primary cause of the massive bubble in the global economy today, the consequences of which are yet to show."
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Mish:
Russ that guy is all over the map. Do not have the examples at hand but someone on my board showed his analysis to be contadictory in several places in the same article (not this one, as I have not posted it there yet for comment). He is also inconsistant from week to week. Roach is clear and consistant in his thinking, week to week. He is not always right but the analysis is usually clear.
I knew you would like that article by Andy Xie because it supports your trainwreck scenario. What both of you fail to realize is China is attepting to curb the boom in China. Furthermore, take a look at US homebuilder charts. Is housing slowing over here? Hint: less demand for copper, etc.
There are several ways the pressure can come off commodities.
1) China slows down its growth
2) China raises interest rates
3) US consumers give up
4) US housing slows
5) Worldwide housing slows: UK NZ Australia - They have raised rates
6) The US raises rates
Now, if 1-5 happen does #6 even remotely have to happen? I think 1-5 are just starting to happen. The affect on #5 will take a while. The affect on #4 will take a while, the affect on #1 will take a while.
EVENTUALLY there will be a disater. Eventually the Spoos will be at 600 IMO. EVENTUALLY can be a long long time. I have outlined the reasons why Japan and China are likely to keep supporting the US$. I will not repeat it here.
As for: "History would not be kind to the Fed"
Well You and I and Andy can all agree on this one. It has been one F up after F up after F up IMO. What we are debating is where we go from here, which again I will not repeat except to say that Greenspan is damned if he does and damned if he doesn't at this point and it is clear he prefers the latter (and I would too If I was in his shoes RIGHT NOW).
As for: "The cycle will end with either the Fed reversing its policy — we saw a glimpse of this in its decision last week ....."
I think you bond bears are reading way way too much into a small change from "considerable period" to "patient". When everyone is focusing on total BS like that, the market initially reacted as if the FED was changing tomorrow. Well I took the opposite side of that bet in Eurodollar futures (now 11/12ths cashsed out - thank you), and we are back close to where the nonsense reaction happened. It is clear Greenspan is waiting for jobs and IMO he may as well be waiting fot Godot. Jobs aren't happening IMO regardless of what spin they put on things tomorrow.
Mish |
